Case | HBS Case Collection | October 2008 (Revised November 2010)

NEC Electronics

by C. Fritz Foley, Robin Greenwood and James Quinn

Abstract

Why do shares in NEC Electronics, a publicly listed subsidiary of Japan conglomerate NEC, trade at a discount to their fundamental value? Can Perry Capital, a U.S. hedge fund, restructure this subsidiary and generate significant returns? This case provides students with an opportunity to analyze Perry's decision to invest in NEC Electronics. In doing so, it asks for the reasons that NEC might take actions that destroy value and shift value away from NECE's minority shareholders. The events covered allow for a discussion of how ownership concentration constrains restructuring alternatives, how hedge fund investors might confront controlling shareholders, and how the mispricing of agency costs can give rise to ownership structures that allow for minority shareholder expropriation.

Keywords: Restructuring; Private Equity; Investment Return; Ownership Stake; Business and Shareholder Relations; Financial Services Industry; Japan;

Citation:

Foley, C. Fritz, Robin Greenwood, and James Quinn. "NEC Electronics." Harvard Business School Case 209-001, October 2008. (Revised November 2010.)