AVI calls for shakeup at NS Solutions

Asset Value Investors (AVI) has launched a public campaign on the submission of its shareholder proposals to NS Solutions, a subsidiary of Nippon Steel Corporation. NS Solutions is held by both AVI Global Trust and AVI Japan Opportunity Trust. Between them, they own 1.2% of voting rights of NS Solutions. Having first invested in March 2020, the team has now concluded that a continued approach of constructive private dialogue has no prospects of success.

A detailed presentation has been published on AVI’s dedicated website –

AVI say that it has identified the following issues:

  • Due to the parent-subsidiary listing relationship between NSSOL and Nippon Steel, the standards of governance and treatment of minority shareholders expected of a Prime Market listed company have not been achieved.
  • Two former Nippon Steel executives with no experience in the IT services industry have been appointed as internal directors of NSSOL in the last two years.
  • NS Solutions has deposited 90.2 billion yen of cash with its parent company Nippon Steel at an interest rate of about 0.2%.
  • NS Solutions holds 67.8 billion yen in shares of its clients, mainly Recruit HD.
  • There is potential disregard for employee welfare issues.
  • The parent company holds a prohibitively high 63.4% of the shares, preventing NSSOL from conducting share buybacks from general shareholders as a further reduction in the free float could violate the criteria for prime listing.

Against this backdrop, NS Solutions trades at a significant undervaluation to its fair enterprise value. Specifically, the ratio of the company’s enterprise value to earnings before interest and tax over the last twelve months is 6.8x (after factoring in the after-tax value of investment securities), which is close to half the average of 13.3x for competitors in the industry. Despite the low valuation and deteriorating capital efficiency, the current board of directors have taken little action to address AVI’s concerns, failing to maximise corporate value for shareholders.

Joe Bauernfreund, CEO of AVI, comments: “NS Solutions must take steps to achieve the highest standards of corporate governance and capital discipline that a Prime Market publicly traded company should uphold, and to address its undervaluation.

As the controlling shareholder, Nippon Steel has an obligation to ensure that NS Solutions is managed for the benefit of all stakeholders. Nippon Steel has the power to hold NSSOL’s board to account and call on NSSOL to address poor employee welfare and its discounted valuation.”

AGT / AJOT : AVI calls for shakeup at NS Solutions

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