Japanese activist fund woos the wealthy

By Alison Tudor and Michael Flaherty

TOKYO (Reuters) - Junichiro Sano's mission as the head of Japanese operations for Dalton Investments is to shake up poorly managed companies, a goal supported by affluent investors in the world's second-biggest economy.

In September, Los Angeles-headquartered Dalton launched a new activist fund in Japan with plans to make 15 to 20 investments over a three-to-five-year period, and a substantial amount of its funding is coming from domestic investors.

Sano said the activist fund plans to be a friendly shareholder in recognition of the more consensual style of doing business in Japan. It will take a few years to establish credibility and get familiar with the company and management before suggesting changes.

The fund's prime targets will be family-owned businesses with market values of around 30 billion yen ($255 million), he said.

If Dalton takes a 10 percent or greater stake and the company refuses to act in accordance with Dalton's plans, then the firm will cash out of its stake or push for a management-led buyout.

"We have billions of dollars in U.S. money backing up our fund," Sano said at Reuters Wealth Management Summit, referring to its likely source of financing for any potential management buyout in Japan.

The friendly approach differs starkly from the strategy of U.S. activists, who typically barrel into companies, agitate for immediate changes and in some cases launch proxy contests.

Sano said the U.S. investor model focuses on shareholders "owning the company" and controlling its fate.  Continued...