Core Viewpoint - GAM portfolio managers are questioning Honda's decision to sell its controlling stake in Yutaka Giken at a significant discount compared to the tender offer for minority shareholders, raising concerns about governance and fiduciary responsibilities [1][4][9]. Group 1: Transaction Details - Honda is selling its 50.65% controlling shareholding in Yutaka Giken for ¥1,470 per share, valuing the entire company at approximately ¥22 billion [3][8]. - In contrast, SAMIL's tender offer to minority shareholders is ¥3,024 per share, indicating a 50% discount on the controlling stake [3][8]. - The transaction is described as one of the lowest takeover offers observed in the Japanese market, especially for a profitable company with net cash of ¥42.2 billion and tangible book value of ¥100.2 billion [8][9]. Group 2: Governance Concerns - The portfolio managers express concerns about potential conflicts of interest and the lack of transparency regarding the sale process, questioning whether a proper auction was conducted [9][10]. - They demand clarity on ancillary transactions mentioned in the tender offer, including SAMIL's purchases of Yutaka Autoparts India and an 11% stake in Shinnichi Kogyo directly from Honda [3][9]. - The letter emphasizes that Honda's actions may represent a breach of fiduciary responsibilities, particularly in light of Japan's advancements in corporate governance [4][9]. Group 3: Treasury Shares and EPS Growth - Honda holds approximately 26% of its shares as treasury shares, a significantly higher percentage compared to its peers, which raises questions about its capital management strategy [10][12]. - The portfolio managers argue that immediate cancellation of these treasury shares would enhance Honda's earnings per share (EPS) and align with best corporate governance practices [10][12]. - Honda's EPS growth has consistently lagged behind competitors, with a five-year compound annual growth rate (CAGR) of 15.6%, compared to Toyota's 19.8% and Suzuki's 24.7% [12].

Core Viewpoint - GAM portfolio managers are challenging Honda's decision to sell its controlling stake in Yutaka Giken at a significant discount compared to the tender offer for minority shareholders, raising concerns about governance and fiduciary responsibilities [1][4][6]. Group 1: Transaction Details - Honda is selling its 50.65% controlling shareholding in Yutaka Giken for ¥1,470 per share, valuing the entire company at approximately ¥22 billion, while the tender offer for minority shareholders is ¥3,024 per share [3][6]. - The portfolio managers emphasize that a controlling shareholder should receive a premium in transactions, not a 50% discount, highlighting the unusual nature of this sale [3][6]. - The transaction raises questions about whether a proper auction was conducted and the terms of ancillary transactions involving SAMIL, including purchases of Yutaka Autoparts India and an 11% stake in Shinnichi Kogyo directly from Honda [7][8]. Group 2: Governance Concerns - The letter from GAM portfolio managers questions Honda's commitment to its fiduciary responsibilities, suggesting that minority shareholders are not being fully informed about the transaction [4][7]. - There are concerns about potential conflicts of interest and the lack of transparency regarding how Honda will be compensated for selling its stake at a negative implied value [8]. - The portfolio managers call for full transparency in the sales process to understand Honda's rationale for the transaction [8]. Group 3: Treasury Shares and EPS Growth - Honda holds approximately 26% of its shares as treasury shares, which is significantly higher than its peers, raising questions about the company's capital management strategy [9]. - The immediate cancellation of these treasury shares is suggested as a means to enhance earnings per share (EPS) and adhere to best corporate governance practices [9][11]. - Honda's EPS growth has consistently lagged behind competitors, with a 5-year CAGR of 15.6%, compared to Toyota's 19.8% and Suzuki's 24.7% [11].