Company Announcements

NSSOL Has Not Secured Its Independence from Its Parent Company, Nippon Steel, and Is Not Being Managed Properly

3D Will Continue to Engage in Constructive Dialogue with NSSOL’s Board of Directors and Management with the Goal of Enhancing Corporate Value

3D Invites NSSOL Shareholders to Share Their Perspectives on NSSOL’s Corporate Governance, Strategy, Operations and Capital Allocation

TOKYO--(BUSINESS WIRE)--Mar. 31, 2025-- 3D Investment Partners Pte. Ltd. which provides investment management services to a fund (hereinafter collectively referred to as “3D” or “we”), a major shareholder of NS Solutions Corporation (“NSSOL”, TSE Code: 2327.T), today released a presentation that highlights the issues facing NSSOL in its efforts to maximize corporate value. These issues arise from NSSOL being majority-owned by Nippon Steel Corporation (“Nippon Steel”, Securities Code: 5401.T) and its consequent lack of independence from Nippon Steel.

The presentation is available at:
https://www.3dipartners.com/engagement/nssol-presentation-en-202503.pdf

NSSOL's Issue s in Maximizing Corporate Value

NSSOL is a highly competitive company that leverages its exceptional technological expertise to provide high value-added SI services. However, NSSOL is currently grappling with issues such as missed growth opportunities, under-realized profitability and an inefficient balance sheet, resulting in its inability to maximize corporate value.

The root cause of these issues is NSSOL’s lack of independence from its parent company, Nippon Steel. Directors who had been employed by Nippon Steel, including a Director who is Nippon Steel’s current Senior Executive Officer, occupy many of the seats on NSSOL’s Board of Directors, creating a conflict of interest from which Nippon Steel benefits at the expense of NSSOL’s corporate value and which limits NSSOL’s ability to govern itself effectively, undermining its corporate value and the interests of minority shareholders. The effects of NSSOL’s lack of independence from Nippon Steel are evident across NSSOL’s business.

The following are examples of conflicts of interest in NSSOL’s business due to its lack of independence from Nippon Steel:

• Approximately 96 billion yen—equivalent to about 40% of NSSOL’s net assets—are deposited with Nippon Steel at an interest rate of 0.2% per annum. This rate is significantly below NSSOL’s cost of capital. This deposit enables Nippon Steel to secure low-cost financing at the expense of NSSOL’s corporate value and the interests of its minority shareholders.¹ Moreover, although NSSOL has attempted to justify to us these large deposits on the grounds that the interest rate exceeds market rates, the question is not whether the interest rate exceeds market rates but whether the interest rate is commensurate with NSSOL’s cost of capital. In this regard, NSSOL has not provided a reasonable explanation.
• Based on our analysis, Nippon Steel benefits from preferential pricing in its contracts with NSSOL, thereby undermining NSSOL’s profitability.² While NSSOL has asserted to us that the pricing in its transactions with Nippon Steel is set at market levels (considering the added value derived from its expertise in existing business processes and systems, the switching costs incurred by Nippon Steel, and the competitive landscape among rival companies), market-level pricing is not appropriate, and, if NSSOL has intention to maximize its corporate value and conduct the arm’s length transaction with Nippon Steel to protect the interest of NSSOL’s minority shareholders, these prices should in fact be set above market levels.
• The lack of independence from Nippon Steel appears to be hindering NSSOL’s ability to provide services to domestic and international steel manufacturers, who would otherwise be ideal customers.³ NSSOL is highly regarded by these steel manufacturers for its industry expertise and ability to handle large-scale projects, and therefore its services should be in high demand. However, NSSOL is unable to capitalize on this potential demand due to potential clients’ concerns regarding its relationship with its parent company and the cumbersome internal approval processes within Nippon Steel and NSSOL.

Because NSSOL has not secured its independence from Nippon Steel, it has failed to establish the governance framework necessary for managing its business in a manner that maximizes its corporate and shareholder value. Even in areas where there is no direct conflict of interest between Nippon Steel and NSSOL’s minority shareholders, efforts to maximize corporate value are being impeded. In fact, aside from the aforementioned issues, NSSOL still has considerable room for improvement in its income statement, balance sheet and capital allocation.⁴

In light of these issues, we shared with NSSOL a document titled “For a Dramatic Enhancement of NS Solutions’ Corporate Value” (hereinafter referred to as the “3D Corporate Value Enhancement Plan”) on September 10, 2024, in which we provide a more detailed and quantitative analysis.

3D Corporate Value Enhancement Plan (the version that was presented to NSSOL) is available at:

https://www.3dipartners.com/engagement/nssol-value-enhancement-plan-en-202503.pdf

We believe that NSSOL's EPS will increase from 162 yen⁵ to 327 yen⁶—approximately a 102% increase—through more efficient management and oversight achieved by complete independence from Nippon Steel.

Dialogue with NSSOL

We have sought to engage constructively with NSSOL. We have presented our 3D Corporate Value Enhancement Plan and pointed out that NSSOL has not been managed in a way that maximizes its corporate value and shareholder interests due to its lack of independence from Nippon Steel. Specifically, we have requested that NSSOL establish a special committee composed of independent outside directors to conduct a comprehensive and fundamental review of all aspects of NSSOL’s governance, including its relationship with Nippon Steel, with the aim of maximizing its corporate value. However, NSSOL has rejected our proposal without any quantitative and objective explanation, and our request to meet with Nippon Steel’s representative director (CEO/COO) to discuss this matter has similarly been declined.

A Request to Shareholders of NSSOL

We believe that, once NSSOL secures its operational independence from its parent company and establishes effective governance and oversight, it will be able to expand its customer base, increase its profitability and improve its balance sheet to create sustainable corporate value. We expect that many other shareholders agree with this assessment. Moreover, we seek to understand what other shareholders think about the important topics of NSSOL's corporate governance, strategy, business operations and capital allocation. As NSSOL’s largest minority shareholder, we believe it is our responsibility to protect the collective interests of minority shareholders and to take action aimed at maximizing NSSOL’s corporate value.

To that end, we invite our fellow shareholders to carefully review our presentation and share their perspectives with us on NSSOL’s corporate governance, strategy and operations by emailing us at 3DIPartners@3DIPartners.com.

Based on your input, we will continue to engage in constructive dialogue aimed at maximizing NSSOL’s corporate value.

About 3D Investment Partners Pte.

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 NSSOL does not reflect its instinct value. 3DIP acquired beneficially and/or economic interest based on its own idea that NSSOL securities have been undervalued and provides attractive investment opportunity and may in the future beneficially own and/or have an economic interest in, NSSOL securities. 3DIP intends to review its investments in the NSSOL on a continuing basis and, depending upon various factors including, without limitation, the NSSOL's financial position and strategic direction, the outcome of any discussions with NSSOL, overall market conditions, other investment opportunities available to 3DIP, and the availability of NSSOL securities at prices that would make the purchase or sale of NSSOL 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 NSSOL 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 NSSOL, to transfer or abolish the business or asset of NSSOL and/or NSSOL group companies at the general shareholders meeting of NSSOL. 3DIP does not have the intention and purpose to engage in any conduct which constricts the continuing and stable implementation of business of NSSOL and/or NSSOL 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.

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.

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Source: 3D Investment Partners Pte. Ltd.