3D Investment Partners Recommends Shareholders of Nippon Steel to Vote Against the Reappointment of President Tadashi Imai and Vice Chairman Takahiro Mori at the Annual General Meeting

TOKYO--(BUSINESS WIRE)--3D Investment Partners Pte. Ltd. (collectively referred to as “3D” or “we,” meaning either or both of 3D Investment Partners Pte. Ltd. and 3D OPPORTUNITY MASTER FUND) provides investment management services to 3D OPPORTUNITY MASTER FUND, a shareholder of Nippon Steel Corporation (5401.T, “Nippon Steel” or the “Company”). Today, 3D released a presentation outlining its concerns regarding Nippon Steel’s conglomerate discount, weak corporate governance, and undisciplined capital allocation practices, as evidenced by its persistently low PBR of 0.5x. The presentation recommends that shareholders vote against the reappointment of Tadashi Imai, Representative Director, President and COO (“Mr. Imai”), and Takahiro Mori, Representative Director, Vice Chairman and Executive Vice President (“Mr. Mori”).

The full presentation can be accessed here:

https://www.3dipartners.com/engagement/nippon-maximizing-corporate-value-en-202506.pdf

3D has previously sought to engage constructively with Nippon Steel’s board and senior management team to express its concerns about the company’s severe conglomerate valuation discount. However, Nippon Steel has limited engagement to meetings with executive officers and the IR department, and has consistently refused requests for meetings with the Chairman, the President, and external directors. This de facto refusal to engage with shareholders is emblematic of the governance issues afflicting Nippon Steel. These issues include a lack of transparency regarding the quantitative rationale for major capital allocation decisions such as the U.S. Steel acquisition and decarbonization investments, and the absence of accountability regarding the risks these decisions pose to corporate value. These concerns are particularly acute given the scale of Nippon Steel’s planned investments, which far exceed its current market capitalization.

Concerns Regarding Capital Allocation Discipline

Excluding its listed subsidiaries, Nippon Steel’s core steelmaking business is valued at an extremely low EV/EBITDA multiple of approximately 3x. By contrast, peers in the same industry are valued at 5–6x EV/EBITDA. This stark disparity highlights the significant conglomerate discount attached to Nippon Steel, largely attributable to its listed subsidiaries. Nevertheless, the company has failed to provide any quantitative explanation justifying its continued ownership of these subsidiaries or why it believes itself to be the best owner. For example, although NS Solutions Corporation (“NSSOL”) accounts for a substantial portion of the value attributable to the conglomerate discount, Nippon Steel has not quantitatively demonstrated why it believes it is the best owner of NSSOL.

The Company’s irrational neglect of its conglomerate discount reflects misallocations of capital across its businesses and creates serious concerns among shareholders over its capital discipline.

Risks of Irreversible Damage to Corporate Value from Future Capital Allocation

Regarding the proposed acquisition of U.S. Steel, in addition to the previously announced US$14.1 billion acquisition price, reports indicate that Nippon Steel is planning a further US$14 billion in additional investments. This level of capital outlay would significantly exceed the Company’s current market capitalization and raises substantial concerns over irreversible impairment of corporate value. The Company has failed to alleviate these concerns by refusing to provide a quantitative explanation demonstrating that this acquisition and investment will yield returns that sufficiently exceed its cost of capital.

Furthermore, there have been reports that the U.S. government may hold a “golden share” in U.S. Steel. This raises additional concerns that, in the event of a market downturn or other emergency requiring structural reforms, the U.S. government could exercise veto rights over any decision to reduce capacity or reduce the workforce in the US. This further increases the risk of future destruction of corporate value. In fact, multiple sell-side analysts have expressed concerns about the potential impairment to corporate value stemming from the U.S. Steel acquisition.

In regard to decarbonization investments, the previously estimated capital expenditure of 4–5 trillion yen is now expected to increase further. However, neither expected returns nor target outcomes have been disclosed, exacerbating concerns that such investments could result in significant damage to corporate value.

In light of these circumstances, we urged Nippon Steel to resolve capital discipline and allocation concerns by conducting a market check on the possible sale of NSSOL to address the conglomerate discount, or to seek shareholder approval for the imminent U.S. Steel acquisition. Nippon Steel failed to provide a clear response on the market check and rejected the request for shareholder approval. The Company is proceeding with massive acquisitions and investments that carry significant risk of irreversible harm to corporate value without any consultation with shareholders.

Our Recommendation for the Annual General Meeting

We believe that responsibility for failing to address capital discipline and allocation concerns, and for increasing the risk of irreversible impairment to corporate value through planned capital allocation decisions without accountability to shareholders, lies with President Mr. Imai. Further, we hold Mr. Mori, responsible for finance and investor relations, accountable for his failure to recognize the seriousness of these concerns and to fulfill his duty of explanation to shareholders.

Accordingly, we strongly recommend that shareholders vote against the reappointment of Tadashi Imai (Representative Director, President and COO) and Takahiro Mori (Representative Director, Vice Chairman and Executive Vice President) at the Annual General Meeting.

To Our Fellow Shareholders

As outlined in this press release and our presentation, the current directors have refused to address capital allocation and discipline concerns and have significantly heightened the risk of corporate value destruction through their planned capital allocation decisions.

We respectfully urge all shareholders to review our presentation and to vote against the reappointment of Mr. Imai and Mr. Mori at the upcoming Annual General Meeting.

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 current market price of Nippon Steel does not reflect its instinct value. 3DIP acquired beneficially and/or economic interest based on its own idea that Nippon Steel securities have been undervalued and provides attractive investment opportunity and may in the future beneficially own and/or have an economic interest in, Nippon Steel securities. 3DIP intends to review its investments in the Nippon Steel on a continuing basis and, depending upon various factors including, without limitation, the Nippon Steel's financial position and strategic direction, the outcome of any discussions with Nippon Steel, overall market conditions, other investment opportunities available to 3DIP, and the availability of Nippon Steel securities at prices that would make the purchase or sale of Nippon Steel 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 Nippon Steel securities) to any degree in any manner permitted by any applicable law, and expressly disclaims any obligation to notify others of any such changes.

No representation or warranty, either expressed or implied, is provided 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 represent such voting rights.

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

This press release is based on constructive dialogue with Nippon Steel and publicly available information (which 3DIP has not independently verified). It is not intended to be complete, timely, or comprehensive. 3DIP affirms that it has not received any insider information or material non-public information under Japan’s Financial Instruments and Exchange Act and that this press release does not contain any such information.

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.