Investment fund Steel Partners Japan Strategic Fund (SPJSF) has called on Ezaki Glico Co. to take steps to improve its operating performance or explore strategic alternatives, including the possible sale of the company.
SPJSF, which has been an investor in Glico since 2004 and is now its largest individual shareholder owning around 15% of the company, said it believed the company had tremendous assets but that management had “lost focus”.
“We believe the company has tremendous assets, particularly the Pocky and Pretz brands as well as dedicated employees,” Warren Lichtenstein, managing partner of SPJSF wrote in an open letter. “However, we believe that Glico’s management has lost focus and has failed to make any meaningful contribution to grow corporate value or to lead Glico to its full potential.”

SPJSF stated that net sales had shown virtually no growth since the fiscal year to the end of March, while operating profit and operating profit margin had declined.
For the fiscal year to the end of March operating profit had fallen by 44.2% and net income had declined by 65.9%. Meanwhile, the company’s investments in Nissin Food Products, Taisho Pharmaceutical, TBS, Duskin and House Foods had resulted in a loss of JPY3.6bn (US$34.4m) for the 12 months ended 31 March.
SPJSF said Glico “lags Japanese and international food companies by almost all measures including gross margins, operating income margins and return on equity”.
In light of this “continued weakness”, SPJSF called on Glico to engage a management consulting firm to evaluate its various businesses and offer suggestions to improve its core businesses. SPJSF also urged the company to engage an investment bank to explore strategic alternatives, including the possible sale of the company.
SPJSF noted that on several occasions since 2004, it had made suggestions to management about how it could turn around its performance.

“During this time of continued poor performance, management has insisted that its plans were superior to our suggestions,” Lichtenstein wrote. “However, actual performance over the long-term clearly indicates otherwise and we once again suggest that management seriously consider our proposals.”