Kaname Capital Announces Updated Engagement Policy for Proto Corporation Following Extension of Tender Offer Period

TOKYO--(BUSINESS WIRE)--Kaname Capital ("we" or "our firm") has consistently expressed opposition to the Management Buyout (MBO) of Proto Corporation ("Proto Corporation" or the "Company") led by its founder and Chairman, Mr. Yokoyama, citing concerns with the deal’s rationale, process, and price (see press releases dated February 19 and March 9). The tender offer period, initially set to end on March 21, has now been extended by 10 business days by the bidder, Forsight Inc. (the "Bidder"). We believe this extension reflects the wise judgment of shareholders, who likely withheld tenders due to the inadequacy of the offer price.

The Bidder claimed that our firm “made baseless suggestions regarding the existence of potential counterbidders offering higher prices.” However, our position has been consistent and clear. We believe that if the Company conducted a proper and active market check, interest from other parties would likely emerge. The fact that there are no counterbids is not an indication of lack interest, but rather a consequence of the Board's unwillingness to challenge Chairman Yokoyama and conduct an open market check. In a company where the founder holds over one-third of the shares, the expectation of the emergence of counterbidders is difficult unless the Board openly signals its willingness to consider such proposals. MBO’s are fundamentally conflicted with the buyer and seller on both sides of the transaction, and we firmly believe the Board has a fiduciary duty to proactively seek out other bidders to “cleanse” this structural defect in the process.

To allow sufficient time for potential counterbidders to come forward, we had filed for an injunction to halt the tender offer, arguing it was unfair and in breach of the directors' duty of care. Although the court dismissed the motion on procedural grounds without a substantive ruling on the fairness of the tender offer, the 10-business-day extension announced by the Bidder appears to reflect widespread shareholder concern over the very issues the court declined to address.

Nevertheless, 10 business days remain insufficient for any meaningful counterproposal to materialize. Furthermore, the extraordinary shareholders’ meeting, which would follow a successful tender, is now projected for late May or early June—conveniently avoiding the regularly scheduled general shareholder meeting in late June, suggesting the intention to use a shortened extension period to avoid shareholder criticism.

Our firm will use the 10 business day extension to pursue all available avenues, including legal remedies, to press the Board and demand a further extension (of at least 20 additional business days) while we continue to advocate that the Company seek the highest potential corporate value by proactively trying to source the best possible owner.

The Bidder has stated that, should the tender offer fail, “there are no plans to conduct another tender offer, and the Company will pursue an increase in corporate value of the Company while maintaining its listing and consider the short-term profit and distribution expectations of minority interest shareholders.” However, as a first principal, the future course of management composition and strategy should not be unilaterally decided by the Bidder. A failed MBO indicates that shareholders believe Proto Corporation possesses intrinsic value exceeding ¥2100 per share. Realizing that value requires a complete separation and rethinking of Chairman Yokoyama’s management that mixed and prioritized his personal interests over obligations as a public company.

Regrettably, the MBO process has revealed that the current Board is beholden to Chairman Yokoyama and incapable of fulfilling its supervisory responsibilities. Accordingly, at the upcoming annual general meeting, we intend to nominate multiple candidates for independent outside directors. These individuals will be independent from Chairman Yokoyama and possess the necessary oversight capabilities in the Company’s core domains of internet and used cars.

We are confident that an independent Board leading a strategic review can unlock value far beyond the ¥2100 proposed by the Bidder. As such, while our primary engagement focus remains securing fair procedures and pricing for the MBO, should the deal fail, we will continue to hold management accountable for realizing the Company’s intrinsic value above ¥2100 per share.