Hoya Founder's Grandson Calls Pentax Acquisition `Failure,' Seeks Reforms

Hoya Corp. needs a more diverse, transparent board to help prevent “failures” such as the $1 billion purchase of Pentax Corp., said Yutaka Yamanaka, a grandson of the Japanese lens maker’s founder.

Yamanaka, 33, on May 11 submitted a 15-point shareholder proposal which includes calls for disclosure of individual directors’ pay and limits on concurrent board membership. Hoya’s 2007 acquisition of camera and endoscope maker Pentax to expand its medical care business was“overpriced,” he said.

“The proposal is aimed at establishing at Hoya a system capable of advancing new businesses such as ophthalmology medicines and research and development,” Yamanaka, whose grandfather Shigeru Yamanaka co-founded Japan’s largest maker of optical glass in 1941, said in an interview yesterday.

Japanese companies facing shareholder activist proposals fell to 19 last year, from a peak 23 in 2007, as the global financial crisis drained funds, according to shareholder advisory group Glass, Lewis & Co. Hoya, whose overseas investors own more than half of its outstanding stock, received no shareholder proposals last year.

Hoya has received multiple agenda items and plans to include them in the notice to its shareholders, the company’s spokesman Naoji Ito said, without elaborating.

Shareholder Votes

Yamanaka’s proposals also seek an end to cumulative voting, which lets shareholders withhold votes from some nominees in order to cast multiple votes for others. The changes to the charter would require a two-thirds vote at Hoya’s annual shareholder meeting on June 18.

“A 15-item shareholder proposal at a Japanese company is unheard of, making voting by overseas investors a major point of interest at this year’s general shareholder meeting,” Jun Frank, a San Francisco-based director of Asian proxy research at Glass, Lewis, said via e-mail.

Hoya gained 0.4 percent to 2,128 yen as of 10:29 a.m. in Tokyo trading, compared with a 0.9 percent decline by the benchmark Nikkei 225 Stock Average. The company’s shares have lost 14 percent this year, compared with a 9.7 percent drop in the Nikkei 225.

Overseas shareholders such as JPMorgan Chase & Co., Capital Research & Management Co. and Deutsche Bank AG, owned 51 percent of Hoya’s outstanding shares as of March 2009, according to the company’s data. Yamanaka said he owns less than 1 percent.

Independent Board

Five of Hoya’s eight directors are independent of the company, the highest ratio among Japan-based industrial goods and services companies, including TDK Corp., Nidec Corp., according to Bloomberg data.

“My goal is not to cause a confrontation at the shareholder meeting, but rather to find way to increase the company’s value,” Yamanaka said.

Net income rose 51 percent to 37.9 billion yen ($421 million) in the 12 months ended March 31, while sales declined 9 percent to 413.5 billion yen, Tokyo-based Hoya reported earlier this month. Operating profit, or revenue minus the cost of goods sold and administrative expenses, rose 8.9 percent to 64.3 billion yen, after Pentax operations turned profitable, the company said.

The company’s initial offer for Pentax in 2006 was about 10 percent higher than its market value at the time.

Hoya’s health-care division, which makes contact lenses and surgically implanted lenses, accounted for about 13 percent of the company’s overall sales last fiscal year, and had a 23 percent operating income margin.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net; Eijiro Ueno in Tokyo at e.ueno@bloomberg.net.

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