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May 14, 2020 12:00 UTC

Fir Tree Comments on JR Kyushu’s Response to Shareholder Proposals

Recognizing the Challenges Facing the Business, a Board of Directors with the Right Skillset is More Important Now than Ever Before

Disappointed by Company’s Refusal to Listen to Shareholders, Fir Tree Pushes for Improved Disclosure, Better Corporate Governance and Industry Expert Independent Board Members

NEW YORK & TOKYO--(BUSINESS WIRE)-- Fir Tree Partners ("Fir Tree"), manager of certain funds that reported collective beneficial ownership of approximately 6.1% of the outstanding shares of Kyushu Railway Company ("JR Kyushu" or the “Company") (TSE ticker 9142) on its latest large shareholding report, today issued the following statement regarding shareholder proposals for the Company’s Annual General Meeting of Shareholders (“Annual Meeting”) to be held on June 23, 2020.

As long-standing shareholders of JR Kyushu since its initial public offering, Fir Tree remains committed to enhancing the long-term value of the Company by fostering sustainable growth, an optimal capital structure and best governance practices in line with Japan’s Corporate Governance Code.

Given the devastating impact Covid-19 has had on the community as well as JR Kyushu’s business operations - including real estate, hotels and rail - the Company has now begun the process of shoring-up capital by selling non-core assets such as Drug Eleven, evaluating its capital structure through “fund-raising methods” and “delaying or controlling its growth investment.”1

Recognizing the challenging economic environment, Fir Tree acknowledges that now is not the appropriate time for a share buyback. However, now more than ever, it is imperative JR Kyushu have the right board members and investor disclosures in place to appropriately address the challenges facing the Company. Specifically, the Board needs outside industry experts with the highest level of experience in finance and capital allocation, corporate governance, and real estate investment, to make value accretive decisions at this crucial time and supervise management in its aggressive growth capex plans.

Over the past two years, Fir Tree invested a significant amount of time and energy locating the most suitable candidates for JR Kyushu’s 12-member Board of Directors. During the past six months, with the help of independent third parties, Fir Tree combed through over a hundred possible candidates to identify 30 qualified individuals. The list was narrowed further and as noted in JR Kyushu’s response to our proposals, management had the opportunity to interview five extremely talented professionals, all of whom they ultimately rejected. Inexplicably, management chose to keep a board seat unoccupied rather than nominating even one of the highly qualified industry experts.

Furthermore, despite repeated requests from current and prospective shareholders (as well as the sell-side community), JR Kyushu continues to refuse to provide investors with standard financial disclosures in line with Principal 3.1 of Japan’s Corporate Governance Code. At a minimum, these should include expected returns on the 340 billion yen of growth capex in the Medium-Term Plan, as well as the revenues, EBITDA, net operating income and appraised cap rates for each of the major real estate assets.

Fir Tree is disappointed management was unwilling to make these changes on their own. In order to protect the interests of all stakeholders, Fir Tree was left with no choice but to submit the following two proposals for next month’s Annual Meeting:

  1. An amendment to the Articles of Incorporation to include the disclosure of revenues, EBITDA, net operating income and appraised cap rates for each of the Company’s commercial and residential real estate assets, as well as growth capex details.
  2. The election of three highly qualified, truly independent directors with related industry experience in finance, capital allocation, ESG and real estate investing.

Fir Tree continues to believe all JR Kyushu shareholders deserve a Board which firmly adopts the best practices of the Corporate Governance Code and is best equipped to address the coming challenges facing the Company.

Fir Tree asks all JR Kyushu shareholders to support their effort to add independent, expert voices to the Board to help it make prudent investment and capital allocation decisions to complement management’s existing rail and development expertise.

Fir Tree will have further updates in the coming weeks and looks forward to discussing these recommendations and their board nominees with fellow shareholders.


About Fir Tree Partners

Fir Tree Partners, founded in 1994 and located in New York City (HQ) and Miami, is a value-oriented investment manager that invests on behalf of endowments, charitable and philanthropic foundations, pension funds and other institutional and private investors. The firm has successfully applied its opportunistic approach across a wide array of asset classes, industries and geographies, including in Japan where it has been actively investing for nearly a decade. Fir Tree Partners has adopted Japan's Stewardship Code.

Important Notice

This press release should not be construed as asking for an agreement on Fir Tree’s proposals or soliciting any person to authorize Fir Tree or any third party to exercise voting rights on such person’s behalf with respect to the election of directors of JR Kyushu or any other matter to be presented to shareholders at JR Kyushu's upcoming Annual General Meeting (the "AGM"). Fir Tree intends to encourage fellow shareholders to cast their votes against certain proposals by JR Kyushu and in favor of Fir Tree’s proposals by either attending the AGM or using the voting card enclosed with the convocation notice that will be sent by JR Kyushu. This press release is not intended and should not be considered to solicit, encourage, induce or seek for fellow shareholders to authorize Fir Tree or any other third party as their proxy in exercising their voting rights on their behalf.

This press release is based solely on Fir Tree’s own analysis and information made publicly available by JR Kyushu.

1 Source: Kyushu Railway Company’s “FY20.3 Annual Investors Meeting” Presentation, May 12, 2020


In Japan
Dan Underwood
Ashton Consulting
+81 3 5425-7220

In the United States
Sloane & Company
Dan Zacchei / Joe Germani
dzachei@sloanepr.com / jgermani@sloanepr.com

Source: Fir Tree Partners

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