Litespeed Management LLC (“Litespeed”), an event-driven investment firm, today announced that it has sent a letter to Mr. Hiroaki Nakanishi, Chairman of the Board and Representative Executive Officer of Hitachi, Ltd. (TSE: 6501), the majority shareholder in Ansaldo STS S.p.A (“STS”). In the letter, Litespeed, a long-term shareholder in STS, highlights significant corporate governance issues at STS and Hitachi’s continuing efforts to deprive minority shareholders of the value of their holdings in STS. Litespeed requests that Mr. Nakanishi ensures that Hitachi offers minority shareholders fair value for their shares, publishes the December 2014 Hitachi Board presentation and meets with Litespeed to engage in constructive dialogue to clarify these issues.

The full text of the letter is below:

March 20, 2017

Mr. Hiroaki Nakanishi,
Chairman of the Board and Representative Executive Officer of Hitachi, Ltd.

Dear Sir,

Litespeed Master Fund Ltd. has been a shareholder of Ansaldo STS S.p.A (“STS”) since 2014. Litespeed Management LLC (“Litespeed”) is the investment manager of Litespeed Master Fund Ltd. We are writing to you regarding certain matters which relate to Hitachi Ltd. (“Hitachi”) in its capacity as majority shareholder in STS. We are deeply concerned by Hitachi’s continuing efforts to deprive minority shareholders of the value of their holdings in STS.

The materials that were made public on the 17th of January 2016 through the website www.fairtreatmentforsts.com coupled with STS’ decision to bring corporate liability action against independent director Giuseppe Bivona and the subsequent removal of Mr. Bivona at the shareholder meeting on the 19th of January are particularly troubling and point to a lack of proper corporate governance to the detriment of minority shareholders.

We believe Hitachi’s behavior does not comport with that of a global corporate citizen. We call upon you Mr. Nakanishi to ensure that a fair price is offered to all minority shareholders.

Specifically we refer to the following points:

1. The December 2014 Hitachi Board Presentation (“the Presentation”) posted on the website, reveals by its own words, a plan to pay minority shareholders less than fair value for their shares in STS. By Hitachi’s own calculation, Hitachi paid €550m less for the 40% of Ansaldo STS purchased from Finmecannica SpA by packaging Finmecannica’s stake in STS with its stake in money losing AnsaldoBreda.

Specifically:

  • Page 2 of presentation (referred to by Elliott Advisors (UK) Limited in a letter to you dated 11th January 2017): “Hitachi seeks to reach basic agreement with Tower [i.e. Finmeccanica] for the Bishop [i.e. Ansaldo Breda] transaction, which is a packaged transaction with Queen [i.e. Ansaldo STS], to secure a favorable position in negotiations for acquiring Tower’s stake in Queen”
  • Page 3 “In the event that Tower struggles to negotiate terms for the sale of Bishop, Tower’s stake in Queen could be subject to an auction process as a stand-alone transaction. In such case, the price of Queen would be much higher than anticipated. To avoid such scenario, Hitachi needs to be flexible for a mutually acceptable position for the Bishop acquisition”
  • Page 6 “The transaction is a “Package Deal” of both Queen and Bishop”;
  • Page 13 “Hitachi understands that if Tower’s stake in Queen were subjected to an auction process as a stand-alone transaction, the price would be around €12 per share (compared to the offer price of €9.4 per share). This implies a discount with an absolute value of approximately €550m on the Queen Equity Value, achievable by purchasing Bishop as well”.

At the shareholder meeting in January your representative Mr Raimondo Premonte stated the website “features a considerable amount of misleading information which is disseminated for purely obstructionist purposes, doubtlessly in defiance of the right of shareholders in STS to receive correct information”. If Hitachi believes this is the case we urge you to publish the entire presentation to clarify the matter.

2. In response to Mr. Bivona’s recommendation to you, Mr. Nakanishi, in an email on August 14, 2016, to appoint a Senior Executive from Hitachi Ltd. to look into the matter of Hitachi’s acquisition of Breda and STS, you responded to Mr. Bivona on 19 August 2016 that “the transactions with Finmeccanica for Ansaldo Breda and 40% of Ansaldo STS were valued as completely separate transactions.” This is in direct contradiction to the information in the Presentation.

3. Possible further evidence of an effort to deprive minority shareholders of fair value was revealed in a March 19, 2016 article published in Il Secolo XIX. According to the article, as part of prosecutor Adriano Squires’ criminal investigation into the possibility of market manipulation and obstruction of supervisory activity by the Chairman of Hitachi Rail, Alastair Dormer, Mr. Squires was privy to a conversation, heard over wiretap, wherein Mr. Dormer asked Stefano Siragusa (then CEO of STS) to alter Hitachi’s impairment charge which was based on Deloitte & Touche’s independent valuation of STS at €14/share because Hitachi was only paying €9.50/share.

With the evidence revealed, Hitachi’s actions regarding Mr. Bivona’s removal seem to be a continuation of an effort to silence minority shareholders of STS and to deprive them of the value of their holdings.

Litespeed would welcome the possibility to meet with Hitachi to engage in a constructive dialogue and clarification regarding the issues raised.

On behalf of Litespeed Master Fund Ltd, a minority shareholder in STS, Litespeed is expressing its own views and beliefs based on the information available to us.

Yours sincerely,

Jamie Zimmerman
Chief Executive Officer
Litespeed Management LLC

About Litespeed Management LLC

Litespeed Management LLC is a New York-based investment firm focused on event-driven strategies.

The contents of this press release and the attached letter reflect solely the views of Litespeed as a shareholder and should not be construed as investment advice on the merits of any investment decision. Litespeed is not responsible for any direct or consequential loss arising directly or indirectly from any person’s use of the information contained herein. The English version of the press release and letter have been translated by a third party into Japanese (and Italian) for the readers’ convenience – Litespeed is not responsible for accuracy or completeness of any such translation.