Activist Investor Takes Stake in Global Shutter and Door Manufacturer #

A prominent activist investment firm has disclosed a 5.94% stake in a leading global manufacturer of shutters, garage doors, and related products for residential and commercial applications. This makes the activist one of the top five shareholders in the company.

The manufacturer holds a dominant position in its industry, with a 50% to 60% market share in Japan, and is a top-two player in the U.S. (30%) and Europe. In the last fiscal year, the company generated 43% of its revenue in Japan, 37% in North America, 18% in Europe, and 2% in the rest of Asia.

The activist investor sees three main value creation opportunities:

U.S. margin expansion
Japan margin expansion
Capital allocation and balance sheet efficiency

In the U.S., the company operates over 15 factories, compared to two to four for peers. There is potential to centralize, consolidate, and professionalize operations, which could lead to improved margins.

The Japanese business also presents a margin opportunity, with current EBIT margins of about 11%. Factors such as vertical integration and recent wage inflation have impacted margins, but strong demand from urban redevelopment and an inflationary environment may allow for price increases.

The activist is likely to focus on optimizing the company’s balance sheet, which currently holds about 10% of its market capitalization in cash. This is seen as excessive compared to peers, and increased shareholder returns through buybacks may be proposed.

The activist investor has a reputation for collaborative engagement and is likely aligned with management on value creation strategies. The company has been performing well, with consistent growth in sales, profits, and shareholder returns since 2020.

While not currently advocated, there is also a potential strategic opportunity to sell the U.S. business, which could potentially value it at almost the entire enterprise value of both the U.S. and Japan businesses combined.

This engagement follows a previous activist involvement in the company, which resulted in proactive measures to improve capital allocation and corporate governance. The new activist investor is expected to take a longer-term approach in supporting management to execute its plan and potentially accelerate value creation.