NextFin News - Asset Value Investors Ltd. (AVI) has formally called for the removal of Kunio Yamada, the long-standing chairman of Rohto Pharmaceutical Co., marking a significant escalation in the London-based activist’s campaign to overhaul the Japanese drugmaker’s governance. The proposal, submitted ahead of Rohto’s annual general meeting, targets Yamada’s dual role and his perceived influence over a board that AVI argues has failed to prioritize capital efficiency and core business growth.
The confrontation centers on Rohto’s strategic direction and its recent diversification efforts. AVI, which manages approximately £1.2 billion in assets and has a decade-long history of targeting Japanese small- and mid-cap firms, contends that Yamada’s leadership has presided over a period of "strategic drift." Specifically, the fund has criticized Rohto’s expansion into regenerative medicine and its acquisition of Eu Yan Sang, a traditional Chinese medicine retailer, as ventures that dilute the company’s focus on its highly profitable skincare and eye-care segments. Rohto’s stock was trading at ¥2,300.50 in Tokyo on Thursday, reflecting a market that remains cautious about the company’s conglomerate-like structure.
Joe Bauernfreund, the Chief Executive Officer of AVI, has built a reputation as a persistent, though often constructive, activist in the Japanese market. AVI typically takes a long-term "value" stance, seeking to unlock "hidden" assets in companies with strong balance sheets but poor shareholder returns. While AVI’s campaigns have occasionally led to increased dividends or buybacks at other Japanese firms, its demand for a chairman’s resignation represents a more aggressive tier of intervention. This stance is not yet a consensus view among institutional investors; many domestic Japanese funds still value the stability and brand heritage associated with the Yamada family, which has led Rohto for generations.
The tension highlights a broader friction in Japan’s corporate landscape between traditional management and international governance standards. Rohto has defended its diversification as a necessary evolution to ensure long-term sustainability beyond the maturing Japanese OTC drug market. The company’s investment in regenerative medicine, while capital-intensive and currently loss-making, is framed by management as a high-growth "moonshot" that leverages Rohto’s existing expertise in cell culture technology. For AVI, however, these "side projects" represent a misallocation of resources that could otherwise be returned to shareholders or reinvested in the Mentholatum brand and other global skincare assets.
The success of AVI’s proposal remains uncertain and faces significant structural hurdles. Under Japanese corporate law, removing a director requires a majority vote, and the Yamada family, along with allied "cross-shareholders," maintains a formidable defensive perimeter. Furthermore, the proposal currently lacks the public backing of major proxy advisors or other large institutional holders, making it more of a symbolic challenge to the status quo than an imminent coup. The outcome will likely hinge on whether AVI can convince a broader base of foreign investors that Rohto’s current valuation discount is a direct result of its governance structure rather than broader sector trends.
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