Brandes Proposes 15 Billion Yen Share Buyback Program for Rohm Company Limited Annual Meeting
SAN DIEGO, Apr. 30 /PRNewswire-AsiaNet/ --
Brandes Investment Partners, L.P. ("Brandes") announced today that, on April 30th, 2009 (Japan time), it
submitted to Rohm Company Limited (the "Company"), a technology company based in Japan and listed on the
Tokyo Stock Exchange and the Osaka Securities Exchange, a resolution (the "Resolution") to be submitted for
shareholder approval at the Company‘s upcoming annual meeting of shareholders. On behalf of its investment
advisory clients, Brandes currently holds in excess of 5.5% of the Company‘s shares. This represents an ownership
position built since 2004.
The Resolution calls for the Company‘s Board of Directors to authorize a share buyback program of up to 2.5
million shares for a maximum of 15 billion yen. Brandes believes that the Company should cancel all shares upon
repurchase. A copy of Brandes' letter to the Company and the Resolution are available at Brandes' website:
In April 2007, the Company announced a policy (the "2007 Capital Return Policy") to limit the growth in excess
capital by utilizing 100 percent of free cash flow for share repurchases and/or dividends. While Brandes supported
the 2007 Capital Return Policy as a positive initial step, Brandes believes that—even taking into account current
global business conditions and expected capital needs-the Company still holds an unnecessarily large amount of
low-yielding cash and marketable securities. Brandes recognizes that the Company must retain some capital in the
event business conditions do not improve in the coming years. However, the proposed maximum buyback amount
of 15 billion yen is less than 5 percent of the 311 billion yen in cash, marketable and investment securities held by
the Company as of December 31, 2008. Brandes believes that utilizing this modest amount of the Company‘s
financial assets to repurchase shares—which currently trade below book value per share—would be very beneficial
over the long-term. In addition, the share buyback program would signal the strong faith that the Company has in
its underlying core businesses. For more details on the rationale for the proposal, please see the attached
shareholder proposal excerpt for reference.
Brandes is a U.S. registered investment advisor. Located at 11988 El Camino Real, Suite 500, San Diego,
California, 92130, Brandes managed approximately US$42.4 billion on behalf of institutional and individual
investors, as of March 31, 2009.
The above information is based on the following conditions. This press release is not intended to advocate the
purchase or sale of the Company's stock. Also, the press release is not based on the intentions that Brandes, its
related parties and other 3rd parties solicit proxies for the Company's Annual General Meeting ("AGM").
This press release and the Resolution are based on information currently available as of the date of this
announcement. Brandes has acted in full caution and on best effort, but cannot guarantee that the information is
correct. In addition, the Resolution does not guarantee a specific outcome for the votes at the AGM. Brandes may,
depending on the situation, change or revoke the Resolution.
This press release is not intended to influence the share price of the Company. Brandes does not guarantee any
reaction by the market in regards to the Resolution or the Company‘s response to the Resolution. This Resolution
is intended to propose an idea to the shareholders of the Company at the upcoming AGM, and this press release is
solely intended to explain the background and rationale for submitting the Resolution.
(Reference Material)
Direct excerpt from Shareholder Proposal
(II) Reasons
This proposal reflects the belief that the Company should maintain a balance sheet that is consistent with its core
business as a semiconductor company, and that capital well in excess of such needs should, if opportunities arise,
be deployed in a more value enhancing manner, which would include repurchasing its own shares.
In April 2007, recognizing that significant excess capital had been built up over the years, the Company
announced an enhanced shareholder return policy to limit future growth of excess capital. Pursuant to this policy,
the Company distributes no less than 100% of consolidated free cash flow in the form of share repurchases and/or
dividends. This policy was a positive initial step.
This share buyback proposal aims for the gradual reduction of excess capital towards more appropriate levels.
In addition, the 2.5 million share buyback program would signal the strong faith that the Company has in its
underlying core businesses, and would also be accretive to shareholders considering that the Company shares
trade below book value prices. It is intended for the Company to cancel all shares upon repurchase.
As of December 31, 2008, after the 85.8 billion yen acquisition for the 95% stake in OKI Semiconductor Co., Ltd.,
the Company continued to have 36% of its total assets or approximately 311.8 billion yen comprised of cash,
marketable securities and investment securities (hereafter referred to as "Financial Assets"). The amount
calculated by subtracting debt and other financial liabilities from the Company‘s Financial Assets ("Net Financial
Assets") represented 48% of total shareholders‘ equity of the Company. The magnitude of Financial Assets held by
the Company goes well beyond what it legitimately needs to fund its operations as a semiconductor company. This
considers the needs for future integration costs relating to the OKI Semiconductor Co., Ltd. acquisition, capital
expenditures, research and development costs, as well as possible future business or corporate acquisitions.
In addition, the return that the Company earns on its Financial Assets is less than 2%, well below its estimated
cost of capital and exhibits no improvements.
In general, shareholders should be supportive of any company investment action that can exhibit higher returns
than the buyback of shares, which currently trade below book value prices. The Company, however, has failed to
explain to shareholders, including in its 'New Policy for Return to Shareholders' announced on April 20th, 2007, a
'justifiable amount' or 'return parameters' for the excess capital. Continuing to maintain significant excess Financial
Assets to provide for potential future acquisitions without clarity of return on capital targets is not in the best interest
of the Company or of its shareholders, especially considering the significant opportunity to invest in its own shares
at a discount to book value.
The proposal, if approved and faithfully executed by the Company, would result in the deployment of excess
capital of approximately 15 billion yen, which would reduce the Company‘s total Financial Assets to approximately
297 billion yen. The remaining Financial Assets will be more than sufficient to support its operations and pursue
available future growth opportunities.
SOURCE: Brandes Investment Partners, L.P.
CONTACT: Ray Lewis, of Brandes Investment Partners, L.P.
+1-858-523-3588
PublicRelations@brandes.com
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