3D Investment Partners Recommends Toho Holdings Shareholders Vote Against the Reappointment of CEO Hiromi Edahiro, and Outside Director Yoshiaki Kamoya and Hidehito Kotani at the Company's 77th Annual General Meeting

Business Wire

27-05-2025

TOKYO--(BUSINESS WIRE)--3D Investment Partners Pte. Ltd., the investment manager of 3D Opportunity Master Fund (collectively referred to as '3D' or 'we,' meaning either or both of 3D Investment Partners Pte. Ltd. and 3D OPPORTUNITY MASTER FUND), today released a shareholder presentation highlighting the ongoing and serious corporate governance failures at Toho Holdings Co., Ltd. ('Toho HD' or the 'Company') (TOKYO: 8129). The presentation outlines in detail the reasons why 3D recommends shareholders vote against the reappointment of Representative Director, President and CFO Hiromi Edahiro ('Mr. Edahiro') and, Outside Director Yoshiaki Kamoya ('Mr. Kamoya') and Hidehito Kotani ('Mr. Kotani').
Link to presentation: https://www.3dipartners.com/engagement/toho-maximizing-corporate-value-en-202505.pdf
3D has been a shareholder of Toho HD since 2020 and currently holds approximately 22% 1 of the voting rights, making it one of the Company's largest shareholders. Over the past two years, 3D has engaged in constructive dialogue with Toho HD with the sole aim of enhancing long-term corporate value.
1 Calculated as: (Number of shares held by us + Number of potential shares from convertible bonds with stock acquisition rights held by us) ÷ (Total number of issued shares – Treasury shares + Number of potential shares from convertible bonds with stock acquisition rights held by us).
Management Issues at Toho HD
3D believes that the fundamental management challenges facing Toho HD—specifically, the low profitability of its core business and an inefficient balance sheet—stem from a serious deficiency in its corporate governance structure. In August 2023, we submitted concrete proposals to address these management issues to Toho HD, which were disclosed in our press release dated March 25, 2025. However, due to Toho HD's dysfunctional governance, the Board of Directors was unable to objectively evaluate and implement recommendations which would improve the Company's profitability and value. As a result, the majority of our proposals were dismissed, and the underlying issues remain unresolved.
As long as this governance failure persists, we believe that these management challenges will remain unresolved and long-term corporate value growth will continue to be impaired.
Repeated Scandals and Involvement in the Nihon University Incident
Toho HD has been subject to administrative sanctions for its involvement in bid-rigging on three separate occasions. Nevertheless, the Company has never conducted a thorough investigation of these scandals led by independent experts and has consistently avoided addressing the root causes of its misconduct.
In addition to the bid-rigging incidents, it has recently come to light that Toho HD was involved in a fraudulent scheme related to Nihon University Hospital (the 'Nihon University Incident'). In this case, a part of funds that should have been returned from Toho HD as purchase rebates were instead funneled to third parties by the Company through fictitious consulting contracts, and resulting in the illicit payments. The Company was obviously able to notice that the scheme involved such clear compliance violations at the time of execution since another peer company reportedly refused to participate.
An attitude that is suspected as Concealment
Despite the seriousness of the Nihon University Incident, Toho HD has failed to provide any public explanation. Statements made by Mr. Edahiro during media interviews are in conflict with case records, raising serious concerns about the credibility and transparency of his explanations. Moreover, Toho HD has refused our request to establish a third-party investigative committee that is independent from the Company. Furthermore, during meetings we have had with the Company, senior executives (Shikkoyakuin) have asked us to refrain from further inquiries. This response, among others, can only be interpreted as attempts to conceal the truth.
Toho HD's assertion that "There was no legal violation," and the decision to take no further action, do not meet the standards of governance required for a listed company. What shareholders are demanding is not the mere absence of illegality, but the presence of sufficient transparency and a sound governance framework necessary for long-term corporate value creation.
Risks of Irreparable Damage to Corporate Value
The Board's continued failure to address the Company's compliance issues threatens to erode trust among business partners, potentially leading to revenue losses. This poses the risks of irreparable damage to corporate value. Based on its unwillingness to address these serious issues, we believe the Board of Directors is fundamentally unfit to enhance corporate value.
Our Recommendation Regarding Voting at the General Meeting
In light of the urgent need to rectify Toho HD's governance failures, we strongly recommend that shareholders vote against the reappointment of Mr. Edahiro (Representative Director, President, and CFO), Mr. Kamoya and Mr. Kotani (Outside Directors) for the following reasons:
Regarding Mr. Edahiro:
He was centrally involved in the management of the companies, which are Toho HD or its subsidiary involved in two prior bid-rigging scandals as well as the Nihon University Incident, and must be held accountable for the ongoing governance failures.
His public statements have critically contradicted case records, raising serious concerns about the credibility and transparency of his explanations.
He was appointed CEO without any external comparison or being held accountable for past scandals, through an internal succession process that lacks transparency.
Regarding Mr. Kamoya:
Despite being the longest-serving outside director, he is not a member of the Special Committee on Governance Enhancement, reflecting a troubling indifference toward governance and compliance issues.
Although he should have taken a central role in the Nomination Committee as a previous chairperson thereof, he did not even try to pursue the responsibilities for the past scandals and failed to fulfill his responsibilities of exercising proper oversight in selecting a qualified successor CEO. Furthermore, the internal CEO succession process lacked transparency and, to our knowledge, no attempt was made to look for and evaluate outside candidates.
He currently serves as an advisor to a company with which Toho HD holds cross-shareholdings, casting significant doubt on his independence.
Regarding Mr. Kotani:
As a member of the Nomination Committee, he was involved in last year's process of appointing Mr. Edahiro as CEO.
Furthermore, this year, regarding the decision to reappoint Mr. Edahiro as CEO, Mr. Kotani has not fulfilled his responsibilities as a chairperson of the Nomination Committee who should play the key role of the committee. The internal CEO succession process lacked transparency and, to our knowledge, no attempt was made to look for and evaluate outside candidates.
To Shareholders
As outlined above, we understand that Toho HD is suffering from a critical failure of governance, which in our view has led to the neglect of pressing management issues, the loss of growth opportunities, and significant risk of value destruction due to unresolved compliance concerns.
We respectfully urge shareholders to review our presentation and support the restoration of sound governance and sustainable long-term value creation at Toho HD by voting against the reappointment of Mr. Edahiro, Mr. Kamoya and Mr. Kotani at the Company's upcoming Annual General Meeting.
About 3D Investment Partners Pte. Ltd.
3D Investment Partners Pte. Ltd. is an independent Singapore-based Japan focused value investing fund manager founded in 2015. 3D Investment Partners Pte. Ltd. focuses on partnering with management[s] who share its investment philosophy of medium- to long-term value creation through compound capital growth and a common objective of achieving long-term returns.
Disclaimer
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3D Investment Partners Pte. Ltd. and its affiliates and related persons ('3DIP') of either believe that the current market price of Toho HD does not reflect its intrinsic value. 3DIP acquired beneficial and/or economic interests based on its own idea that Toho HD securities have been undervalued and provide an attractive investment opportunity and may in the future beneficially own, and/or have an economic interest in, Toho HD securities. 3DIP intends to review its investments in Toho HD on a continuing basis and, depending upon various factors including, without limitation, Toho HD's financial position and strategic direction, the outcome of any discussions with Toho HD, overall market conditions, other investment opportunities available to 3DIP, and the availability of Toho HD securities at prices that would make the purchase or sale of Toho HD securities desirable, 3DIP may, from time to time (in the open market or in private transactions), buy, sell, cover, hedge, or otherwise change the form or substance of any of its investments (including the investment in Toho HD securities) to any degree in any manner permitted by any applicable law, and expressly disclaims any obligation to notify others of any such changes.
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