* Taiyo aims to be a long-term investor in portfolio
* Invested in Roland for 7 years before joint deal
* Few foreign activist investors succeed with aggressive
By Ritsuko Ando
TOKYO, May 16 When activist investor Brian
Heywood first met the newly appointed CEO of Japanese musical
instruments maker Roland Corp over a year ago, he
launched into a passionate discussion about music rather than
the company's weak finances.
That friendly approach led to a series of conversations on
how to improve its business and culminated in an announcement
this week of a joint 42.6 billion yen ($419.4 million)
management buyout (MBO) by CEO Junichi Miki and Heywood's Taiyo
Pacific Partners, a fund based in the United States but focused
The move takes the company private and is aimed at helping
it push through drastic and potentially volatile restructuring.
It also marks the rise of a new and friendly style of
shareholder activism in Japan, where funds such as Steel
Partners have grappled with a conservative corporate culture
criticised for prioritising long-standing business ties over
"Our intention is never to run the company," Heywood told
Reuters in an interview. Taiyo limits its investments to
companies that take a cooperative stance. "We want to work with
smart management that can do the right thing."
In a major endorsement of such an approach, it was chosen
last month as one of the asset managers for Japan's Government
Pension Investment Fund, the world's largest public pension fund
which is undergoing reforms to cope with the country's ageing
Heywood, a former missionary who is fluent in Japanese, said
Taiyo aimed to be a long-term investor in the companies in its
portfolio and wasn't anxious for a hasty exit.
In fact, Taiyo had already invested in Roland, which makes
instruments such as synthesizers, digital pianos, and guitar
amps, for seven years before the MBO deal. It is currently
invested in 45 companies in Japan and manages over $2 billion.
Heywood acknowledged that kind of investment timeframe isn't
for everyone. It's also not clear whether and how long it will
take for the deal to turn a profit for Roland.
"Obviously, we're a fund and I have to make money for our
investors. So there will be some exit for us some time," he
said. "But we were investors in them for seven years before
this. So seven years is not a long time for us."
Few foreign activist investors, who have tried more
aggressive moves, have succeeded.
U.S. private equity company Cerberus was locked in a bitter
dispute last year with railway and property conglomerate Seibu
Holdings last year, when Cerberus tried and failed to
take control of the company's board.
The two sides appeared to set aside differences earlier this
year to prepare for an IPO, but Cerberus pulled out of the
recent offering due to what sources said was dissatisfaction
Steel Partners forced the removal of management at Japanese
wig maker Aderans in 2008, but the company's shares
have since fallen. The fund tried and failed to replace
directors at brewer Sapporo Holdings in 2010.
While the relationship between Sony Corp and
billionaire Daniel Loeb's Third Point has been more civil, the
electronics giant has still rebuffed the hedge fund's suggestion
to spin off its entertainment arm.
Roland's Miki said the company had known for years that it
needed to restructure but had moved slowly - too slowly, he
realised after seeing rivals at trade shows earlier this year
launching new products and reshaping themselves through
restructuring and M&A.
Looking back on their first meeting, the former sound
engineer said he was struck by Heywood's enthusiasm.
"He started talking about instruments right away, so the
impression wasn't really that of a normal American. I got the
sense he was very passionate," he said.
($1 = 101.5750 Japanese Yen)
(Additional reporting by Chikafumi Hodo and Susan Thomas)