NEW YORK (HedgeWorld.com)–Bargain hunting in Japan has been good for Dalton Investments’ James Rosenwald, whose Japanese Management Buyout Fund is up 78% since its inception in April 2003.
But while he has profited from the initial stakes he takes in companies, which typically represent an interest of around 5%, he has not been able to achieve the buyouts indicated by the name of the fund.
Although Mr. Rosenwald describes his overtures as friendly, he typically is snubbed and disappointed by the companies. For instance, in late December Teikoku Hormone Mfg. Co. Ltd. rejected his second offer of US$12.50 per share for all outstanding shares.
The offer was at 40% or more over market price, and with 24 million shares outstanding represented a total of about US$300 million. According to Mr. Rosenwald’s estimate, the business is worth closer to half a billion dollars.
Teikoku Hormone is undervalued because for a number of reasons, he said. Very few people know anything about the company, and there is no coverage of it by analysts. Small- and medium-size companies in Japan tend to be overlooked–a condition that makes them highly attractive for a value investor.