Family Office of Nintendo Heirs Says Patience is a Superpower

(Japan Times) - The investment firm managing nearly $1.5 billion (about ¥204 billion) of assets for members of Nintendo’s founding family is willing to play a long game when it comes to portfolio companies and can wait more than a decade to see a turnaround, a top executive said.

That timeline helps explain why Yamauchi-No.10 Family Office shows no sign of relenting nearly a year into its quest to take marine construction firm Toyo Construction private, a takeover battle that could see a critical turn at an annual shareholders meeting in June.

The long-term outlook gives the Yamauchi family office a rare flexibility and risk appetite in its hunt for both listed and privately held companies with technology that can revitalize Japan, Chief Investment Officer Hirowaka Murakami said.

“We are trying to do what other investors can’t or are reluctant to do. That’s the spirit we have,” Murakami said in an interview in the firm’s Tokyo office.

The family office was launched in 2020 by Banjo Yamauchi, the 30-year-old biological grandson and adopted son of Nintendo’s third president, Hiroshi Yamauchi, who transformed the maker of playing cards into a video game giant known for characters such as mushroom-fueled plumber Mario and Princess Zelda.

It says it aims to preserve the “unique creativity and pioneering mindset” of Hiroshi Yamauchi, who died in 2013, to help Japan innovate.

Its quirky webpage, with colorful, 8-bit graphics and chiptune music, recalls early Nintendo games such as Donkey Kong and its office is adorned with washi paper used for traditional hanafuda playing cards — Nintendo’s first product.

But its tussle with the $620 million Toyo, Japan’s third-largest marine construction firm in which it holds 27%, has been anything but whimsical.

It accuses Toyo’s board of “serious governance flaws and oversight failures” and says it will oppose the re-election of Toyo’s president and two other executives at the June meeting of shareholders.

When asked for comment, Toyo Construction said it intended to set up a committee to consider the takeover proposal. It said it repeatedly requested more information to help it evaluate the offer but the Yamauchi office had not responded.

The family office, which says it has submitted more than 100 pages of proposals, won’t rule out increasing its stake in Toyo after May, when an agreement not to do so lapses, Murakami said.

About half of its assets are being invested in some two dozen projects focused on next-generation technologies, including space debris clean-up company Astroscale and AI-driven health care.

An island nation with many big coastal cities, Japan could better leverage Toyo’s marine construction technology in power generation, said Murakami, who previously worked at Deutsche Bank and Goldman Sachs Group, and was a childhood friend of Banjo Yamauchi.

The Yamauchi family office announced its all-cash offer to take Toyo private in May last year, a 30% premium to an earlier bid by Toyo’s then largest shareholder.

The board supported the lower offer, which later lapsed and the Yamauchi family office says it spent many months trying to engage with the board.

“If your investments are driven solely by commercial purposes, then you can invest into a company, talk to them and quickly exit when you see obstacles,” Murakami said.

“But is that the way we want to achieve our goals? No.”

By Mariko Katsumura, Makiko Yamazaki, Ritsuko Shimizu
March 4, 2023


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