Warren Lichtenstein has gone east to find investment opportunities and come back with knowledge, perhaps, of how to bridge the U.S.-Japan business-culture divide.
“The principle is to hold open, frank dialogue with companies you invest in,” says Lichtenstein, founder of activist $5 billion hedge fund firm Steel Partners, based in New York. “Couple that with a strong local presence of smart local partners with lots of experience and understanding of local market and business culture.”
Last year Steel’s hostile takeover bid for Japanese condiment maker Bull-Dog Sauce Co. was thwarted by an antitakeover, poison-pill strategy. Steel mounted a legal challenge but lost and sold off its shares in April, pocketing a small profit. The encounter offered a lesson: Western activist investment can be seen as unseemly in Japan.
When hostility fails, then, diplomacy may work, a notion Lichtenstein appears to have embraced.
In June, Steel Partners managed to block the reelection of most of the board of Japanese wig maker Aderans Holdings Co. It was the first, but probably not the last, time that a foreign shareholder had unseated the management of a publicly owned company in Japan. Lichtenstein’s support for the sale of Malvern, Pennsylvania–based IKON Office Solutions to Tokyo-based Ricoh Co., the printer and photocopier maker, offers a clue as to how he did it. Ricoh will pay $17.25 a share, or about $1.6 billion in cash, for the last independent U.S. office equipment distributor, capping a wave of consolidation among manufacturers and distributors in the sector. The deal worked for Steel because it bought millions of shares at $10.50 four years ago, holding as many as 14 million, or close to 15 percent of the company, making it the biggest shareholder. The firm sold most of that stake for $17 a share on August 17, the day of the announcement. Lichtenstein says that after building Steel’s position, he insisted on “constant and open dialogue with the management team: We met them all the time.”
Lichtenstein has — or had — a reputation for playing rough. In 1999 he invested in United Industrial Corp., a Hunt Valley, Maryland–based defense contractor that made surveillance drones later used in Iraq. He joined its board and wrote public letters critical of directors and management.
His aggression might not have been tolerated in Japan, but it proved fruitful in the U.S. In fall 2007, Textron, a Providence, Rhode Island–based conglomerate that makes Cessna jets, bought United for $81 a share, a 440 percent return for Steel.
