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3D Calls on Outside Directors to Address Sapporo’s Prolonged Underperformance

TOKYO--(BUSINESS WIRE)--3D Investment Partners Pte. Ltd. as investment manager of 3D OPPORTUNITY MASTER FUND (together "3D") is publishing a letter (dated November 3, 2022, the “Letter”) sent to the Outside Directors of Sapporo Holdings Limited (2501.T, "Sapporo" or “the Company”).

3D, one of the major shareholders of Sapporo, has been engaging in constructive dialogue with Sapporo's management and Outside Directors with the aim of enhancing corporate value. 3D believes it is essential that Outside Directors seek opinions and new ideas from shareholders as they fundamentally reexamine Sapporo's existing management policies.

Private dialogue with portfolio companies is often a precursor to strategic change. On occasion, 3D chooses to make its views public. Sapporo's Outside Directors have consistently ignored 3D’s requests to explore new ways of unlocking and compounding value; for this reason, 3D believes it is urgent to draw wider attention to Sapporo’s underperformance, which can be addressed only if the Outside Directors absorb feedback from a range of stakeholders and take substantive action.

Sapporo’s new Medium-Term Management Plan (the “MTMP”) must address the root causes of Sapporo’s prolonged underperformance. It cannot be an extension of the Company’s current strategic direction. 3D maintains significant doubts as to whether this forthcoming MTMP, to be announced by the end of 2022, will be able to reverse Sapporo’s chronic underperformance vis-à-vis its domestic and global peers.

Sapporo’s Track Record Necessitates a Fundamental Rethink of its Strategic Direction

Sapporo’s underperformance relative to its competitors is well-established:

  • Sapporo's average ROE over the past five years is just 2%, well below the average of 13% for global peers. Sapporo also underperforms domestic peers: 14% for Kirin Holdings (“Kirin”) and 11% for Asahi Holdings ("Asahi”).1
  • Sapporo's average operating margin for its alcoholic beverage business over the past five years has been 1%, well below the average of 13% for global peers, and 12% and 10% for Kirin and Asahi, respectively.2
  • Sapporo's Total Shareholder Return (“TSR”) over the past 15 years is -7%, well below the average of 226% for global peers, and below 181% and 88% for Asahi and Kirin respectively.3

Sapporo’s management has failed to achieve almost all of its past targets communicated to the market, eroding trust in management.

  • Over the past 15 years, Sapporo has never achieved any of its sales targets, and the operating profit target has been achieved only once.4
  • Sapporo’s management team fell short on all targets set on a consolidated basis (achieving sales of JPY600 billion by 2016, for example). These targets, part of Sapporo’s "New Management Framework," were communicated to the market immediately after the introduction of its poison pill in 2007.

In September 2022, 3D presented to the Board a 200+ page plan of action (the "Value Enhancement Plan") recommending a fundamental shift in strategy. The Value Enhancement Plan, informed by the Corporate Governance Code, is objective, based solely on publicly available information. Upon receipt of "specific shareholder proposals, etc. with reasonable grounds," it is Sapporo’s responsibility to respond promptly and to take appropriate action.5 Unfortunately, 3D has little confidence that a robust discussion is underway in the boardroom.

Outside Directors Should Lead an Independent Examination

In October 2022, 3D requested that Sapporo's Outside Directors initiate a comparative review of the Value Enhancement Plan and the new MTMP formulated by Sapporo's management team. According to the Corporate Governance Code, a systematic review of existing management policies, which necessarily includes receptivity to new ideas and strategies available to the Company, falls under the purview of Outside Directors, who are not bound by internal bias or shackled to previous strategic decision-making.6

3D’s Appeal for Transparency and Accountability

3D believes that communication problems underlie the misalignment between Outside Directors and the shareholders they are elected to represent. Outside Directors need to solicit a broader range of shareholders’ views on what they expect from Outside Directors.

In the attached Letter, 3D asks Outside Directors to take the following measures:

  1. Prior to the announcement of the new MTMP, Outside Directors should meet with the portfolio managers of Sapporo's major institutional investors to obtain a wide range of opinions on Sapporo’s management issues.7
  2. Outside Directors should jointly explain to shareholders the results of the feedback sessions. 8
  3. Outside Directors should comprehensively reflect this range of opinions in the new MTMP.9
  4. When the new MTMP is announced, all Outside Directors should be present to explain how shareholder concerns have been addressed, the reasons for any opinions excluded, how they plan to uphold shareholders’ interests in the future, and how they understand their own role at Sapporo going forward. 10

3D will continue to engage constructively with Sapporo’s management team and Outside Directors. 3D remains hopeful that with meaningful input from shareholders, Outside Directors will appreciate the responsibilities entrusted to them and explore how best to increase Sapporo's corporate value.

About 3D Investment Partners Pte.

3D Investment Partners Pte. Ltd. is an independent Singapore-based Japan focused value investing fund manager founded in 2015. 3D Investment Partners Pte. Ltd. focuses on partnering with managements who share its investment philosophy of medium- to long-term value creation through compound capital growth and a common objective of achieving long-term returns.


This press release is provided for informational purposes only and does not constitute an offer to purchase or sell any security or investment product, nor does it constitute professional or investment advice. This press release should not be relied on by any person for any purpose and is not, and should not be construed as investment, financial, legal, tax or other advice.

3D Investment Partners Pte. Ltd. and its affiliates and their related persons (“3DIP”) believe that current market price of Sapporo does not reflect its intrinsic value. 3DIP acquired beneficially and/or economic interest based on its own idea that Sapporo securities have been undervalued and provides attractive investment opportunity and may in the future beneficially own and/or have an economic interest in, Sapporo securities. 3DIP intends to review its investments in the Sapporo on a continuing basis and, depending upon various factors including, without limitation, the Sapporo's financial position and strategic direction, the outcome of any discussions with Sapporo, overall market conditions, other investment opportunities available to 3DIP, and the availability of Sapporo securities at prices that would make the purchase or sale of Sapporo securities desirable, 3DIP may, from time to time (in the open market or in private transactions), buy, sell, cover, hedge, or otherwise change the form or substance of any of its investments (including the investment in Sapporo securities) to any degree in any manner permitted by any applicable law, and expressly disclaims any obligation to notify others of any such changes.

3DIP provides no representation or warranty, either expressed or implied, in relation to the accuracy, completeness, or reliability of the information contained herein, nor is it intended to be a complete statement or summary of the securities, markets, or developments referred to herein. 3DIP expressly disclaims any responsibility or liability for any loss howsoever arising from any use of, or reliance on, this press release or its contents as a whole or in part by any person, or otherwise howsoever arising in connection with this press release. 3DIP hereby expressly disclaims any obligation to update or provide additional information regarding the contents of this press release or to correct any inaccuracies in the information contained in this press release.

3DIP disclaims any intention or agreement to be treated as a joint holder (kyodo hoyu sha) under the Financial Instruments and Exchange Act of Japan, a closely related party (missetsu kankei sha) under the Foreign Exchange and Foreign Trade Act with other shareholders, or receiving any power or permission to represent other shareholders in relation to the exercise of their voting rights, and has no intention to solicit, encourage, induce or require any person to cause other shareholders to represent such voting rights.

3DIP does not have the intention to make a proposal, directly or through other shareholders of Sapporo, to transfer or abolish the business or asset of Sapporo and/or Sapporo group companies at the general shareholders meeting of Sapporo. 3DIP does not have the intention and purpose to engage in any conduct which constricts the continuing and stable implementation of business of Sapporo and/or Sapporo Holdings group companies.

This press release may include content or quotes from news coverage or other third party public sources (“Third Party Materials”). Permission to quote from Third Party Materials in this press release may neither have been sought nor obtained. The content of the Third Party Materials has not been independently verified by 3DIP and does not necessarily represent the views of 3DIP. The authors and/or publishers of the Third Party Materials are independent of, and may have different views to 3DIP. The quoting Third Party Materials on this press release does not imply that 3DIP endorses or concurs with any part of the content of the Third Party Materials or that any of the authors or publishers of the Third Party Materials endorses or concurs with any views which have been expressed by 3DIP on the relevant subject matter. The Third Party Materials may not be representative of all relevant news coverage or views expressed by other third parties on the stated issues.

In respect of information that has been prepared by 3DIP (and not otherwise attributed to any other party) and which appear in the English language version of this press release, in the event of any inconsistency between the English language version and the Japanese language version of this press release, the meaning of the Japanese language version shall prevail unless otherwise expressly indicated.

1 Bloomberg. Global competitors refer to the following companies: AB InBev, Asahi Group, Beer Thai (Chang), Carlsberg, CCU, China Res. Snow Breweries, Constellation Brands, Diageo (Guinness), Efes Group, Heineken, HiteJinro, Kirin, Molson Coors, Olvi Group, Pearl River, Royal Unibrew, Saigon Beverage Corp. (SABECO), San Miguel Corporation, Tsingtao Brewery Group, United Breweries Group, Yanjing

2 Bloomberg. For Sapporo, Asahi, and Kirin, only the alcoholic beverage-related business is covered. Figures for all other competitors are company-wide. For Kirin, the average of FY2018-FY2021 where figures for the alcoholic beverage-related business are disclosed.

3 Bloomberg. TSR is calculated based on following criteria: dividends are reinvested, the period is from November 1, 2007 to October 31, 2022, if the company is not listed as of November 1, 2007, the TSR is obtained for the longest period available on Bloomberg.

4 Refer to Sapporo's past disclosures. The management targets for each year are based on the earliest date of announcement.

5 Practical Guidelines for Business Restructuring - Toward Reform of Business Portfolio and Organization (Business Restructuring Guidelines), 4.3

6 Practical Guidelines for Outside Directors (Guidelines for Outside Directors) 2.1.2, Practical Guidelines for Business Restructuring - Toward Reform of Business Portfolios and Organizations (Guidelines for Business Restructuring) 3.2.1, Practical Guidelines for Group Governance Systems (Guidelines for Group Governance Systems) 3.2. 3.2.1 Practical Guidelines for Group Governance Systems (Group Guidelines) 3.2. Corporate Governance Code Principles 4-7(i) (iv)). 2.1.2 and 6.1 of the Guidelines for Outside Directors, 3.2 of the Guidelines for Business Restructuring, and 2.2.4 of Appendix 1 of the Practical Guidelines on Corporate Governance Systems (CGS Guidelines)

7 Practical Guidelines for Independent Directors 6.1 and Business Transformation Guideline 3.2.2

8 Corporate Governance Code Principle 5-2, Practical Guidelines for Independent Directors 6.2, CGS Guidelines 8 in Appendix 1

9 Corporate Governance Code Principles 4-7(i)(iv)?Practical Guidelines for Independent Directors 2.1.2 and 6.1, Business Transformation Guideline 3.2, CGS Guidelines 2.2.4 in Appendix 1

10 Corporate Governance Code Principle 5-2, Practical Guidelines for Independent Directors 6.2, CGS Guidelines 8 in Appendix 1


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