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Elliott Management is calling for Japan’s biggest property group, Mitsui Fudosan, to launch a ¥1tn ($6.8bn) share buyback as the US activist fund targets the most prestigious end of the Tokyo stock market.
Elliott’s demands — presented to top management within the past month — include a request that the company sell down its $3.6bn stake in Oriental Land, the company that runs Tokyo Disneyland, said people close to the fund and Mitsui Fudosan.
Elliott’s move is part of increasing pressure on Japanese companies to improve their market valuations, raise their standards of corporate governance and increase their returns on equity.
That pressure has been ratcheted up over the past 18 months as the Tokyo Stock Exchange has pushed companies to lay out how they plan to boost their corporate value — a scheme intended to shame those that fail to do so — while domestic institutional investors have become more emboldened to demand higher returns.
The response has been striking, according to market strategists, and contributed to the benchmark Nikkei 225 rising to a 34-year high in January. Buybacks by Japanese companies in 2023 hit a record ¥9.6tn, with the number of companies announcing them exceeding 1,000 for the second year in a row, according to a recent calculation by the Nikkei newspaper.
Elliott’s move, which marks its fourth major public foray into the Japanese stock market after engagements with Toshiba, SoftBank and Dai Nippon Printing, targets a company with a property empire that stretches across the world and includes iconic buildings that define the skyline of central Tokyo.
Mitsui Fudosan’s three “Midtown” projects dominate the Hibiya, Nogizaka and Yaesu districts of central Tokyo. It owns the Tokyo Dome stadium and is leading a redevelopment of the vast area on which the Tsukiji fish market once stood.
Elliott’s demand for the buyback, according to people familiar with the situation, follows a secretive, year-long stakebuilding process by the US fund that has made it one of Mitsui Fudosan’s top five shareholders. Nomura Asset Management, Vanguard and BlackRock are all major shareholders, and Elliott’s stake is at least 2.5 per cent, according to people familiar with the situation.
The pressure for the big buyback is part of a broader criticism of the company’s governance and of the fact that its market capitalisation represents a more than 33 per cent discount to the market value of the property it owns, according to those people.
Although Mitsui Fudosan is the largest Japanese property group by value, it has, at 6.91 per cent, the lowest return on equity among peers such as Mitsubishi Estate and Sumitomo Realty.
Elliott Management declined to comment. Mitsui Fudosan did not immediately respond to a request for comment.
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