Activist fund targets maker of Maruchan ramen noodles over governance, sources say

TOKYO, May 16 (Reuters) - A Singapore-based activist investor is pressing the Japanese maker of “Maruchan” ramen noodles to improve group governance and explain why a majority-owned subsidiary remains listed, two people familiar with the matter told Reuters.

Vasanta Master Fund has filed shareholder resolutions ahead of the June annual general meetings of Toyo Suisan Kaisha Ltd and its 50.9% owned subsidiary, Yutaka Foods Corp , according to the people, who spoke on condition of anonymity because the information was not public.

In letters to both companies sent last month and reviewed by Reuters, the hedge fund said there was a “high risk” of a conflict of interest in transactions between the two, given the stronger position of Toyo Suisan. Both the chairman and president of Yutaka Foods are from its parent.

Representatives for Yutaka Foods and Toyo Suisan declined to comment.

Vasanta’s resolutions highlight so-called “parent-child listings” that remain prevalent in Japan despite official attempts to encourage companies to sell off or buy out listed units. Governance experts say such listings are unfair to subsidiaries’ minority shareholders, whose interests may take a back seat to those of the parent company.

Yutaka Foods purchases most of its raw materials from Toyo Suisan, which are then processed into noodles and other packaged foods that are mostly sold back to the parent, according to recent company filings.

Toyo Suisan’s “Maruchan” ramen noodles are a staple for university students in North America. It is the market leader for instant noodles in both the United States and Mexico.

Vasanta, managed by Singapore-listed investment firm TIH Ltd , is Yutaka Foods’ second-largest shareholder with nearly 5% and holds a small stake in Toyo Suisan, according to the sources.

The fund has also proposed that Yutaka increase dividends and create an audit committee to strengthen corporate governance, according to its letter to the company.

While some 260 listed subsidiaries remain among Japan’s roughly 3,700 listed firms, according to Tokyo Stock Exchange data, some high-profile firms have addressed the “parent-child” issue in recent years.

Hitachi Ltd has sold or taken control of more than a dozen listed subsidiaries, including Hitachi Chemical. Nippon Telegraph and Telephone Corp (NTT) launched a $40 billion buyout in 2020 to take its wireless business private. (Reporting by Makiko Yamazaki; Editing by David Dolan and Edmund Klamann)