July 11, 2007 – US Investment fund Perry Capital LLC, the third-largest shareholder in NEC Electronics, says it wants to build up to a 25% ownership in order to cleave the business away from its parent group, according to media reports.
Perry Capital wants NEC to reduce its ownership in the publicly-traded unit from ~70% to <50%, claiming its current stake is negatively impacting the unit's stock price and preventing the unit from seeking its own interests. To that end, Perry has offered to buy 30.87 million shares of the unit for 154 billion yen (5000 yen/share, a ~58% premium) to boost its current 4.5% stake by an additional 25%, according to the Nikkei daily paper.
“We strongly believe that with the right business plan and ownership structure, over time the company has the potential to achieve much better results and reach an intrinsic value of around 1,000 billion yen,” Perry Capital wrote in a letter to NEC and NEC Electronics, noted Reuters, adding that US fund NWQ Investment Management Co. is also pressuring NEC to cut its stake in the chip subsidiary.
In a statement, NEC confirmed it had received the written request from Perry. The Nikkei daily noted the company is unlikely to bite on the offer, but will have to come up with a counterproposal to match the 5000/yen share offer and justify its decision to shareholders.
NEC Electronics, which posted a second consecutive loss in FY06 while expanding system chip operations, saw its stock jump 16% on the news of Perry’s offer.