Japonica Partners discovered a significant "Value Gap" between Chicago Northwestern Railroad's ("CNW") trading price and the potential value of the company's shares. Upon revealing an almost 9% pre-control stake, Japonica contacted CNW and, as a proactive white knight, sought to create value through changing both the internal and external expectations and executing a superior business plan.

Japonica approached CNW intending to work with management as "Partners in Progress" to maximize shareholder value. Japonica met frequently with senior executives, including the CEO, who assisted Japonica's team in discovering additional Nuggets of Value. In addition, the investment required extensive governmental and regulatory negotiation and management skills. To solicit the necessary support, Japonica worked closely with the U.S. House of Representatives and Senate, numerous state governments, the U.S. Department of Transportation, and the Interstate Commerce Commission. Additionally, Japonica's special core competency of changing cultures & operations were tested successfully with the efforts of numerous separate railroad-related unions.

Prior to Japonica's investment, CNW's return to shareholders had been disappointing, and it was trading at a significantly lower multiple than its peers. A management buyout offer of approximately $30 per share, sponsored by one of the largest and most reputable buyout firms, had recently collapsed. The investing public shared management's negative assessment. Investment bankers were so troubled with the company's performance that CNW was openly referred to as "two strips of rust running into the sunset."

Despite Japonica's entrepreneurial efforts to partner with management to increase value, CNW's board prohibited management from implementing Japonica's business plan. Therefore, Japonica proposed its own slate of outside directors to assist management in working constructively toward closing the Value Gap. Concurrently, based upon the quality of its analytical work, business plan, and management team, Japonica arranged a fully financed $1.6 billion tender offer. Ultimately, outside advisers persuaded senior management to pursue an auction process for the sale of the company. A competing consortium of firms, including a major U.S. railroad and private equity firm, offered a price significantly above Japonica's premium offer.

Japonica began acquiring CNW shares at $22. The rival consortium launched a $50 competing tender. With Japonica acting as a catalyst, CNW shareholders doubled the value of their investment, and total shareholder value increased by approximately $400 million from the point when Japonica first privately contacted management.

Japonica and its team of approximately 60 entrepreneuers, including former executives from IC Industries, Florida East Coast Railroad, Consolidated Natural Gas, and the U.S. Department of Transportation, dedicated an estimated 22,000 work hours to the co-investment and produced approximately 3,000 pages of analyses.