TOKYO--(BUSINESS WIRE)-- 3D Investment Partners Pte. Ltd., the asset management company of the 3D OPPORTUNITY MASTER FUND (collectively referred to as “3D,” “we” or “our”), today released a presentation regarding a shareholder proposal aimed at strengthening the supervisory ability of the Board of Directors (the “Board”) of Sapporo Holdings Limited (“Sapporo” or the “Company”) (2501.T). At the Company’s 101st Annual General Meeting (the “AGM”) scheduled for March 2025, 3D proposes to appoint Mr. Paul Brough as an outside director who is a member of the Audit and Supervisory Committee of Sapporo. Mr. Brough has extensive experience overseeing real estate, business/asset divestiture processes, M&A, and capital allocation policy, and is well-versed in accounting, shareholder communication, and corporate governance, having served as an independent non-executive director at several large publicly listed companies.

The presentation is available at: https://www.3dipartners.com/engagement/sapporo-agm-en-202502.pdf

Our Past Initiatives

We currently hold approximately 19% of Sapporo’s shares, making us the Company’s largest shareholder. Over the past three years, we have engaged in constructive dialogue with Sapporo’s Board and management, proposing measures such as maximizing investment resources through a review of the business portfolio, improving profit margins in the Alcoholic Beverages business, strengthening capital discipline, and establishing a reinvestment strategy aimed at achieving a high ROIC (return on invested capital), which is essential for long-term corporate value growth.

More recently, following Sapporo’s announcement on January 30, 2025, of an impairment loss of ¥13.9 billion on the goodwill of Stone Brewing (“Stone”), we requested that the Company provide supplemental information to shareholders to enable them to make informed voting decisions at the AGM. In a public letter dated February 18, 2025 (the “February 18 Letter”), we raised questions regarding the root causes of the failed Stone acquisition and any corrective measures to be implemented by the Board to prevent recurrence, in order to address the Company’s longstanding lack of capital discipline. We requested a public response by February 28.

The February 18 Letter is available at: https://www.businesswire.com/news/home/20250216591496/en/3D-Investment-Partners-Issues-Open-Letter-to-Sapporo%E2%80%99s-Board-of-Directors-Reiterating-Concerns-Regarding-the-Company%E2%80%99s-Severe-Lack-of-Capital-Discipline-Amid-Repeated-Large-Scale-MA-Impairments

Sapporo’s Severe Undermanagement and the Risk of Irreversible Decision-Making Failures

Over the past five years (FY20–FY24), Sapporo’s average ROE has been 2.1% and its average operating profit margin 1.5%—figures that are significantly lower than its global competitors’ averages (ROE 12.3%, operating profit margin 12.3%), and nearly the lowest among the global competitors. This indicates that Sapporo is severely undermanaged. Furthermore, Sapporo has recorded impairment losses in all its major overseas alcoholic beverages acquisitions—including Sleeman Breweries, Sapporo Vietnam, Anchor Brewing, and Stone—highlighting a persistent lack of capital discipline.

Sapporo’s track record of poor capital allocation is of great and immediate concern. The Company is currently planning the substantial divestiture of the Real Estate business—expected to be valued at over 70% of the Company’s market capitalization¹—and the Board intends to reallocate a substantial portion of the proceeds from this divestiture to growth investments in the Alcoholic Beverages business, including large-scale M&A.

Given Sapporo’s undermanagement and history of recording impairment losses on all major overseas alcoholic beverages acquisitions, we believe that it is impossible to deny the substantial risk that, without proper oversight, the Company could make erroneous decisions on important future matters.

Sapporo’s ability to maximize the proceeds derived from the divestiture of the Real Estate business and optimally reallocate those proceeds will decisively and irreversibly determine the Company’s medium- to long-term direction of corporate value due to the large scale of the divestiture. Therefore, as a shareholder deeply committed to enhancing Sapporo’s corporate value, we cannot tolerate the risk that management might make erroneous decisions on the divestiture or reallocation of those proceeds that could significantly impair Sapporo’s corporate value.

To Prevent Irreversible Decision-Making Failures

To mitigate these risks, we propose strengthening the oversight function of the Audit and Supervisory Committee by appointing Mr. Paul Brough as an outside director serving as a member of the Audit and Supervisory Committee. The Audit and Supervisory Committee is responsible for both accounting and business audits, including reviewing the appropriateness of business decisions. However, as currently comprised, Sapporo’s Audit and Supervisory Committee lacks the necessary expertise to perform such functions effectively. Furthermore, the independence of not only the Audit and Supervisory Committee, but also its chairperson, are of critical importance. Currently, Sapporo’s Audit and Supervisory Committee Chairperson is an internal director and, moreover, was involved in the M&A decision that resulted in the aforementioned impairment losses; thus, his independence is not sufficiently ensured.

To prevent decisions that could impair Sapporo’s corporate value, it is essential to appoint a person as a member of the Audit and Supervisory Committee who possesses high-level expertise and independence, with a proven track record in overseeing real estate, business/asset divestiture processes, M&A, and capital allocation policy. In this regard, Mr. Brough has the following accomplishments:

• Toshiba: Served as Outside Director and Chairman of the Strategic Committee, leading portfolio reviews and processes of divesting assets, participating in stakeholder communication while ensuring high transparency in shareholder disclosures.
• Noble Group Holdings: Served as Executive Chairman, leading the company’s debt restructuring, executing multi-billion-dollar asset sales, dealing with general shareholders and contributing to its bankruptcy avoidance.
• Guoco Group: Served as an Independent Non-Executive Director at this publicly listed company specializing in real estate development and transactions in Asia.
• Other Leadership Roles: Held external directorships and chairmanships of audit committees at various companies, contributing to corporate value enhancement. He also possesses deep expertise in accounting, financial management, and corporate governance.

Moreover, Mr. Brough has no business dealings with Sapporo and meets the independence criteria of both the Tokyo Stock Exchange and Sapporo.

Accordingly, Mr. Brough possesses exceptional expertise and the independence necessary to support the critical decisions Sapporo will face in the future. We are confident that his participation as an outside director and a member of the Audit and Supervisory Committee will enhance the Board’s oversight capabilities and contribute to improved capital discipline at Sapporo.

A Request to Shareholders

We encourage all shareholders to review our presentation and cast their votes in favor of the proposal to appoint Mr. Paul Brough at the upcoming AGM.

About 3D Investment Partners Pte. Ltd.

3D Investment Partners Pte. Ltd. is an independent Singapore-based Japan focused value investing fund manager founded in 2015. 3D Investment Partners Pte. Ltd. focuses on partnering with managements who share its investment philosophy of medium- to long-term value creation through compound capital growth and a common objective of achieving long-term returns.

Disclaimer

This press release is provided for informational purposes only and does not constitute an offer to purchase or sell any security or investment product, nor does it constitute professional or investment advice. This press release should not be relied on by any person for any purpose and is not, and should not be construed as investment, financial, legal, tax or other advice.

3D Investment Partners Pte. Ltd. and its affiliates and their related persons (“3DIP”) believe that the current market price of Sapporo does not reflect its intrinsic value. 3DIP acquired beneficially and/or economic interests based on its own idea that Sapporo securities have been undervalued and provides attractive investment opportunity and may in the future beneficially own and/or have an economic interest in, Sapporo securities. 3DIP intends to review its investments in Sapporo on a continuing basis and, depending upon various factors including, without limitation, Sapporo's financial position and strategic direction, the outcome of any discussions with Sapporo, overall market conditions, other investment opportunities available to 3DIP, and the availability of Sapporo securities at prices that would make the purchase or sale of Sapporo securities desirable, 3DIP may, from time to time (in the open market or in private transactions), buy, sell, cover, hedge, or otherwise change the form or substance of any of its investments (including the investment in Sapporo securities) to any degree in any manner permitted by any applicable law, and expressly disclaims any obligation to notify others of any such changes.

3DIP provides no representation or warranty, either expressed or implied, in relation to the accuracy, completeness, or reliability of the information contained herein, nor is it intended to be a complete statement or summary of the securities, markets, or developments referred to herein. 3DIP expressly disclaims any responsibility or liability for any loss howsoever arising from any use of, or reliance on, this press release or its contents as a whole or in part by any person, or otherwise howsoever arising in connection with this press release. 3DIP hereby expressly disclaims any obligation to update or provide additional information regarding the contents of this press release or to correct any inaccuracies in the information contained in this press release.

3DIP disclaims any intention or agreement to be treated as a joint holder (kyodo hoyu sha) under the Financial Instruments and Exchange Act of Japan, a closely related party (missetsu kankei sha) under the Foreign Exchange and Foreign Trade Act with other shareholders, or receiving any power or permission to represent other shareholders in relation to the exercise of their voting rights, and has no intention to solicit, encourage, induce or require any person to cause other shareholders to represent such voting rights.

3DIP does not have the intention to make a proposal, directly or through other shareholders of Sapporo, to transfer or abolish the business or assets of Sapporo and/or Sapporo group companies at the general shareholders meeting of Sapporo. 3DIP does not have the intention and purpose to engage in any conduct which constricts the continuing and stable implementation of business of Sapporo and/or Sapporo Holdings group companies.

This press release may include content or quotes from news coverage or other third-party public sources (“Third-Party Materials”). Permission to quote from Third-Party Materials in this press release may neither have been sought nor obtained. The content of the Third-Party Materials has not been independently verified by 3DIP and does not necessarily represent the views of 3DIP. The authors and/or publishers of the Third-Party Materials are independent of, and may have different views to 3DIP. The quoting Third-Party Materials in this press release does not imply that 3DIP endorses or concurs with any part of the content of the Third-Party Materials or that any of the authors or publishers of the Third-Party Materials endorses or concurs with any views which have been expressed by 3DIP on the relevant subject matter. The Third-Party Materials may not be representative of all relevant news coverage or views expressed by other third parties on the stated issues.

In respect of information that has been prepared by 3DIP (and not otherwise attributed to any other party) and which appear in the English language version of this press release, in the event of any inconsistency between the English language version and the Japanese language version of this press release, the meaning of the Japanese language version shall prevail unless otherwise expressly indicated.

¹ As of February 17, 2025, Sapporo’s market capitalization was approximately 555.5 billion yen, whereas newspaper reports state that the overall value of its real estate business is around 400 billion yen (according to the December 20, 2024 issue of the Nihon Keizai Shimbun titled “Sapporo HD’s 400-Billion-Yen Real Estate Utilization, with names such as Mitsui Fudosan and KKR mentioned”). Furthermore, when our company engaged an independent third-party agency to assess the overall value of the company’s real estate business, the valuation was found to be as high as approximately 636 billion yen.

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