March 2, 2024

Nintendo heir’s family office says “patience is a superpower”

Nintendo family office empireNintendo family office empire

Yamauchi-No.10 Family Office, an investment firm managing almost $1.5 billion (about ¥204 billion) of assets for members of Nintendo’s founding family, is willing to play the long game when it comes to portfolio companies and can wait more than a decade to see a turnaround, according to Chief Investment Officer Hirowaka Murakami.

That timeline explains why the firm is continuing its bid to take marine construction firm Toyo Construction private, despite being nearly a year into the process, and highlights the Yamauchi family office’s flexibility and risk appetite in the hunt for both listed and privately held companies with technology that can revitalize Japan.

Yamauchi family legacy

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.

Its aim is to preserve the “unique creativity and pioneering mindset” of Hiroshi Yamauchi, who died in 2013, to help Japan innovate. Its quirky webpage, with colourful, 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.

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The family office’s tussle with $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.

Meanwhile, Toyo Construction said it intended to set up a committee to consider the takeover proposal and that it had 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, will not 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 healthcare. As 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 in 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.”

Long term strategy

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

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By investing in cutting-edge technology and backing a turnaround in companies that are struggling but have strong fundamentals, the Yamauchi family office is taking a unique approach to investing that could yield substantial returns over the long term. While other investors may be focused on short-term gains, the Yamauchi family.

The Yamauchi family office’s approach to investing is unique in that it is patient and focused on the long-term outlook. This strategy allows the firm to wait for more than a decade to see a turnaround in its portfolio companies, giving it a rare flexibility and risk appetite in its hunt for both listed and privately held companies with technology that can revitalize Japan.

The family office’s website, with its colorful 8-bit graphics and chiptune music, harks back to early Nintendo games such as Donkey Kong, reflecting the Yamauchi family’s commitment to preserving the “unique creativity and pioneering mindset” of 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.

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Despite its whimsical appearance, the firm is no stranger to serious investment battles, as demonstrated by its tussle with Toyo Construction, Japan’s third-largest marine construction firm. The family office, which holds a 27% stake in Toyo, has accused the company’s board of “serious governance flaws and oversight failures” and has opposed the re-election of Toyo’s president and two other executives at the June meeting of shareholders.

About half of the family office’s 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. With many big coastal cities, Japan could better leverage Toyo’s marine construction technology in power generation, said Murakami.

The family office’s investment philosophy is driven by a desire to achieve its goals in a way that is not solely commercial. This approach is in keeping with its commitment to preserving the legacy of Hiroshi Yamauchi, who transformed Nintendo into a global video game powerhouse.

By investing in companies that have the potential to revitalize Japan and its economy, the Yamauchi family office is carrying on the legacy of its founder and contributing to the country’s future growth and success.

By Adam Schilling

Adam Schilling is a finance reporter at Fund23, with a wealth of experience covering the financial industry. With a passion for uncovering insights and trends that impact the world of finance, Adam is a highly respected journalist with a reputation for delivering accurate and thought-provoking content.

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