3D Investment Partners Pte. Ltd. (“3D”), the asset management company of 3D OPPORTUNITY MASTER FUND, has released a supplemental presentation in response to the presentation published on February 28, 2025, by Sapporo Holdings Limited (“Sapporo” or “the Company”) (2501.T). This comes ahead of Sapporo’s 101st Annual General Meeting of Shareholders (“AGM”) scheduled for March 28, 2025.
3D’s Concerns with Sapporo’s February 28 Presentation
Sapporo’s February 28 Presentation failed to sufficiently address or alleviate our concerns regarding the Company’s governance, Board composition, and commitment to optimizing the proceeds from its Real Estate business divestiture. Additionally, the Partners Company’s presentation does not adequately demonstrate the level of capital discipline required to ensure the proceeds are strategically deployed in a manner that enhances long-term shareholder value.
As Sapporo’s largest shareholder, holding approximately 19% of its outstanding shares, 3D has persistently sought constructive engagement with Partners the Company’s Board and executives to improve governance, oversight, and corporate value. Our engagement has already influenced positive changes, including driving the strategic direction towards the divestiture of the Real Estate business. These developments have contributed to Sapporo’s share price outperforming its competitors and the broader market.
While we acknowledge and support Sapporo’s efforts to refocus on its core Alcoholic Beverages business and divest most of its real estate assets, we remain deeply concerned that the strategic review process currently underway is not structured to maximize corporate value. Partners Furthermore, given Sapporo’s historical capital allocation missteps,Partners the Company’s stated intent to deploy proceeds from the divestiture into large-scale investments in the beer business raises significant concerns. Without proper oversight and enhanced capital discipline, Sapporo risks repeating past errors that have led to substantial impairment losses.
Persistent Weaknesses in Sapporo’s Governance and Financial Performance
Sapporo has consistently lagged behind its peers, with the lowest profit margin and return on equity (ROE) among all publicly traded beer companies worldwide. Additionally, the Company has recorded impairment losses on all of its major overseas alcoholic business acquisitions. Notably, it has never achieved its sales and operating profit targets, including the final-year goals of its mid-term management plans, over the past 19 years.
These troubling trends underscore the need for a more robust governance framework to prevent further missteps and ensure that Sapporo’s leadership acts in the best interests of shareholders. However, Sapporo’s February 28 Presentation fails to acknowledge or address these fundamental issues. Instead, the Company attempts to emphasize procedural aspects, such as the frequency of Audit and Supervisory Committee meetings and the proportion of independent directors on the Board, as evidence of strong corporate governance.
Inadequate Response to Shareholder Concerns
We firmly believe that corporate governance effectiveness should be measured by tangible outcomes rather than procedural metrics. Sapporo’s current Board composition and governance structures have not translated into superior performance or shareholder value. The Company’s track record—a suboptimal business configuration, consistent underperformance in its Alcoholic Beverages segment, and repeated value-destructive acquisitions—demonstrates the inadequacy of its governance framework.
Moreover, despite Sapporo’s assertion that its Board structure is optimal for improving corporate value, shareholders have not benefitted from its governance approach. The Company’s reluctance to commit to maximizing the proceeds from its Real Estate business divestiture further illustrates the need for enhanced oversight. The Board’s failure to make a clear and explicit pledge in this regard signals a lack of transparency and accountability to shareholders.
Sapporo’s February 28 Presentation also does not contest several critical concerns raised by 3D:
- The chairperson of the Audit and Supervisory Committee, a role that demands high independence, is currently held by Mr. Miyaishi—a former executive of Sapporo Breweries—rather than an independent outside director.
- Mr. Miyaishi, as a director of Sapporo Breweries, was directly involved in the acquisitions of Anchor Brewing and Stone Brewing. Both acquisitions resulted in entire or significant impairment losses, raising questions about his suitability to oversee financial and operational audits.
- Mr. Miyaishi lacks expertise in finance, accounting, real estate, and capital allocation, further undermining the effectiveness of his role in overseeing key strategic decisions.
The Need for Stronger Oversight and Board Expertise
To address these governance shortcomings, 3D is advocating for a strengthened Audit and Supervisory Committee composed of independent directors with expertise in financial management, accounting standards, mergers and acquisitions (M&A), capital allocation, and real estate transactions. This enhancement is essential for ensuring that Sapporo makes well-informed decisions regarding its business strategies, particularly with respect to the divestiture of the Real Estate business and the reinvestment of proceeds.
As part of this initiative, we have proposed the appointment of Mr. Paul Brough as an independent outside director and a member of the Audit and Supervisory Committee. Mr. Brough is highly qualified for this role, with extensive experience in financial accounting, M&A, business restructuring, asset sales, and corporate governance.
Addressing Misleading Statements About Mr. Brough
Sapporo’s February 28 Presentation attempts to justify its opposition to Mr. Brough’s appointment by making misleading claims regarding his independence and qualifications. To clarify:
- Mr. Brough is entirely independent of 3D.
- He is not an employee of 3D and has never been nominated or recommended by 3D for any other public company board.
- He has no involvement in 3D’s operations, investments, or decision-making processes.
- If appointed as an outside director, Mr. Brough intends to terminate his advisory agreement with 3D to eliminate any perceived conflicts of interest.
- Mr. Brough meets the independence criteria set forth by both the Tokyo Stock Exchange and Sapporo’s publicly disclosed governance guidelines.
Furthermore, Sapporo acknowledges Mr. Brough’s expertise in financial accounting but fails to recognize his broader skill set, which includes significant experience in M&A, shareholder engagement, corporate restructuring, and real estate asset management. His prior roles at Toshiba Corporation, where he contributed to the company’s strategic review process, and Noble Group Holdings Limited, where he played a key role in restructuring, demonstrate his ability to navigate complex corporate challenges effectively.
