Japan’s Cosmo Energy Holdings Faces Tough Battle to Defend Against Activist Investors

Cosmo has been in a protracted battle against Murakami's group for over a year.

Japan’s Cosmo Energy Holdings (5021.T) faces an uphill battle in garnering shareholder support for a revised “poison pill” strategy, according to its CEO, as the company strives to fend off activist investors pursuing a hostile takeover.

The nation’s third-largest oil refiner is set to hold another shareholder vote on December 14, aiming to gain approval to thwart an activist group led by Yoshiaki Murakami from increasing its stake from the current 20% to 24.56%.

In an interview with Reuters, CEO Shigeru Yamada acknowledged the challenging landscape, with certain investors firmly opposing any takeover defense measures.

Cosmo has been in a protracted battle against Murakami’s group for over a year.

In June, a previous vote successfully implemented a poison pill strategy to dilute the activists’ stake if they purchased more shares without adhering to prescribed procedures.

The upcoming vote seeks to block further acquisitions by the activists, even if they comply with the established procedures.

Yamada explained that the company opted not to employ the “majority of minority vote” tactic introduced in June this time around.

This decision was made to keep the focus on the fundamental question of who can best enhance the company’s shareholder value.

He posed the question to shareholders, “Whose plans can boost shareholder value more, ours or Murakami-san’s?”

The majority of minority votes effectively prevent specific shareholders from voting, a practice some governance experts believe could be a new weapon against shareholder activism.

Yamada argued that the Murakami group lacks a concrete management strategy to enhance Cosmo’s corporate value.

The activist group contends that Cosmo’s shares are undervalued and has suggested ideas like consolidating refineries and divesting the oil and gas development unit.

Yamada countered that refineries and oil and gas development will remain the company’s core business until approximately 2030 and that consolidation or divestment would undermine the interests of shareholders.

The battle for control of Cosmo Energy Holdings continues to unfold as the company seeks to protect its future direction and shareholder value.