Cross-shareholdings that reduce capital efficiency | Increase Keihanshin's shareholder value
What we hope Keihanshin to increase the shareholder
value as a shareholder are:
I. Improve Corporate Governance
II. Realize the potential value of real estate owned by the Company (e.g. by creating a REIT)

Cross-shareholdings that reduce capital efficiency

Keihanshin Building has disclosed that it holds approximately ¥15 billion of cross-shareholdings as of March 2019. The ratio of the current market value of cross-shareholdings relative to the Company’s equity capital (hereinafter referred to as the “cross-share/capital ratio”) is 23.9%. When calculating the cross-share/capital ratio of listed companies excluding the financial industry, only 8.9% of the companies exceed 20%. So even amongst listed companies, the Company holds a high ratio of cross-shareholdings.

(Source:QUICK Astra Manager)
(As of 8th Jan 2020)

The Company explains the purpose for cross-shareholdings as follows, (1) to facilitate business activities in the real estate leasing business developed by the Company and increase corporate value over the medium to long term; (2) to ensure stable and continuous fund raising for expanding the business and strengthening the management base. The Board of Directors has disclosed that it has decided whether to continue cross-shareholdings after verifying the economic rationality.

(Source:QUICK Astra Manager & YUHO)
(As of 8th Jan 2020. “Both sides” under the last column means Keihanshin Building and the company own each other’s shares)

We find it difficult to see the causal relationship between holding cross-shareholdings and (1) facilitation of business activities and (2) realization of fund raising. In fact, there is a high possibility that former Sumitomo Bank associates, who have “privatized” the Company, are trying to preserve their own position as a director in exchange for unconditionally supporting the management of the issuing companies of cross-share. Directors, entrusted by shareholders to manage the company, should use company assets to improve shareholder value. This situation cannot be overlooked from the standpoint of shareholders.

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