Loeb's Third Point takes aim at Fanuc

A famed US activist investor is taking on one of Japan's most obsessive companies in what promises to be an epic clash of cultures across the Pacific.

According to its quarterly letter to investors, Third Point - the hedge fund run by Daniel Loeb - has bought into Fanuc, the world's largest robotics company, and is urging it to conduct a share buyback.

The purchase highlights renewed investor interest in Japan as massive monetary stimulus drives stocks higher, the government prepares a new corporate governance code, and return on equity finally catches on as a management goal.

But it also is reminiscent of numerous bitter and destructive clashes between Japanese corporations and foreign investors, from the saga of Steel Partners and Bull-Dog Sauce a decade ago, to The Children's Investment Fund and its run at electricity wholesaler J-Power in 2008.

"Fanuc's productivity is amongst the highest in the world, on track to achieve $2.4bn of operating profit and 40 per cent margins. . .with just 5,500 employees," said Third Point. But it added: "There is a reason that Fanuc remains cheap at 13 times earnings: the company's illogical capital structure which does nothing for shareholder value."

Third Point is known for its aggressive campaigns to shake up target companies - famously engineering the installation of Marissa Mayer as chief executive of Yahoo - and there is a gulf between its financial world on New York's Park Avenue and the secretive, yellow-clad engineers of Fanuc.

Fanuc has grown to become Japan's 10th-largest company by market capitalisation, dominating the global market for factory robots from its base near Mount Fuji. It is known for an ultra-focused corporate culture, ruled until recently by founder Seiuemon Inaba, that rejects all distractions from its core robotics business.

The company seldom grants interviews and refuses to talk to investors and analysts - offering them a quarterly earnings report and little else. More than half its shares are in the hands of foreign investors, however, which could increase Third Point's leverage.

Fanuc could not be reached for comment on Wednesday, which was a public holiday in Japan.

Third Point recently sold out of an investment in Sony after failing to persuade management to spin off its entertainment business.

In its letter, Third Point pays tribute to Fanuc, saying the company "reminds us of Apple in its product approach". It suggests Fanuc's robotics sales will double in a few years, given the broader range of industries now being automated, the low density of robot use in China, and the Japanese company's market dominance.

"Virtually every large manufacturing footprint expansion in North America - from Airbus to Ford to Tesla - is taking place with Fanuc's robots," says the letter.

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