Oasis Management launches the “A Better Hokuetsu” campaign (2021)

A shrinking core business and capital that would not move

The heart of this episode lies less in how well or badly the business was run than in the fact that the very arrangement of capital built up by a long-tenured president was called into question. With its footing in the contracting pulp-and-paper industry, Hokuetsu held cross-shareholdings equivalent to most of its market capitalisation — foremost the Daio Paper stake taken on in 2012. Oasis’s demand was an objection from the standpoint of capital efficiency, that this immobile capital be turned toward growth areas, and it can be seen as pressing management on accountability at a level separate from the quality of results. Kishimoto was not removed, but that support approached 40% shows that a considerable portion of shareholders shared the dissatisfaction with capital policy.

The irony is that the Daio Paper shares Oasis wanted sold went on to become, if anything, the main arena of management. The stake Hokuetsu once took on against the background of the founding family’s governance problems turned in time into a foothold from which Daio Kaiun, in which that founding family is involved, could exert influence over Hokuetsu. Hokuetsu has sought a soft landing through a business alliance and a policy of reduction, but the tangle of capital relations has not easily come undone. The arrival of an activist shareholder will be remembered as the event that made visible, from an outside vantage point, the old paper company’s structural problem of a shrinking core business and capital that could not be moved.