Oasis Management's Fischer on Japan, Korea

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00:00It's certainly an environment where it's just layer upon layer of uncertainty and complexity,

00:04but does that make your job easier or is it more challenging?

00:08It makes my job every day very interesting.

00:11Okay, elaborate then. In which way?

00:13Look, there's never a dull day.

00:15It means that companies have to deal with these additional challenges,

00:18so the old paradigms have changed,

00:20and so it means that exporting companies need to realize and think about what this means for them.

00:26Importing companies need to think about what this means for them as well.

00:28Actually, a dollar-yen helps a lot of them.

00:31It means that the domestic economy changes.

00:33We have two orders of magnitude.

00:36You have directly exporting companies,

00:38and you have companies that are affected because they sell to exporting companies,

00:42and so you've got to think about what their effect is and them are,

00:45and a lot of companies take a long time to figure that out,

00:47so you can't even ask the CFO, like, what does this mean for you?

00:50They're having to figure it out themselves.

00:52You have to do a lot of the work and figure it out on your own.

00:54So I think about two companies you're working with right now.

00:56There's Tayo, for instance. It's a chemicals company.

00:58There's Kyocera that's more in the ceramics and electronics manufacturing side.

01:02Are you working with them both on sort of like trade policies

01:05and how they would be interacting or engaging with those?

01:08These are actually much more domestically-oriented companies.

01:11So, yes, some of them have some exporting businesses, and there are effects on them.

01:15For both of them, corporate governance is a much more important lever for them,

01:20and there's much more upside from kind of fixing their corporate governance,

01:23helping them focus on their profitable businesses,

01:26and get rid of their money-losing businesses,

01:28and that has a lot more upside than their 10% or 20% kind of tariff impact on them.

01:33Seth, I wanted to ask about some of the opportunities in Japan,

01:35and let me start off with 7-Eleven because, of course, the drama continues to unfold.

01:39Are you optimistic that this new leadership, you know,

01:41that has been given some grace by shareholders will be able to achieve their targets and their goals,

01:47or do you think it's still important to keep the Custard bid alive?

01:52I think Custard remain extraordinarily interested in the company.

01:56I think that 7-Eleven and I have a couple of possibilities.

01:59They could either add value on their own,

02:00or they should really be fully open to Custard and fully open to a bid.

02:06When it comes to other opportunities within Japan,

02:09but also some of the other geographies,

02:10what are you sort of most constructive on at the moment?

02:13We're spending a lot of time across the region.

02:18Yes, we're extraordinarily involved and engaged in Japanese companies.

02:22Remain interested, and I spent a lot of time in the last year in Korea.

02:26There are changes, albeit they're slow.

02:29There's a carrot and a stick approach that the government's taken,

02:32so we spend a lot of time in South Korea, for that matter.

02:35Remain engaged in kind of the reopening of a window

02:39for a number of Chinese companies to raise capital,

02:40so we're re-engaged there,

02:42and we're engaged in kind of the rest of Southeast Asia also.

02:47Yeah, I think we talked to you about South Korea

02:49and making that comparison to progress being made in Japan

02:51every time we speak to you,

02:52but can you give us an idea of how you feel about that progress,

02:56whether it's accelerating,

02:57whether you think that the presidential election

02:59and some of the political developments might help or hinder this process?

03:04We're optimistic that the change in the presidential election

03:07will bring even more substantial changes to South Korea.

03:11There's a long, long, long way to go.

03:13Maybe they kind of started with a lot of FOMO,

03:15kind of seeing what Japan's done, and want to achieve that.

03:18The phenomenons are different.

03:20The tables have to kind of realize this

03:21and make some significant changes.

03:23There's a lot more inheritance issues.

03:25I think you've seen some of that in Samsung

03:27kind of splitting off its biological businesses.

03:32And so there are some kind of e-mart as well.

03:35There are some significant changes.

03:37Regulators have been much more favorable

03:39to minority shoulders very, very, very recently.

03:41But remember, we've come a long way in Japan.

03:44Japan has like 13 years of progress going on here.

03:47It depends on whether it's 12 or 13 years,

03:50depending on your count.

03:51So Korea is just the very start of this.

03:53We're very optimistic.

03:54South Korea could go very, very fast.

03:56But yes, they're dealing with different challenges.

03:59Yeah, I think actually in Japan, in May,

04:01there were 30 activist campaigns that were started.

04:05So the market is just, I mean,

04:06I guess that's why you're going back and forth.

04:08Yes, I mean, Japan has kind of exploded.

04:11And it's going to, you know,

04:12since our first public campaign in 2017,

04:14Japan at home, when it was like untold to do this at all,

04:19and it had been decades than anything publicly.

04:21And we had spoken to a lot of people privately,

04:23and like, can we do this?

04:25And is it appropriate?

04:25And they're like, yeah.

04:26Like, this is what Abenomics is really about,

04:28kind of engaging companies.

04:30We always engage companies privately.

04:32And if they work with us, fantastic.

04:33We won't mention them to anybody.

04:34But if they won't, then we'll be increasingly public.

04:36So we launched our first public website in 2017.

04:38And now their public engagement is only every other week in Japan.

04:42So there's a big explosion in it.

04:44And to some degree, some other investors that,

04:47I don't know, we're never going to be in public,

04:48are out there publicly now, you know, very often.

04:51And look, it's not just us.

04:53There's foreign domestic companies that are engaging with hostile bids.

04:56There's domestic companies engaging with hostile bids at companies.

04:59So it's completely opened up.

05:01We're going into the AGM season as well in Japan.

05:04It kicks off in, actually, in June.

05:05So in a few days.

05:06Last week in June, too.

05:07Yeah.

05:08So what's the expectation, then?

05:10What's going to be your focus areas for those meetings?

05:12We're going to be at a lot of AGMs, as we always are.

05:14It's a crazy week for us.

05:16And some of them will be over north of 80% of companies in Japan

05:20have their AGMs in basically one week.

05:23We have a lot of questions for companies.

05:25That's the one, you know, best time to kind of ask companies,

05:29engage with other shareholders and ask the chairman and meet the chairman and the CEO

05:32and ask them publicly and on the record a number of questions

05:35that sometimes you don't get to ask.

05:36So we have a lot of questions about why they remain in kind of money-losing businesses,

05:40as discussed, why they have remaining related party transactions.

05:44What are they doing with those related party transactions?

05:46We're asking the minority directors, the independent directors, I should say,

05:50who should represent all shareholders in the company.

05:52What are they doing of inspecting these related party transactions

05:55and kind of seeing if they're really truly appropriate?

05:58And asking also for parent-child relationships, what's going on with those directors

06:03and are they really taking on the responsibility of looking at what's best

06:08for the underlying company and not best for the parent?

06:10Last year at the Sohn Conference, your pick was the pharmaceutical company Kobayashi,

06:15which is another company that you're very actively engaged in with

06:18to the extent that it's reached a lawsuit now.

06:20But aside from those details, what's the amount of value that you think can be unlocked

06:24and what's the time horizon that you have for that?

06:26Look, Kobayashi is still a work in progress.

06:29We think there's an enormous amount of upside to the company.

06:32You know, that's 50% plus.

06:34We think there's an enormous amount of upside to them running a better business.

06:37There's still remaining to be, you know, the family now is voting against management.

06:43Effectively, the management's on our side, but the family's holding them back,

06:45the Kobayashi family, you know, there's been an incredibly large scandal there

06:50and an enormous amount of deaths that are associated with Benikoji

06:53because of the product that is, you know, effectively now reportedly killed over 405 people.

06:59So it's a very serious issue.

07:03We would like the family to stand down and listen to minority shareholders

07:05and listen to the family's attempts at improving governance.

07:09If you can improve the governance, I think the company could, you know, perform very well.

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