Exclusive: ValueAct eyes Nintendo with stake of over
$1.1 billion - letter
Send a link to a friend
[April 22, 2020] By
Svea Herbst-Bayliss
BOSTON (Reuters) - Activist investor
ValueAct Capital Partners LP has built a stake of over $1.1 billion in
Nintendo <7974.T>, according to a letter seen by Reuters, a bet that
digital software distribution and the development of new entertainment
products will fuel growth at the Japanese gaming company.
ValueAct, which first began buying the stock in April 2019, grew the
position in Nintendo, known for its gaming consoles and for having
turned characters like Mario and Donkey Kong into international hits,
during the stock market sell-off in February and March, according to the
letter sent to its investors.
Nintendo's future is bright, ValueAct wrote in its letter, adding there
is potential for growth both in the software business and room for the
company to transform itself into a broader entertainment company.
ValueAct has picked up about 2.6 million shares, or about a 2% stake, in
Nintendo. Shares of the Japanese company rose more than 2% as trading
started in Tokyo.
"We are aware that ValueAct is holding a stake and we've been engaged in
dialogue with them. We don't disclose content of our dialogue with our
investors," a Nintendo spokesman said.
![](http://archives.lincolndailynews.com/2020/Apr/22/images/ads/current/elkhart_grain_daily_sda_022614.png)
A spokesman for ValueAct declined to comment.
San Francisco-based ValueAct said it has had several meetings with
members of Nintendo management and that it believes in the vision the
company's chief executive, Shuntaro Furukawa, has shared with ValueAct
and with others.
Unlike other investment firms that push for change publicly and often
ask for board seats at target companies, ValueAct prefers to work with
management behind the scenes.
Its partners could offer relevant guidance and experience to help
Nintendo after having served on boards at Adobe and Microsoft, the
firm's letter said, stopping short of asking for board representation.
U.S. activist investors are increasingly looking to target Japan's cash
rich companies and this marks the third investment ValueAct has made in
Japan in the last four years.
Only a few weeks ago ValueAct, which has $12.3 billion in regulatory
assets under management according to a recent filing, took a 7% stake in
chip and display materials maker JSR Corp <4185.T> and last year
ValueAct partner Rob Hale joined the board of Olympus, marking a
milestone in corporate governance.
ValueAct said Nintendo had not prospered as much as video game software
companies like EA and Activision as the industry's fortunes improved
over the last decade. But it said the company was now going through a
digital transition that was sure to pay off.
![](http://archives.lincolndailynews.com/2020/Apr/22/images/ads/current/newhollandbank_sda_SFARM_2020.png)
[to top of second column] |
![](../images/042220pics/2020-04-21T183937Z_1_LYNXNPEG3K1Y3_RTROPTP_4_NINTENDO-STORE_small.JPG)
The logo of the Nintendo
is displayed at Nintendo Tokyo, the first-ever Nintendo official
store in Japan, at at SHIBUYA PARCO department store and shopping
mall complex, during a press preview in Tokyo, Japan November 19,
2019. REUTERS/Issei Kato
![](http://archives.lincolndailynews.com/2020/Apr/22/images/ads/current/rohlfs_lda_072017.png)
Additionally ValueAct said the company has a chance to become an entertainment
company. "We believe Nintendo will be one of the largest digital media services
in the world, in a category with the likes of Netflix, Disney+, Tencent
Interactive Entertainment and Apple Music," the letter said.
The investment in Nintendo ranks among the biggest bets ValueAct has made since
announcing a $1.2 billion investment in U.S. bank Citigroup in 2018. While there
is much communication between the bank and the hedge fund at the highest levels,
ValueAct does not have a board seat.
ACTIVISM IN JAPAN
As U.S. investors turned their attention to targets in Japan, ValueAct has been
among the most successful, helped by its more low-key tactics, industry analysts
said.
While top management in Japan has been historically wary of brash U.S.
investors, ValueAct said its experience at Nintendo has been different.
Management has been "welcoming to those who take the time to understand the
unique Nintendo way," it said in its letter.
Activist campaigns in Japan have remained steady with 14 being waged this year,
the same as last year, data from Activist Insight shows. Elsewhere the novel
coronavirus has dampened activity, with investors saying calls for mergers or
different capital allocation would not be welcome now.
ValueAct's investment in Nintendo may invite some comparisons with Third Point,
another U.S. activist, which last year launched a campaign at Sony, urging the
company to spin off its semiconductor business and sell off stakes in Sony
Financial and other units.
![](http://archives.lincolndailynews.com/2020/Apr/22/images/ads/current/chicagost_sda_SFARM_2020.png)
Nintendo and Sony compete in the gaming areas.
The new investment is also the first blockbuster investment announced since
long-term partner Mason Morfit took over as ValueAct's chief executive officer
from founder Jeffrey Ubben earlier this year.
The pair first told clients about the succession planning three years ago when
Morfit was made chief investment officer. Ubben remains with the firm and is
concentrating on its impact investing fund, the ValueAct Spring Fund.
(Reporting by Svea Herbst-Bayliss, additional reporting by Makiko Yamazaki in
Tokyo; Editing by David Gregorio, Andrea Ricci, Tom Brown and Himani Sarkar)
[© 2020 Thomson Reuters. All rights
reserved.] Copyright 2020 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content. |