3D Investment Publishes Corporate Value Enhancement Plan for Toho Holdings

TOKYO--(BUSINESS WIRE)--3D Investment Partners Pte. Ltd. (“3D” or “we”), the investment manager of the 3D OPPORTUNITY MASTER FUND, today, published a presentation provided to Toho Holdings Co., Ltd. (“Toho HD” or the “Company”) (8129.T) highlighting its proposals to improve Toho HD’s performance and value.

3D has invested in Toho HD since 2020 and is currently one of the Company’s largest shareholders, holding approximately 22%¹ of the Company’s voting rights. We have been engaging constructively with Toho HD for more than two years to improve the Company’s performance and corporate governance and, in August 2023, presented Toho HD’s Board of Directors (the “Board”) with a detailed plan to enhance corporate value (the “Corporate Value Enhancement Plan”).

We are sharing that plan with our fellow owners so that they can understand the opportunity we see in Toho HD and the measures we have proposed to the Company’s Board.

The Corporate Value Enhancement Plan (Japanese version only) is available at: https://www.3dipartners.com/engagement/toho-presentation-on-corporate-value-enhancement-plan-jp-202503.pdf

In the plan, we describe Toho HD’s longstanding governance deficiencies, which we believe have impaired corporate value, and propose four initiatives aimed at improving oversight and performance and maximizing the abundant potential we see in the Company. These initiatives include:

1. Establishing a Robust Governance Structure
   In our view, Toho HD’s large cross-shareholdings and failure to empanel independent Board members have contributed to a persistent lack of oversight and accountability. The Company’s flawed governance structure has, in our view, enabled a series of compliance and succession issues to occur successively, to which we believe the Company has failed to adequately respond. We believe Toho HD must promptly address these issues and establish an appropriate governance framework to rebuild investor trust and provide a foundation for long-term corporate value enhancement.
   
   We do not believe the Company’s Special Committee on Governance Enhancement is likely to materially improve the Board’s oversight. The committee does not maintain the nature of an investigative body, lacks the authority to ensure the Board implements its recommendations, and shows no intention to disclose its proposals to Toho HD shareholders.
   
2. Improving Core Business Profitability
   We have encouraged Toho HD to improve labor productivity by optimizing its headcount and personnel placement and enhance profitability by reducing indirect costs. We also recommended initiatives to improve the Company’s net promoter scores (NPS) by customer segment to drive top-line growth.
   
3. Disposing of Surplus Assets to Generate Investment Capital
   We have recommended that Toho HD rationalize its non-operating assets such as excess cash, cross-shareholdings, and investment securities. We also requested a review of operating assets—including logistics facilities, fixed assets, and working capital—to ensure they are properly utilized without injuring capital productivity.
   
4. Reinvesting Capital Above the Hurdle Rate
   We expect the rationalization of non-operating assets to free up significant capital, and we have proposed that Toho HD reinvest this capital in growth initiatives that are expected to deliver returns in excess of the Company’s cost of capital. These investments would enable compounding value creation. We have also urged the Company to pursue scale-driven growth and profitability improvements through reinvestment in the segments within or around its portfolio of businesses that promise the highest return on investment.

In our view, although the first step toward maximizing Toho HD’s corporate value is to reform the Company’s flawed governance structure and establish a solid foundation for sustainable value creation, we believe that the Company’s recent governance changes have been merely cosmetic and have failed to address the root causes of the deficiencies.

We were encouraged by the Company’s formation in April 2024 of a Management Strategy Committee, which conducted a review aimed at accelerating and improving the execution of the Company’s medium-term management plan and enhancing corporate value.

However, the execution plan based on the Committee’s six-month review is only a brief report of 8 pages and a few half-hearted and somewhat vague commitments to improve profitability, divest some surplus assets, and reinvestment policy. We do not believe that these initiatives go far enough to address the Company’s challenges, nor are they likely, in our view, to create more corporate value than those we proposed to the Board in our Corporate Value Enhancement Plan. We believe the Company should set more specific goals for its business units and commit to a transparent assessment of its success or failure in achieving those goals.

As one of Toho HD’s largest shareholders, we believe we have a responsibility to engage constructively with the Company and advocate for improvements on behalf of our fellow owners. We are disclosing our Corporate Value Enhancement Plan today because we believe it is important for shareholders to understand Toho HD’s challenges and opportunities and the measures that we have proposed in order to achieve Toho HD’s full potential.

We encourage shareholders to review the Corporate Value Enhancement Plan and consider our analysis and perspectives while engaging in constructive dialogue with Toho HD.

About 3D Investment Partners Pte. Ltd.

3D Investment Partners Pte. Ltd. is an independent Singapore-based Japan focused value investing fund manager founded in 2015. 3D Investment Partners Pte. Ltd. focuses on partnering with managements who share its investment philosophy of medium- to long-term value creation through compound capital growth and a common objective of achieving long-term returns.

Disclaimer

This press release is provided for informational purposes only and does not constitute an offer to purchase or sell any security or investment product, nor does it constitute professional or investment advice. This press release should not be relied on by any person for any purpose and is not, and should not be construed as investment, financial, legal, tax or other advice.

3D Investment Partners Pte. Ltd. and its affiliates and their related persons (“3DIP”) believe that the current market price of Toho HD does not reflect its intrinsic value. 3DIP acquired beneficially and/or economic interests based on its own idea that Toho HD securities have been undervalued and provides attractive investment opportunity and may in the future beneficially own and/or have an economic interest in, Toho HD securities. 3DIP intends to review its investments in Toho HD on a continuing basis and, depending upon various factors including, without limitation, Toho HD's financial position and strategic direction, the outcome of any discussions with Toho HD, overall market conditions, other investment opportunities available to 3DIP, and the availability of Toho HD securities at prices that would make the purchase or sale of Toho HD securities desirable, 3DIP may, from time to time (in the open market or in private transactions), buy, sell, cover, hedge, or otherwise change the form or substance of any of its investments (including the investment in Toho HD securities) to any degree in any manner permitted by any applicable law, and expressly disclaims any obligation to notify others of any such changes.

3DIP provides no representation or warranty, either expressed or implied, in relation to the accuracy, completeness, or reliability of the information contained herein, nor is it intended to be a complete statement or summary of the securities, markets, or developments referred to herein. 3DIP expressly disclaims any responsibility or liability for any loss howsoever arising from any use of, or reliance on, this press release or its contents as a whole or in part by any person, or otherwise howsoever arising in connection with this press release. 3DIP hereby expressly disclaims any obligation to update or provide additional information regarding the contents of this press release or to correct any inaccuracies in the information contained in this press release.

3DIP disclaims any intention or agreement to be treated as a joint holder (kyodo hoyu sha) under the Financial Instruments and Exchange Act of Japan, a closely related party (missetsu kankei sha) under the Foreign Exchange and Foreign Trade Act with other shareholders, or receiving any power or permission to represent other shareholders in relation to the exercise of their voting rights, and has no intention to solicit, encourage, induce or require any person to cause other shareholders to represent such voting rights.

3DIP does not have the intention to make a proposal, directly or through other shareholders of Toho HD, to transfer or abolish the business or assets of Toho HD and/or Toho HD group companies at the general shareholders meeting of Toho HD. 3DIP does not have the intention and purpose to engage in any conduct which constricts the continuing and stable implementation of business of Toho HD and/or Toho HD group companies.

This press release may include content or quotes from news coverage or other third-party public sources (“Third-Party Materials”). Permission to quote from Third-Party Materials in this press release may neither have been sought nor obtained. The content of the Third-Party Materials has not been independently verified by 3DIP and does not necessarily represent the views of 3DIP. The authors and/or publishers of the Third-Party Materials are independent of, and may have different views to 3DIP. The quoting Third-Party Materials in this press release does not imply that 3DIP endorses or concurs with any part of the content of the Third-Party Materials or that any of the authors or publishers of the Third-Party Materials endorses or concurs with any views which have been expressed by 3DIP on the relevant subject matter. The Third-Party Materials may not be representative of all relevant news coverage or views expressed by other third parties on the stated issues.

In respect of information that has been prepared by 3DIP (and not otherwise attributed to any other party) and which appear in the English language version of this press release, in the event of any inconsistency between the English language version and the Japanese language version of this press release, the meaning of the Japanese language version shall prevail unless otherwise expressly indicated.

¹ Calculated as: (number of shares held by 3D + the potential number of shares held through convertible bonds with stock acquisition rights held by 3D) divided by (total number of issued shares - treasury shares + the potential number of shares held through convertible bonds with stock acquisition rights held by 3D).