Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>In my piece <a href="https://www.smartkarma.com/insights/smallcap-kosaido-7868-jp-tender-offer-wrong-price-but-whaddya-gonna-do" target="_blank" data-smartkarma-citation="insights:27405">Smallcap Kosaido (7868 JP) Tender Offer: Wrong Price But Whaddya Gonna Do?</a> discussing the <a href="https://www.smartkarma.com/entities/15158" target="_blank" data-smartkarma-citation="entities:15158:1">Kosaido Co Ltd (7868 JP)</a> MBO by Bain, even the title suggested it was a lowball bid with the wrong price.</p><p>The deal was announced at ¥610/share which was a 40+% premium to last, but it was still being done at a 44% discount to Tangible Book Value Per Share. I mentioned in the conclusions the following four points...</p><blockquote><ul>
<li><p>This is a virtual asset strip in progress. It is the kind of thing which gives activist hedge funds a bad name, but when cloaked in the finery of "Private Equity", it looks like renewal of a business.</p></li>
<li><p>This company is an example of why investors should be spending more time on their stewardship and the governance of their portfolio companies.</p></li>
<li><p>It is also why investors should be taking a very close look at the METI request for public comment on what constitutes "Fair M&amp;A."</p></li>
<li><p>If deals like this start to <em>not</em> get done, that would be a bullish sign. Investors will finally be taking the blinders off to unfair M&amp;A practices.</p></li>
</ul></blockquote><p>The share price jumped from the 400s to just under the Tender Offer Price, traded there for several days, then a week after it started trading at or near arb terms, the share price suddenly jumped through terms and headed higher. As of today's close, the stock is 28% through terms.</p><p>Yesterday the shares briefly traded almost 40% through terms.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/078/131/original/Screenshot%202019-02-07%20at%201.26.58%20PM.png?1549517267" class="editor-image img-responsive" data-smartkarma-image-id="78131"></figure><div style="text-align: left;" class="content-caption">data source: investing.com</div><table class="table table-striped"><tbody>
<tr><td colspan="2"><h2>Terms &amp; Schedule of Bain Tender Offer for Kosaido</h2></td></tr>
<tr>
<td>Tender Offer Price</td>
<td>JPY 610</td>
</tr>
<tr>
<td></td>
<td></td>
</tr>
<tr>
<td>Tender Offer Start Date</td>
<td>18 January 2019</td>
</tr>
<tr>
<td>Tender Offer Close Date</td>
<td>1 March 2019</td>
</tr>
<tr>
<td></td>
<td></td>
</tr>
<tr>
<td>Tender Agent</td>
<td>SMBC Securities</td>
</tr>
<tr>
<td>Maximum Shares To Buy</td>
<td>24,913,439 shares</td>
</tr>
<tr>
<td>MINIMUM Shares To Buy</td>
<td>16,609,000 shares</td>
</tr>
<tr>
<td>Currently Owned Shares</td>
<td>100 shares</td>
</tr>
<tr>
<td>Irrevocable Undertakings</td>
<td>Sawada Holdings' 3,088,500 shares or 12.40%<br>(includes the holdings at both Sawada Holdings and HS Securities).</td>
</tr>
</tbody></table><p></p><p>Something is up.</p>

In my piece Smallcap Kosaido (7868 JP) Tender Offer: Wrong Price But Whaddya Gonna Do? discussing the Kosaido Co Ltd (7868 JP) MBO by Bain, even the title suggested it was a lowball bid with the wrong price.The deal was announced at ¥610/share which was a 40+% premium to last, but it was still being done at a 44% discount to Tangible Book Value Per Share. I mentioned in the conclusions the following four points...
This is a virtual asset strip in progress. It is the kind of thing which gives activist hedge funds a bad name, but when cloaked in the finery of "Private Equity", it looks like renewal of a business.
This company is an example of why investors should be spending more time on their stewardship and the governance of their portfolio companies.
It is also why investors should be taking a very close look at the METI request for public comment on what constitutes "Fair M&amp;A."
If deals like this start to not get done, that would be a bullish sign. Investors will finally be taking the blinders off to unfair M&amp;A practices.
The share price jumped from the 400s to just under the Tender Offer Price, traded there for several days, then a week after it started trading at or near arb terms, the share price suddenly jumped through terms and headed higher. As of today's close, the stock is 28% through terms.Yesterday the shares briefly traded almost 40% through terms.data source: investing.com
Terms &amp; Schedule of Bain Tender Offer for Kosaido

Tender Offer Price
JPY 610






Tender Offer Start Date
18 January 2019


Tender Offer Close Date
1 March 2019






Tender Agent
SMBC Securities


Maximum Shares To Buy
24,913,439 shares


MINIMUM Shares To Buy
16,609,000 shares


Currently Owned Shares
100 shares


Irrevocable Undertakings
Sawada Holdings' 3,088,500 shares or 12.40% (includes the holdings at both Sawada Holdings and HS Securities).

Something is up.

Kosaido: Activism Drives Price 30+% Through Terms

<p>Last week on 17 January, printing and HR services company and funeral parlor operator <a href="https://www.smartkarma.com/entities/15158" target="_blank" data-smartkarma-citation="entities:15158:1">Kosaido Co Ltd (7868 JP)</a> <a href="https://contents.xj-storage.jp/xcontents/AS01383/41aa4c68/e5e7/45c9/ac36/614b613de988/140120190117460766.pdf" target="_blank">announced</a> that Bain Capital Private Equity would conduct an MBO on its shares via Tender Offer, with a minimum threshold for success of acquiring 66.67% of the shares outstanding. The Tender Offer commenced on 18 January and goes through 1 Mach 2019. The Tender Offer Price is ¥610/share, which is a 43.8% premium to the close of the day before the announcement and a 59.7% premium to the one-month VWAP up through the day before the announcement. </p>
<p>The company's board of directors <a href="https://contents.xj-storage.jp/xcontents/AS01383/f871a065/11bc/48a9/86e0/0660ecd1a5ac/140120190109457983.pdf" target="_blank">announced</a> it supported the deal. </p>
<h2>Terms &amp; Schedule</h2>
<div>
<table class="table table-striped">
<tbody>
<tr>
<td colspan="2" style="width: 805px;">
<h2>Terms &amp; Schedule of Hitachi Tender Offer for Yungtay Engineering</h2>
</td>
</tr>
<tr>
<td style="width: 287px;">Tender Offer Price</td>
<td style="width: 518px;">JPY 610</td>
</tr>
<tr>
<td style="width: 287px;"></td>
<td style="width: 518px;"></td>
</tr>
<tr>
<td style="width: 287px;">Tender Offer Start Date</td>
<td style="width: 518px;">18 January 2019</td>
</tr>
<tr>
<td style="width: 287px;">Tender Offer Close Date</td>
<td style="width: 518px;">1 March 2019</td>
</tr>
<tr>
<td style="width: 287px;"></td>
<td style="width: 518px;"></td>
</tr>
<tr>
<td style="width: 287px;">Tender Agent</td>
<td style="width: 518px;">SMBC Securities</td>
</tr>
<tr>
<td style="width: 287px;">Maximum Shares To Buy</td>
<td style="width: 518px;">24,913,439 shares</td>
</tr>
<tr>
<td style="width: 287px;">MINIMUM Shares To Buy</td>
<td style="width: 518px;">16,609,000 shares</td>
</tr>
<tr>
<td style="width: 287px;">Currently Owned Shares</td>
<td style="width: 518px;">100 shares</td>
</tr>
<tr>
<td style="width: 287px;">Irrevocable Undertakings</td>
<td style="width: 518px;">Sawada Holdings' 3,088,500 shares or 12.40%<br>(includes the holdings at both Sawada Holdings and HS Securities).</td>
</tr>
</tbody>
</table>
<p></p>
<p>This deal is probably reasonably straightforward. </p>
<ul>
<li>It is a big premium to last trade, and a multi-year high. </li>
<li>There is one large holder publicly willing to sell and I expect the cross-holders would be willing to sell too.</li>
<li>Management is involved and supportive.</li>
</ul>
<p>Except it is being done (and recommended) at a 44% discount to Tangible Book Value Per Share after the directors managed to work Bain up from a 49% discount to TBVPS. </p>
<p></p>
</div>

Last week on 17 January, printing and HR services company and funeral parlor operator Kosaido Co Ltd (7868 JP) announced that Bain Capital Private Equity would conduct an MBO on its shares via Tender Offer, with a minimum threshold for success of acquiring 66.67% of the shares outstanding. The Tender Offer commenced on 18 January and goes through 1 Mach 2019. The Tender Offer Price is ¥610/share, which is a 43.8% premium to the close of the day before the announcement and a 59.7% premium to the one-month VWAP up through the day before the announcement. 
The company's board of directors announced it supported the deal. 
Terms &amp; Schedule





Terms &amp; Schedule of Hitachi Tender Offer for Yungtay Engineering



Tender Offer Price
JPY 610






Tender Offer Start Date
18 January 2019


Tender Offer Close Date
1 March 2019






Tender Agent
SMBC Securities


Maximum Shares To Buy
24,913,439 shares


MINIMUM Shares To Buy
16,609,000 shares


Currently Owned Shares
100 shares


Irrevocable Undertakings
Sawada Holdings' 3,088,500 shares or 12.40% (includes the holdings at both Sawada Holdings and HS Securities).




This deal is probably reasonably straightforward. 

It is a big premium to last trade, and a multi-year high. 
There is one large holder publicly willing to sell and I expect the cross-holders would be willing to sell too.
Management is involved and supportive.

Except it is being done (and recommended) at a 44% discount to Tangible Book Value Per Share after the directors managed to work Bain up from a 49% discount to TBVPS. 



Smallcap Kosaido (7868 JP) Tender Offer: Wrong Price But Whaddya Gonna Do?

Japan

KOSAIDO Co., Ltd. provides commercial printing services.  The Company also develops and markets computer software and provides information processing systems.

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Kosaido (7868 JP)

Kosaido: Activism Drives Price 30+% Through Terms

In my piece Smallcap Kosaido (7868 JP) Tender Offer: Wrong Price But Whaddya Gonna Do? discussing the Kosaido Co Ltd (7868 JP) MBO by Bain, even...

Travis Lundy

Smallcap Kosaido (7868 JP) Tender Offer: Wrong Price But Whaddya Gonna Do?

Last week on 17 January, printing and HR services company and funeral parlor operator Kosaido Co Ltd (7868 JP) announced that Bain Capital Private...

Travis Lundy

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