Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

True to the sentiment expressed by the <a href="https://www.smartkarma.com/entities/idemitsu-kosan-co-ltd" target="_blank" data-smartkarma-citation="entities:109:1" rel="noopener">Idemitsu Kosan (5019 JP)</a> Finance Dept chief who spoke at the earnings news conference last week, Idemitsu Kosan did not change the price on its ¥2450/share Tender Offer for <a href="https://www.smartkarma.com/entities/toa-oil-co-ltd" target="_blank" data-smartkarma-citation="entities:11021:1" rel="noopener">Toa Oil Co Ltd (5008 JP)</a>.Yesterday, the Tender Offer closed without fanfare. Today Idemitsu announced the results (<a href="https://ssl4.eir-parts.net/doc/5019/ir_material9/154414/00.pdf" target="_blank" rel="noopener">English</a>, <a href="https://www.idss.co.jp/content/100034505.pdf" target="_blank" rel="noopener">Japanese</a>). Because Idemitsu already owned 50+% it only needed 2,058,875 shares which was 16+% or roughly a third of the minority to get to 66.7% to squeeze out remaining minority shareholders. Idemitsu got 470,668 shares, or 3.82%. In my first insight <a href="https://www.smartkarma.com/insights/idemitsu-launches-lowball-tender-offer-for-subsidiary-toa-oil-5008" target="_blank" data-smartkarma-citation="insights:46384" rel="noopener">Idemitsu Launches Lowball Tender Offer for Subsidiary Toa Oil (5008)</a>, I showed what I thought the shareholder structure breakdown for support looked like. In that table, I suggested at a minimum, it was likely to get support from financial and corporate crossholders 483,000 shares) and from directors (13,500 shares). They did not even get that much. Cornwall Capital, which had climbed from 18+% to 26.5+% during the course of the Tender Offer obviously did not tender, but neither did 99% of the other non-crossholder-held shares. This was an enormous failure for Idemitsu. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/093/original/Screenshot+2021-02-16+at+8.26.07+PM.png?1613478380" class="editor-image img-responsive" data-smartkarma-image-id="189093"></figure></section>What next? Read on.

True to the sentiment expressed by the Idemitsu Kosan (5019 JP) Finance Dept chief who spoke at the earnings news conference last week, Idemitsu Kosan did not change the price on its ¥2450/share Tender Offer for Toa Oil Co Ltd (5008 JP).Yesterday, the Tender Offer closed without fanfare. Today Idemitsu announced the results (English, Japanese). Because Idemitsu already owned 50+% it only needed 2,058,875 shares which was 16+% or roughly a third of the minority to get to 66.7% to squeeze out remaining minority shareholders. Idemitsu got 470,668 shares, or 3.82%. In my first insight Idemitsu Launches Lowball Tender Offer for Subsidiary Toa Oil (5008), I showed what I thought the shareholder structure breakdown for support looked like. In that table, I suggested at a minimum, it was likely to get support from financial and corporate crossholders 483,000 shares) and from directors (13,500 shares). They did not even get that much. Cornwall Capital, which had climbed from 18+% to 26.5+% during the course of the Tender Offer obviously did not tender, but neither did 99% of the other non-crossholder-held shares. This was an enormous failure for Idemitsu. What next? Read on.

Toa Oil (5008) - The Dog Has Caught the Car, But Beware Mangalores

Friday after the close, <a href="https://www.smartkarma.com/entities/open-house-co-ltd" target="_blank" data-smartkarma-citation="entities:19550:1" rel="noopener">Open House (3288 JP)</a> announced the results of the Partial Tender Offer (Tender Offer for 19.8815mm shares) for <a href="https://www.smartkarma.com/entities/pressance-corp" target="_blank" data-smartkarma-citation="entities:17783:1" rel="noopener">Pressance Corp (3254 JP)</a>.Pro-Ration ended up at 60.92%. This was a LOT lower than I expected. The breakdown of the Tender Offer provided by the Offeror in its MOF Filing suggests a few of the reasons for why this occurred, and one can look at the tendered quantities and deduce a few elements of what may happen going forward.

Friday after the close, Open House (3288 JP) announced the results of the Partial Tender Offer (Tender Offer for 19.8815mm shares) for Pressance Corp (3254 JP).Pro-Ration ended up at 60.92%. This was a LOT lower than I expected. The breakdown of the Tender Offer provided by the Offeror in its MOF Filing suggests a few of the reasons for why this occurred, and one can look at the tendered quantities and deduce a few elements of what may happen going forward. 

Pressance Partial Tender - Almost EVERYONE Tendered

In <a href="https://www.smartkarma.com/insights/pressance-3254-jp-partial-tender-yummy" target="_blank" data-smartkarma-citation="insights:45354" rel="noopener">Pressance (3254 JP) Partial Tender - YUMMY!</a> I looked at the partial tender which was being launched by the much larger Kanto-based <a href="https://www.smartkarma.com/entities/open-house-co-ltd" target="_blank" data-smartkarma-citation="entities:19550:1" rel="noopener">Open House (3288 JP)</a> on Kansai-based <a href="https://www.smartkarma.com/entities/pressance-corp" target="_blank" data-smartkarma-citation="entities:17783:1" rel="noopener">Pressance Corp (3254 JP)</a>, a partial tender offer combined with a third-party placement by Pressance to Open House after the Tender Offer designed to get Open House to a 65% ownership level in Pressance. 65% is near the maximum that an owner can get to without being obliged to launch a tender offer for all shares outstanding, and it sets up the new owner for both control and near-super-majority control when including both Open House's future 65% stake and the 7% held by financial and corporate cross-holders and existing directors outside the shares held by former and disgraced CEO Yamagishi-san, who will be selling his shares in the Tender Offer. I thought the trade pretty "yummy." I still think so. The shareholding has changed somewhat dramatically since the Tender Offer was launched, but not in a way that dramatically changes the outcome I expected. Discussion ensues.

In Pressance (3254 JP) Partial Tender - YUMMY! I looked at the partial tender which was being launched by the much larger Kanto-based Open House (3288 JP) on Kansai-based Pressance Corp (3254 JP), a partial tender offer combined with a third-party placement by Pressance to Open House after the Tender Offer designed to get Open House to a 65% ownership level in Pressance. 65% is near the maximum that an owner can get to without being obliged to launch a tender offer for all shares outstanding, and it sets up the new owner for both control and near-super-majority control when including both Open House's future 65% stake and the 7% held by financial and corporate cross-holders and existing directors outside the shares held by former and disgraced CEO Yamagishi-san, who will be selling his shares in the Tender Offer. I thought the trade pretty "yummy." I still think so. The shareholding has changed somewhat dramatically since the Tender Offer was launched, but not in a way that dramatically changes the outcome I expected. Discussion ensues.

Pressance Partial - Last Chance To Buy The Tender Residual Cheap

On Friday 13th November 2020, <a href="https://www.smartkarma.com/entities/open-house-co-ltd" target="_blank" data-smartkarma-citation="entities:19550:1" rel="noopener">Open House (3288 JP)</a> and 32%-owned affiliate <a href="https://www.smartkarma.com/entities/pressance-corp" target="_blank" data-smartkarma-citation="entities:17783:1" rel="noopener">Pressance Corp (3254 JP)</a> announced a revision of their shareholder agreement and a quasi-MBO Partial Tender Offer and Capital Injection which would, as a result of both being successful, get Open House to 65% ownership and would get Pressance an additional JPY 5bn in capital. Pressance (3254 JP) is a relatively fast-growing Kansai-based real estate developer and broker in Japan, building, selling, and managing condos and parking lots. It specializes in smaller condos - both in terms of bedrooms per unit and in terms of total units per property - and investment properties, and then managing those properties. It also runs a small hotel business. Pressance had been fast-growing in stock price as well until just under a year ago when former CEO Yamagishi-san was arrested in connection with a case of missing money at a school called Meijo Gakuen. The previous president was arrested too. Hedge funds bought shares in large numbers at the time. Tower Investment Management, which had been steadily selling into strength, bought 3.5% of the shares out in the two days after the sharp selloff started, getting to 10.27%. They bought more in March when the COVID crisis hit getting to 15.46% by early April 2020. CEO Yamagishi sold 31.63% to Open House in April.Open House (3288 JP) is a larger fast-growing Kanto-based real estate broker and developer, getting two-thirds of its revenue from the development and sale of single-family homes, another 10% from developing condominiums - both done under a number of "brands", and another 20% from the property resale/broking business with more than 80% of properties (by count) in the 100-500mm and 500mm yen-plus price categories (65% in Tokyo and Yokohama, 35% in Kansai/Chubu/Kyushu and elsewhere).Open House already owns just under one-third of Pressance and is looking to make that just under two-thirds, probably hoping that some shareholders who might be viewed as "noisy" will accept the invitation to exit their positions. This is also an exit opportunity for the former Pressance CEO who will be selling roughly 8% of Pressance shares into the Tender Offer. For Open House, this is a bolt-on to consolidate more growth.We'll see.As always with partial offers, below you'll find the details and the Partial Offer Arb Grids.

On Friday 13th November 2020, Open House (3288 JP) and 32%-owned affiliate Pressance Corp (3254 JP) announced a revision of their shareholder agreement and a quasi-MBO Partial Tender Offer and Capital Injection which would, as a result of both being successful, get Open House to 65% ownership and would get Pressance an additional JPY 5bn in capital. Pressance (3254 JP) is a relatively fast-growing Kansai-based real estate developer and broker in Japan, building, selling, and managing condos and parking lots. It specializes in smaller condos - both in terms of bedrooms per unit and in terms of total units per property - and investment properties, and then managing those properties. It also runs a small hotel business. Pressance had been fast-growing in stock price as well until just under a year ago when former CEO Yamagishi-san was arrested in connection with a case of missing money at a school called Meijo Gakuen. The previous president was arrested too. Hedge funds bought shares in large numbers at the time. Tower Investment Management, which had been steadily selling into strength, bought 3.5% of the shares out in the two days after the sharp selloff started, getting to 10.27%. They bought more in March when the COVID crisis hit getting to 15.46% by early April 2020. CEO Yamagishi sold 31.63% to Open House in April.Open House (3288 JP) is a larger fast-growing Kanto-based real estate broker and developer, getting two-thirds of its revenue from the development and sale of single-family homes, another 10% from developing condominiums - both done under a number of "brands", and another 20% from the property resale/broking business with more than 80% of properties (by count) in the 100-500mm and 500mm yen-plus price categories (65% in Tokyo and Yokohama, 35% in Kansai/Chubu/Kyushu and elsewhere).Open House already owns just under one-third of Pressance and is looking to make that just under two-thirds, probably hoping that some shareholders who might be viewed as "noisy" will accept the invitation to exit their positions. This is also an exit opportunity for the former Pressance CEO who will be selling roughly 8% of Pressance shares into the Tender Offer. For Open House, this is a bolt-on to consolidate more growth.We'll see.As always with partial offers, below you'll find the details and the Partial Offer Arb Grids.

Pressance (3254 JP) Partial Tender - YUMMY!

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

After failing to break above resistance, global equities (MSCI ACWI) have had a rough start to the third quarter. Continued weakness in global manufacturing and the U.S.-EU tariff escalation raises the potential for a breakdown in global equities, however our outlook remains neutral as long as the MSCI ACWI remains confined to its horizontal range. In today's report we highlight attractive and actionable set-ups within technology, construction and engineering, and real estate.

After failing to break above resistance, global equities (MSCI ACWI) have had a rough start to the third quarter. Continued weakness in global manufacturing and the U.S.-EU tariff escalation raises the potential for a breakdown in global equities, however our outlook remains neutral as long as the MSCI ACWI remains confined to its horizontal range. In today's report we highlight attractive and actionable set-ups within technology, construction and engineering, and real estate.

Global Equity Strategy: Prevailing Trends Persist

Japan

Open House Co.,Ltd. provides real estate services. The Company offers services including renting, buying, selling and appraising real estate.

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Open House (3288 JP)

Toa Oil (5008) - The Dog Has Caught the Car, But Beware Mangalores

The Idemitsu Tender Offer for Toa failed. Independent shareholders stayed away in droves. Next, Idemitsu may be inclined to try something less...

Travis Lundy

Pressance Partial Tender - Almost EVERYONE Tendered

Pressance Tender Pro-ration came in well below where I expected, suggesting almost everyone who could tender did tender. The headline residual is...

Travis Lundy

Pressance Partial - Last Chance To Buy The Tender Residual Cheap

Pressance (3254 JP) Partial Tender by Open House (3288 JP) is priced too low, and designed to transfer control. Buying and tendering gets one long...

Travis Lundy

Pressance (3254 JP) Partial Tender - YUMMY!

Open House bought 31.6% of Pressance (3254) in spring when embattled former CEO Yamagishi needed to sell. Now OH are going in to get up to 65%,...

Travis Lundy

Global Equity Strategy: Prevailing Trends Persist

After failing to break above resistance, global equities (MSCI ACWI) have had a rough start to the third quarter. Continued weakness in global...

Vermilion Research

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