Tuesday, May 06, 2008

A Kinder, Gentler Greenmailer

Often-spurned and wholly-despised greenmailer of Japanese companies - Warren Liechtenstein - recently wrote an uncharacteristically nice letter to the management of dental materials supplier Shofu Ltd (TSE Code #7979) commending them for their exemplary behaviour. The original letter (of which a transcription appears below), contained three lick-on gold-stars pasted into the top margin, a hand-written smiley face, and hand written note inviting members of the Shofu Board to join Mr Liechtenstein at the upcoming Mummer's parade. One might well wonder whether such a publicly visible display of affection by Mr Liechtenstein and Steel will help or hinder future compliance by management, since the unwritten penalty inside Japan for conspiring with the enemy, must be inordinately severe. (The transcribed letter is below)
Katsuya Ota, President
Shofu Ltd
11 Kamitakamatsu-cho
Fukuine, Higashiyama-ku
Kyoto 605-0983

Dear Mr Ota,

First I want to say that I disagree with that rude Mr Loeb and his disrespectful behaviour. We at Steel would like to think of ourselves as a softer, entirely more gentle activist, so we've arranged to adopt the kewpie doll for use on our new (Japanese) corporate letterhead.

Marshall Petain was reputed to have said that "...He who fights and run away lives to fight [or not] another day..." Or maybe it was Bob Marley. In any case we commend your cooperation. And in the event you were having doubts about your actions, I can tell you that "Courage", is, economically speaking, over-rated. Whether what you've done is courageous or not obviously depends upon where your sitting. From where we are sit, we think you've been courageous, though we understand your friends and countrymen might think otherwise.

We've been shareholders for nearly eight years now. We bought the shares cheap, by any comparison to earnings and intrinsic value. And unlike many of the other cash-rich, prospect-poor enterprises that we've bought, ramped and greenmailed, you've, in fact, grown your enterprise. For this simple feat of not destroying value, we thank you since we own a lot of your stock. And unlike many of your counter-revolutionary pig-dog lackey peers, you've also bought back shares in the open market to support the value of our investment and we are grateful. For our part, we've continue d to buy more of your stock, at higher and higher prices. And though you've never thanked us, I know you are secretly appreciative of the impact of this upon your personal wealth, and the patrimony it will provide for your grandchildren.

Now, however, we find ourselves facing the new tomorrow. The credit crunch is impacting our ability to borrow. Many of our portfolio holdings have been crucified. We are unsure what our investors will do when their redemption dates roll around. And so it is with heavy heart that for the first time in eight years of association, we must ask something of you: Please buy our position from us in whole and immediately, at current market prices. Since we own nearly six months of volume, I need not paint a picture of what the liquidation of our position in the open market will consequentially do to Shofu's share price, the harmony of your shareholders, and with it, your patrimony.

Finally, allow me to highlight how envious I am of your position. For rarely in one's life is one able to simultaneously preserve and enhance one's honor when one sits in the middle between two conflicting parties (us and TeamJapan) and do so with a single financially-bold action. You have this opportunity before you, and urge you to seize it.

So I thank you for your cooperation - both past and future, and look forward to your reply.

Hopefully yours,


Warren Liechtenstein
Steel Partners Japan Ltd. (et. al.)

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