Activist fund targets ramen noodle maker Maruchan over governance, sources say

Band Makiko Yamazaki

TOKYO, May 16 (Reuters)A Singapore-based activist investor is pressuring Japanese ramen noodle maker “Maruchan” to improve the group’s governance and explains why a majority-owned subsidiary remains listed, two people familiar with the matter told Reuters.

Vasanta Master Fund Files Shareholder Resolutions Ahead of Toyo Suisan Kaisha Ltd’s June Annual General Meetings 2875.T and its 50.9% owned subsidiary, Yutaka Foods Corp 2806.Taccording to the people, who spoke on condition of anonymity because the information was not public.

In letters to the two companies sent last month and reviewed by Reuters, the hedge fund said there was a “high risk” of conflict of interest in dealings between the two, given the stronger position of Toyo Swissan. The president and president of Yutaka Foods are from its parent company.

Representatives for Yutaka Foods and Toyo Suisan declined to comment.

Vasanta’s resolutions highlight so-called “parent-child lists” that remain prevalent in Japan despite official attempts to encourage companies to sell or buy back listed units. Governance experts say such listings are unfair to minority shareholders of subsidiaries, whose interests may take a back seat to those of the parent company.

Yutaka Foods sources most of its raw materials from Toyo Suisan, which are then processed into noodles and other packaged foods that are mostly sold back to the parent company, according to recent company filings.

Toyo Suisan’s “Maruchan” ramen noodles are a staple for college students in North America. It is the market leader for instant noodles in the United States and Mexico.

Vasanta, managed by Singapore-listed investment firm TIH Ltd TIHL.SIis Yutaka Foods’ second largest shareholder with nearly 5% and has a small stake in Toyo Suisan, the sources said.

The fund also proposed that Yutaka increase dividends and create an audit committee to strengthen corporate governance, according to its letter to the company.

While some 260 listed subsidiaries remain among the approximately 3,700 listed companies in Japan, according to data from the Tokyo Stock Exchange, some prominent companies have addressed the “parent-child” issue in recent years.

Hitachi Ltd 6501.T sold or took control of more than a dozen listed subsidiaries, including Hitachi Chemical. Nippon Telegraph and Telephone Corp (NTT) 9432.T launched a $40 billion buyout in 2020 to privatize its wireless business.

(Reporting by Makiko Yamazaki; Editing by David Dolan and Edmund Klamann)

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