Suzuki Motor Corp., the second-tier Japanese automaker that is best known for its small cars jumped to a record in Tokyo on the stock exchange market following an announcement from the hedge fund run by Daniel Loeb.
Loeb decided to invest in the carmaker and purchased a holding as it estimated a positive outcome to the very long dispute between Suzuki and Germany’s Volkswagen AG. According to Loeb’s Third Point LLC, cited in a letter to investors, an arbitration that lasted almost half a decade between the two automakers “paralyzed” the Japanese company but now a solution is coming up. Additionally, the stock acquisition was also triggered by the health of its Maruti Suzuki Indian division, which has a “sustainable scale-based advantage” over its rivals and enjoys “significant room” to lift its earnings margins. “The company’s greatest asset is its low-cost manufacturing process for vehicles for the emerging market consumer,” commented the New York-based fund. “An overhang from a protracted litigation with Volkswagen has resulted in significant balance sheet inefficiency and created an attractively valued investment opportunity.” The fund declined to disclose the size of the acquired holding.
The billionaire Loeb has made its third investment in the past two years in a Japanese company, making him one of the more prominent members of the recent wave of shareholder activism in the country, spurred in part by the actions taken by the government of Prime Minister Shinzo Abe – he pledged to shake up the country’s corporate culture to restart the nation’s stagnant economy.