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As a day out from Tokyo, the Kawamura Memorial DIC Museum of Art in Chiba is hard to beat: Rembrandt, Monet, Picasso and Chagall in the morning, lunch at the outstanding Belvedere restaurant, perhaps, then Rothko, Pollock, Twombly, Ernst and Magritte in the afternoon.
The scale and fabulousness of the art collection is absolutely clear; its ownership, and how far shareholders should be encouraged to push for greater disclosure, much less so.
DIC Corp, a lossmaking, heavily indebted chemicals company, owns the museum and an unstated proportion of this collection. Circumstances look primed to force the issue but is DIC — or Japan at large — ready to think of the art held by the company as the property of shareholders?
With a famously aggressive fund (Oasis Management) now a top-three shareholder in DIC, battle lines of activism, ideology and the societal purpose that companies serve are being drawn around the museum. How they are fought will reverberate far, far beyond the Chiba countryside.
The clash should also frame another emerging reality of the Japanese market. As the world’s most heavily activist-targeted companies outside the US, Tokyo-listed stocks have an undeclared but transformative bargain to consider. Delist now, or accept that remaining listed is going to be a more flinty, humbling and accountable ordeal than ever before.
Investors, the government and the Tokyo Stock Exchange have made it increasingly clear what standards (of governance, capital efficiency, performance targets, valuation levels, etc) listed companies will be held to. Heavily implied in this build-up of pressure is that they must properly accept as a principle that they are owned by, and work for, their shareholders.
There will be wriggle room with Japanese characteristics, of course — there will be no sudden switch to full-blown, US-style shareholder-primacy capitalism. Companies that stay listed, however, should expect such room to be ceded grudgingly and investors to become ever more emboldened.
Meanwhile, corporate Japan has an untold hoard of art, and the questions around it provide a sharp-edged focus for all this. Earlier this year, the Nikkei Average finally recovered to its peak in the 1980s bubble. That has helped remind everyone just how supremely acquisitive Japanese companies and their founding families were back then, particularly when it came to fine art. But where did it all go, and how is it valued on the books?
In many instances, say specialist analysts now tracking the treasures hidden beneath the opaque disclosure of corporate Japan, listed companies in effect bought and own the art that their founders chose for themselves. DIC and others have been very vague on where it is and what it is worth. Some is on public display, some hangs in boardrooms, a lot is believed to be in private homes.
Buried towards the back of its latest annual securities report, DIC declares Y67bn ($440mn) of corporate assets “that do not belong to any reportable segment”. This sum, it says, comprises deferred tax assets, assets of the DIC research institute and assets of the museum. The company refuses to break this trove down any further, and will not say how much of the art in the museum belongs to DIC and how much to the founding family. Investors who have delved further believe that the company owns the majority of it, and that it could altogether be worth many hundreds of millions of dollars, perhaps even $1bn.
So how fierce will the pressure be on DIC to disclose everything more fully and start selling the art to lower debt and raise corporate value? Under its current leadership, the TSE has mounted a campaign cajoling companies to raise their valuations to above a price-to-book ratio (market capitalisation versus the stated value of assets) of 1.0x. DIC has a ratio of just 0.79x and says it is trying to raise that as a matter of priority. In a recent presentation, the company said it would look into the management of the art museum, but provided no details.
DIC’s investors may now forcibly argue that the art needs to be treated as shareholder-owned, and more clearly accounted for. The company may push back, arguing that its collection should not be treated like any other asset, and cite the wider benefit to Japan of its maintaining a fabulous museum.
Whether they intended it to work out this way or not, the pressures created by the government and TSE are going to create more and more crunch moments. One of the more immediate ones may be to force a debate on the desirability of corporate Japan still owning — and often concealing — the treasures it amassed in the 1980s.
