Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>For the month of January, seventeen new deals were discussed on Smartkarma with an overall deal size of US$91bn, with ~81% of that figure from the <strong><a href="https://www.smartkarma.com/entities/7410" target="_blank" data-smartkarma-citation="entities:7410:1">Celgene Corp (CELG US)</a> </strong>deal. This overall number does not include rumours on <strong><a href="https://www.smartkarma.com/entities/7012" target="_blank" data-smartkarma-citation="entities:7012:1">Nexon Gt Co Ltd (041140 KS)</a></strong> and <strong><a href="https://www.smartkarma.com/entities/55" target="_blank" data-smartkarma-citation="entities:55:1">Capitaland Ltd (CAPL SP)</a></strong>'s acquisition of <a href="https://www.smartkarma.com/entities/7012" target="_blank" data-smartkarma-citation="entities:7012:1">Ascendas-Singbridge.</a> The average transaction premium was 43%, or 26% if ignoring <strong><a href="https://www.smartkarma.com/entities/23493" target="_blank" data-smartkarma-citation="entities:23493:1">Earthport plc (EPO LN)</a></strong>.</p>
<table class="table table-striped">
<colgroup></colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Target Company"}'>
<h2>New Deals</h2>
</td>
<td data-sheets-value='{"1":2,"2":"Industry"}'>
<h2>Industry</h2>
</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Premium for Deals Announced in January"}'>
<h2>Premium</h2>
</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Deal Size (US$m)"}' data-sheets-numberformat='[null,2,"#,##0",1]'>
<h2>Deal Size (US$m)</h2>
</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Deal Type"}'>
<h2>Deal Type</h2>
</td>
</tr>
<tr>
<td colspan="5" data-sheets-value='{"1":2,"2":"Healius Limited"}'><strong>Australia</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Healius Limited"}'><a href="https://www.smartkarma.com/entities/6296" target="_blank" data-smartkarma-citation="entities:6296:1">Healius (HLS AU)</a></td>
<td data-sheets-value='{"1":2,"2":"Health Care"}'>Health Care</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.332}' data-sheets-numberformat='[null,3,"0.00%",1]'>33.2%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1809.78}' data-sheets-numberformat='[null,2,"#,##0",1]'>1,402</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Scheme"}'>Scheme</td>
</tr>
<tr>
<td colspan="5" data-sheets-value='{"1":2,"2":"New Sports Group"}'><strong>Hong Kong</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"New Sports Group"}'><a href="https://www.smartkarma.com/entities/8706" target="_blank" data-smartkarma-citation="entities:8706:1">New Sports Group (299 HK)</a></td>
<td data-sheets-value='{"1":2,"2":"Communication Services"}'>Communication Services</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0357}' data-sheets-numberformat='[null,3,"0.00%",1]'>3.6%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":638.91}' data-sheets-numberformat='[null,2,"#,##0",1]'>82</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Off-Mkt"}'>Off-Mkt</td>
</tr>
<tr>
<td colspan="5" data-sheets-value='{"1":2,"2":"GRUH Finance"}'><strong>India</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GRUH Finance"}'><a href="https://www.smartkarma.com/entities/16072" target="_blank" data-smartkarma-citation="entities:16072:1">Gruh Finance (GRHF IN)</a></td>
<td data-sheets-value='{"1":2,"2":"Thrifts and Mortgage Finance"}'>Thrifts and Mortgage Finance</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.0761}' data-sheets-numberformat='[null,3,"0.00%",1]'>-7.6%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3154}' data-sheets-numberformat='[null,2,"#,##0",1]'>2,974</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Scheme"}'>Scheme</td>
</tr>
<tr>
<td colspan="5" data-sheets-value='{"1":2,"2":"GRUH Finance"}'><strong>Indonesia</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GRUH Finance"}'><a href="https://www.smartkarma.com/entities/135" target="_blank" data-smartkarma-citation="entities:135:1">Bank Danamon Indonesia (BDMN IJ)</a></td>
<td data-sheets-value='{"1":2,"2":"Thrifts and Mortgage Finance"}'>Finance</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.0761}' data-sheets-numberformat='[null,3,"0.00%",1]'>14.9%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3154}' data-sheets-numberformat='[null,2,"#,##0",1]'>4,000</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Scheme"}'>Offer</td>
</tr>
<tr>
<td colspan="5" data-sheets-value='{"1":2,"2":"Kosaido Co Ltd"}'><strong>Japan</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Kosaido Co Ltd"}'>
<a href="https://www.smartkarma.com/entities/7888" target="_blank" data-smartkarma-citation="entities:7888:1">Clarion Co Ltd (6796 JP)</a> </td>
<td data-sheets-value='{"1":2,"2":"Commercial Printing"}'>Audio/infotainment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.438}' data-sheets-numberformat='[null,3,"0.00%",1]'>10.5%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":498.47}' data-sheets-numberformat='[null,2,"#,##0",1]'>1,300</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Off-Mkt"}'>Tender offer</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Kosaido Co Ltd"}'><a href="https://www.smartkarma.com/entities/8225" target="_blank" data-smartkarma-citation="entities:8225:1">Descente Ltd (8114 JP)</a></td>
<td data-sheets-value='{"1":2,"2":"Commercial Printing"}'>Retailer</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.438}' data-sheets-numberformat='[null,3,"0.00%",1]'>49.7%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":498.47}' data-sheets-numberformat='[null,2,"#,##0",1]'>185</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Off-Mkt"}'>Partial offer</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Kosaido Co Ltd"}'><a href="https://www.smartkarma.com/entities/1209" target="_blank" data-smartkarma-citation="entities:1209:1">Jiec Co Ltd (4291 JP)</a></td>
<td data-sheets-value='{"1":2,"2":"Commercial Printing"}'>Info Tech</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.438}' data-sheets-numberformat='[null,3,"0.00%",1]'>39.3%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":498.47}' data-sheets-numberformat='[null,2,"#,##0",1]'>52</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Off-Mkt"}'>Tender Offer</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Kosaido Co Ltd"}'><a href="https://www.smartkarma.com/entities/15158" target="_blank" data-smartkarma-citation="entities:15158:1">Kosaido Co Ltd (7868 JP)</a></td>
<td data-sheets-value='{"1":2,"2":"Commercial Printing"}'>Commercial Printing</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.438}' data-sheets-numberformat='[null,3,"0.00%",1]'>43.8%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":498.47}' data-sheets-numberformat='[null,2,"#,##0",1]'>139</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Off-Mkt"}'>Tender offer</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shinmaywa Industries Ltd"}'><a href="https://www.smartkarma.com/entities/18738" target="_blank" data-smartkarma-citation="entities:18738:1">Shinmaywa Industries (7224 JP)</a></td>
<td data-sheets-value='{"1":2,"2":"Industrials"}'>Industrials</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.105}' data-sheets-numberformat='[null,3,"0.00%",1]'>10.5%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":364.86}' data-sheets-numberformat='[null,2,"#,##0",1]'>365</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Off-Mkt"}'>Tender offer</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ascendas-Singbridge"}'><a href="https://www.smartkarma.com/entities/19831" target="_blank" data-smartkarma-citation="entities:19831:1">Veriserve Corp (3724 JP)</a></td>
<td data-sheets-value='{"1":2,"2":"Construction and Engineering"}'>Info tech</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.07}' data-sheets-numberformat='[null,3,"0.00%",1]'>44.6%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4481.45}' data-sheets-numberformat='[null,2,"#,##0",1]'>142</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Scheme"}'>Tender offer</td>
</tr>
<tr>
<td colspan="5" data-sheets-value='{"1":2,"2":"Ascendas-Singbridge"}'><strong>Singapore</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Courts Asia Ltd"}'><a href="https://www.smartkarma.com/entities/13837" target="_blank" data-smartkarma-citation="entities:13837:1">Courts Asia Ltd (COURTS SP)</a></td>
<td data-sheets-value='{"1":2,"2":"Consumer Discretionary"}'>Consumer Discretionary</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.349}' data-sheets-numberformat='[null,3,"0.00%",1]'>34.9%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":80}' data-sheets-numberformat='[null,2,"#,##0",1]'>27</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Scheme"}'>Scheme</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"M1 Ltd"}'><a href="https://www.smartkarma.com/entities/412" target="_blank" data-smartkarma-citation="entities:412:1">M1 Ltd (M1 SP)</a></td>
<td data-sheets-value='{"1":2,"2":"Communication Services"}'>Communication Services</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.26}' data-sheets-numberformat='[null,3,"0%",1]'>26.0%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":932}' data-sheets-numberformat='[null,2,"#,##0",1]'>932</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Off-Mkt"}'>Off-Mkt</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Pci Ltd"}'><a href="https://www.smartkarma.com/entities/11743" target="_blank" data-smartkarma-citation="entities:11743:1">Pci Ltd (PCI SP)</a></td>
<td data-sheets-value='{"1":2,"2":"Information Technology"}'>Information Technology</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.28}' data-sheets-numberformat='[null,3,"0%",1]'>28.0%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":45}' data-sheets-numberformat='[null,2,"#,##0",1]'>45</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Scheme"}'>Scheme</td>
</tr>
<tr>
<td colspan="5" data-sheets-value='{"1":2,"2":"Panalpina Welttransport Holdin"}'><strong>Taiwan</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Yungtay Engineering"}'><a href="https://www.smartkarma.com/entities/14121" target="_blank" data-smartkarma-citation="entities:14121:1">Yungtay Engineering (1507 TT)</a></td>
<td data-sheets-value='{"1":2,"2":"Industrials"}'>Industrials</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.22}' data-sheets-numberformat='[null,3,"0%",1]'>22.0%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":703.51}' data-sheets-numberformat='[null,2,"#,##0",1]'>704</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Off-Mkt"}'>Off-Mkt</td>
</tr>
<tr>
<td colspan="5" data-sheets-value='{"1":2,"2":"Earthport PLC"}'><strong>Europe</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Earthport PLC"}'><a href="https://www.smartkarma.com/entities/23493" target="_blank" data-smartkarma-citation="entities:23493:1">Earthport plc (EPO LN)</a></td>
<td data-sheets-value='{"1":2,"2":"Information Technology"}'>Information Technology</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3.4}' data-sheets-numberformat='[null,3,"0%",1]'>340.0%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":277.2}' data-sheets-numberformat='[null,2,"#,##0",1]'>277</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Off-Mkt"}'>Off-Mkt</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Celgene"}'><a href="https://www.smartkarma.com/entities/22460" target="_blank" data-smartkarma-citation="entities:22460:1">Panalpina Welttransport Holdin (PWTN SW)</a></td>
<td data-sheets-value='{"1":2,"2":"Health Care"}'>Industrials</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.537}' data-sheets-numberformat='[null,3,"0.00%",1]'>24.0%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":99367.24}' data-sheets-numberformat='[null,2,"#,##0",1]'>4,083</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Scheme"}'>Off-Mkt</td>
</tr>
<tr>
<td colspan="5" data-sheets-value='{"1":2,"2":"Celgene"}'><strong>US</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Celgene"}'><a href="https://www.smartkarma.com/entities/7410" target="_blank" data-smartkarma-citation="entities:7410:1">Celgene Corp (CELG US)</a></td>
<td data-sheets-value='{"1":2,"2":"Health Care"}'>Health Care</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.537}' data-sheets-numberformat='[null,3,"0.00%",1]'>53.7%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":99367.24}' data-sheets-numberformat='[null,2,"#,##0",1]'>74,000</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Scheme"}'>Scheme</td>
</tr>
</tbody>
</table>
<p><strong><a href="https://www.smartkarma.com/entities/412" target="_blank" data-smartkarma-citation="entities:412:1">M1 Ltd (M1 SP)</a></strong> is essentially an ongoing transaction; while <strong><a href="https://www.smartkarma.com/entities/15529" target="_blank" data-smartkarma-citation="entities:15529:1">Mastercard Inc Class A (MA US)</a> </strong>trumped <strong><a href="https://www.smartkarma.com/entities/8707" target="_blank" data-smartkarma-citation="entities:8707:1">Visa Inc Class A Shares (V US)</a></strong>'s December offer for Earthport. <strong><a href="https://www.smartkarma.com/entities/6296" target="_blank" data-smartkarma-citation="entities:6296:1">Healius (HLS AU)</a> </strong>rejected its proposal.</p>
<p><strong><a href="https://www.smartkarma.com/entities/135" target="_blank" data-smartkarma-citation="entities:135:1">Bank Danamon Indonesia (BDMN IJ)</a></strong> is similarly an ongoing transaction and arguably the premium is higher than 14.9%, which is based on the last close.</p>
<p>Directly below is a summary of ongoing M&amp;A situations, followed by a recap of news associated with each event situation.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/077/633/original/CaptureMonth%20summary.PNG?1549001321" class="editor-image img-responsive" data-smartkarma-image-id="77633"></figure>
<div style="text-align: left;" class="content-caption">Source: Company announcements, our workings</div>

For the month of January, seventeen new deals were discussed on Smartkarma with an overall deal size of US$91bn, with ~81% of that figure from the Celgene Corp (CELG US) deal. This overall number does not include rumours on Nexon Gt Co Ltd (041140 KS) and Capitaland Ltd (CAPL SP)'s acquisition of Ascendas-Singbridge. The average transaction premium was 43%, or 26% if ignoring Earthport plc (EPO LN).





New Deals


Industry


Premium


Deal Size (US$m)


Deal Type



Australia


Healius (HLS AU)
Health Care
33.2%
1,402
Scheme


Hong Kong


New Sports Group (299 HK)
Communication Services
3.6%
82
Off-Mkt


India


Gruh Finance (GRHF IN)
Thrifts and Mortgage Finance
-7.6%
2,974
Scheme


Indonesia


Bank Danamon Indonesia (BDMN IJ)
Finance
14.9%
4,000
Offer


Japan



Clarion Co Ltd (6796 JP) 
Audio/infotainment
10.5%
1,300
Tender offer


Descente Ltd (8114 JP)
Retailer
49.7%
185
Partial offer


Jiec Co Ltd (4291 JP)
Info Tech
39.3%
52
Tender Offer


Kosaido Co Ltd (7868 JP)
Commercial Printing
43.8%
139
Tender offer


Shinmaywa Industries (7224 JP)
Industrials
10.5%
365
Tender offer


Veriserve Corp (3724 JP)
Info tech
44.6%
142
Tender offer


Singapore


Courts Asia Ltd (COURTS SP)
Consumer Discretionary
34.9%
27
Scheme


M1 Ltd (M1 SP)
Communication Services
26.0%
932
Off-Mkt


Pci Ltd (PCI SP)
Information Technology
28.0%
45
Scheme


Taiwan


Yungtay Engineering (1507 TT)
Industrials
22.0%
704
Off-Mkt


Europe


Earthport plc (EPO LN)
Information Technology
340.0%
277
Off-Mkt


Panalpina Welttransport Holdin (PWTN SW)
Industrials
24.0%
4,083
Off-Mkt


US


Celgene Corp (CELG US)
Health Care
53.7%
74,000
Scheme



M1 Ltd (M1 SP) is essentially an ongoing transaction; while Mastercard Inc Class A (MA US) trumped Visa Inc Class A Shares (V US)'s December offer for Earthport. Healius (HLS AU) rejected its proposal.
Bank Danamon Indonesia (BDMN IJ) is similarly an ongoing transaction and arguably the premium is higher than 14.9%, which is based on the last close.
Directly below is a summary of ongoing M&amp;A situations, followed by a recap of news associated with each event situation.

Source: Company announcements, our workings

Travis Lundy

<p>On 26 October <a href="https://www.smartkarma.com/entities/7797" target="_blank" data-smartkarma-citation="entities:7797:1">Hitachi Ltd (6501 JP)</a> and  <a href="https://www.smartkarma.com/entities/21451" target="_blank" data-smartkarma-citation="entities:21451:1">Faurecia (EO FP)</a><a href="https://www.hitachi.com/New/cnews/month/2018/10/f_181026a.pdf" target="_blank">announced</a> that Faurecia would take over Hitachi car audio and infotainment equipment subsidiary <a href="https://www.smartkarma.com/entities/7888" target="_blank" data-smartkarma-citation="entities:7888:1">Clarion Co Ltd (6796 JP)</a> in a tender offer to be launched 3+ months hence. </p><p>This was discussed in <a href="https://www.smartkarma.com/insights/faurecia-to-buy-clarion-at-2500-share" target="_blank" data-smartkarma-citation="insights:25382">Faurecia to Buy Clarion at ¥2500/Share</a>. </p><p>At the time I had looked at the situation and the question about whether the price was fair and concluded that yes it was, and investors should take the money and run. The investors for whom the deal was most important on a forward-looking basis the day after that announcement were not Clarion investors but investors in Alpine (6816 JP). At that time, there was a question as to whether investors would look at the 10+x EV/EBITDA multiple being paid for Clarion against a multiple in the 2x EV/EBITDA range after cash and other financial assets were  accounted for to be paid for Alpine and suggest that Alpine management and directors had not done a good enough job getting an appropriate valuation (they did not). In addition, the buyer proposed a 5.7x multiple on a post-synergies basis 18-24 months out was a reasonable level to buy a company. I did not disagree, but that made Alpine investors' submission to <a href="https://www.smartkarma.com/entities/12001" target="_blank" data-smartkarma-citation="entities:12001:1">Alps Electric (6770 JP)</a> later in 2018 all the more disappointing. </p><h2>The New News</h2><p>As noted in the original announcement, Faurecia planned to commence their Tender Offer for Clarion shares in January 2019 and the Tender Offer would run for 20 days. </p><p>Clarion today announced a <a href="https://www.clarion.com/jp/ja/pdf/190129_02.pdf" target="_blank">forecast revision</a> for the fiscal year to 31 March 2019 which involves a shortfall in revenue of 9.1%, a 16.7% drop in forecast Operating Profit, and a drop in Net Profit from ¥1.7 billion to a loss of ¥500 million (a ¥2.2bn swing), but...</p><p>In a development which will cause Clarion investors to breathe a sigh of relief, Faurecia also announced will go through with the deal with no changes (other than to extend the Tender Offer to 21 business days). </p>

On 26 October Hitachi Ltd (6501 JP) and  Faurecia (EO FP)announced that Faurecia would take over Hitachi car audio and infotainment equipment subsidiary Clarion Co Ltd (6796 JP) in a tender offer to be launched 3+ months hence. This was discussed in Faurecia to Buy Clarion at ¥2500/Share. At the time I had looked at the situation and the question about whether the price was fair and concluded that yes it was, and investors should take the money and run. The investors for whom the deal was most important on a forward-looking basis the day after that announcement were not Clarion investors but investors in Alpine (6816 JP). At that time, there was a question as to whether investors would look at the 10+x EV/EBITDA multiple being paid for Clarion against a multiple in the 2x EV/EBITDA range after cash and other financial assets were  accounted for to be paid for Alpine and suggest that Alpine management and directors had not done a good enough job getting an appropriate valuation (they did not). In addition, the buyer proposed a 5.7x multiple on a post-synergies basis 18-24 months out was a reasonable level to buy a company. I did not disagree, but that made Alpine investors' submission to Alps Electric (6770 JP) later in 2018 all the more disappointing. The New NewsAs noted in the original announcement, Faurecia planned to commence their Tender Offer for Clarion shares in January 2019 and the Tender Offer would run for 20 days. Clarion today announced a forecast revision for the fiscal year to 31 March 2019 which involves a shortfall in revenue of 9.1%, a 16.7% drop in forecast Operating Profit, and a drop in Net Profit from ¥1.7 billion to a loss of ¥500 million (a ¥2.2bn swing), but...In a development which will cause Clarion investors to breathe a sigh of relief, Faurecia also announced will go through with the deal with no changes (other than to extend the Tender Offer to 21 business days). 

Faurecia Launches Tender Offer for Clarion

<p><a href="https://www.smartkarma.com/entities/15895" target="_blank" data-smartkarma-citation="entities:15895:1">Pioneer Corp (6773 JP)</a> has been under the cosh for years, and multiple self-directed rescue efforts have been to no avail. In early September it was <a href="https://global.pioneer/en/news/press/2018/pdf/0907-1.pdf" target="_blank">revealed</a> that Pioneer had sold its Tohoku Pioneer subsidiary to <a href="https://www.smartkarma.com/entities/18703" target="_blank" data-smartkarma-citation="entities:18703:1">Denso Corp (6902 JP)</a> for ¥10.9bn, and less than a week later it was revealed in the Nikkei, then the Japan Times that Pioneer was going to get a short-term loan of ¥25bn from Baring Private Equity Asia leading to an equity injection of ¥50-60bn a few months later in December 2018. </p><p>The <a href="https://global.pioneer/en/news/press/2018/pdf/0912-1.pdf" target="_blank">announcement</a> of the MOU was effectively the commencement of the final death throes of Pioneer as a company. Pioneer set a record date at the time, then in November changed the record date to 7 December.</p><h2>The New News</h2><p>On Friday 7th December Pioneer announced a "<a href="https://global.pioneer/en/ir/announcements/" target="_blank">Partnership</a>" with Baring Private Equity Asia which is a revitalization plan of ¥102 billion. </p><p>The Partnership  announcement makes note of the Baring investment. It mentions that the deal will offer to offer minority shareholders an exit. There is a finalization of the 7 Dec record date and a call to an EGM to approve share issuance and debt/equity swap to Baring. The announcement does not mention investors are effectively being asked to approve their own squeezeout at 25% below the last price.</p>

Pioneer Corp (6773 JP) has been under the cosh for years, and multiple self-directed rescue efforts have been to no avail. In early September it was revealed that Pioneer had sold its Tohoku Pioneer subsidiary to Denso Corp (6902 JP) for ¥10.9bn, and less than a week later it was revealed in the Nikkei, then the Japan Times that Pioneer was going to get a short-term loan of ¥25bn from Baring Private Equity Asia leading to an equity injection of ¥50-60bn a few months later in December 2018. The announcement of the MOU was effectively the commencement of the final death throes of Pioneer as a company. Pioneer set a record date at the time, then in November changed the record date to 7 December.The New NewsOn Friday 7th December Pioneer announced a "Partnership" with Baring Private Equity Asia which is a revitalization plan of ¥102 billion. The Partnership  announcement makes note of the Baring investment. It mentions that the deal will offer to offer minority shareholders an exit. There is a finalization of the 7 Dec record date and a call to an EGM to approve share issuance and debt/equity swap to Baring. The announcement does not mention investors are effectively being asked to approve their own squeezeout at 25% below the last price.

Barring Beleaguered Booster Boldness, Baring Buys Pioneer (In a Takeunder)

<p>In the sordid and ongoing war for the hearts and minds of investors in <a href="https://www.smartkarma.com/entities/2704" target="_blank" data-smartkarma-citation="entities:2704:1">Alpine Electronics (6816 JP)</a>, after Alpine released an <a href="http://www.alpine.com/e/investor/library/pdf/kessai/newsrelease_en_181116.pdf" target="_blank">English-language commentary</a> (a Form 425 in US terms) on November 15th reiterating its reasons why the proposed merger with parent <a href="https://www.smartkarma.com/entities/12001" target="_blank" data-smartkarma-citation="entities:12001:1">Alps Electric (6770 JP)</a> was imperative and fair, it was a question of who was going to spend time parsing the language to de-bunk it. Oasis has <a href="https://static1.squarespace.com/static/59cdad74bebafba2f59ec9fb/t/5bf4f0a44ae2376294e27899/1542779048756/Oasis+Alpine+Truth+Meter.pdf" target="_blank">done so</a> therefore I don't have to. </p><p>Taken in combination with the presentation (see links <a href="https://www.protectalpine.com/latest-updates/" target="_blank">here</a>) from their Investor Day in Tokyo two weeks ago on 7 November), there are important angles investors should consider when making their decision. </p><p>More importantly for <em>many</em> investors, shareholder proxy advisory firm ISS has come out with its voting recommendations for the December 5th vote on the merger for Alpine shareholders after meeting with both Oasis and Alpine. </p><p>The recommendations leave current market observers in a quandary. Investors today are being asked to make a bet on whether a) lead activist and once again #2 shareholder Oasis can rally enough support to block the merger by seeing 33.34% of votes cast against, and b) whether they can get to the 50.1% required to push through the special ¥300/share dividend.</p><p>As of yesterday's closing price of ¥1,798/share, the numbers that Alpine shareholders would be giving up are not cheap. For every ¥100 spent buying stock, Alpine shareholders today get ¥2,288 of book value. If they vote for the merger, they are voting for receiving ¥100 of cash in the special dividend, and are voting to exchange the ¥2,188 of remaining book value per share for ¥1,094.8 of book value of Alps (Alps' ¥1610 of BVPS multiplied by the 0.68 ratio). That means Alpine has to return less than half the ROE of Alps in perpetuity for that to work.</p><p>If you think the ROE assumptions are bad, what if you changed the E in ROE?</p><table class="table table-striped"><tbody>
<tr><td colspan="3"><h2>ALPINE PER SHARE VALUES</h2></td></tr>
<tr>
<td></td>
<td style="text-align: right;"><strong>comment</strong></td>
<td style="text-align: right;"><strong>value per share (¥)</strong></td>
</tr>
<tr>
<td><strong>Market Value of Alpine (per share)</strong></td>
<td style="text-align: right;"><strong>price 21-Nov</strong></td>
<td style="text-align: right;"><strong>1,798</strong></td>
</tr>
<tr><td colspan="3" style="text-align: right;"></td></tr>
<tr>
<td><strong>Cash and Securities Value (per share)</strong></td>
<td style="text-align: right;"></td>
<td style="text-align: right;"></td>
</tr>
<tr>
<td>       Cash</td>
<td style="text-align: right;">30-Sep-18</td>
<td style="text-align: right;">746</td>
</tr>
<tr>
<td>       Listed Securities</td>
<td style="text-align: right;">Now</td>
<td style="text-align: right;">476</td>
</tr>
<tr>
<td>       Unlisted JV Securities (current FX)</td>
<td style="text-align: right;">Now</td>
<td style="text-align: right;">246</td>
</tr>
<tr>
<td><strong>     TOTAL</strong></td>
<td style="text-align: right;"></td>
<td style="text-align: right;"><strong>1,467</strong></td>
</tr>
<tr><td colspan="3" style="text-align: right;"></td></tr>
<tr>
<td style="text-align: left;"><h2>Ex-Cash &amp; Securities MarketCap Per Share (i.e. Adjusted EV)</h2></td>
<td style="text-align: right;"><h2>Now</h2></td>
<td style="text-align: right;"><h2>331</h2></td>
</tr>
<tr><td colspan="3" style="text-align: right;"></td></tr>
<tr>
<td><strong><em>Additional</em> Net Current Assets Less ALL Liabilities</strong></td>
<td style="text-align: right;"><strong>30-Sep-18 - Now</strong></td>
<td style="text-align: right;"><strong>418</strong></td>
</tr>
<tr><td colspan="3"></td></tr>
<tr>
<td>Trailing 12mo OP</td>
<td style="text-align: right;"></td>
<td style="text-align: right;">258</td>
</tr>
<tr>
<td>Trailing 12mo EBITDA</td>
<td style="text-align: right;"></td>
<td style="text-align: right;">360</td>
</tr>
</tbody></table><p>Because Alpine shares are trading flat to terms, that tells you the numbers above are the wrong terms. If you thought Alpine shares were expensive at &lt;1x EV/Adjusted EBITDA because Alps shares were even cheaper, you'd buy Alps without worrying about the Alps/Alpine relationship.</p><p>If you have not read the Oasis documents, both the rebuttal and the Nov7 presentation are worthwhile.</p><p>Otherwise, the previous insights on Smartkarma on this situation are also worthwhile...</p><table class="table table-striped"><tbody>
<tr><td colspan="2"><h2>Some In-Depth Insights on Smartkarma About the Alpine/Alps Merger Event Leading to Today</h2></td></tr>
<tr>
<td><strong>Date</strong></td>
<td><strong>Title</strong></td>
</tr>
<tr>
<td>30-Oct-2017</td>
<td><a href="https://www.smartkarma.com/insights/alps-deal-for-alpine-not-fair-oasis-is-right" target="_blank" data-smartkarma-citation="insights:14832">Alps Deal for Alpine Not Fair - Oasis Is Right</a></td>
</tr>
<tr>
<td>31-Oct-2017</td>
<td><a href="https://www.smartkarma.com/insights/alpine-alps-earnings-revisions-moooar-value-for-alpine" target="_blank" data-smartkarma-citation="insights:14881">Alpine &amp; Alps Earnings Revisions - Moooar Value for Alpine</a></td>
</tr>
<tr>
<td>29-Apr-2018</td>
<td><a href="https://www.smartkarma.com/insights/what-to-do-with-the-alpine-alps-ratio-part-i-this-one-went-to-11-and-beyond" target="_blank" data-smartkarma-citation="insights:19742">What To Do With The Alpine/Alps Ratio Part I:  This One Went To 11! And Beyond!</a></td>
</tr>
<tr>
<td>29-Apr-2018</td>
<td><a href="https://www.smartkarma.com/insights/what-to-do-with-the-alpine-alps-ratio-part-ii-where-to-from-here" target="_blank" data-smartkarma-citation="insights:19795">What To Do With The Alpine/Alps Ratio Part II:  Where To From Here?</a></td>
</tr>
<tr>
<td>17-Jun-2018</td>
<td><a href="https://www.smartkarma.com/insights/alpine-agm-upcoming-what-to-do-how-to-trade" target="_blank" data-smartkarma-citation="insights:21349">Alpine AGM Upcoming - What To Do, How To Trade</a></td>
</tr>
<tr>
<td>26-Jun-2018</td>
<td><a href="https://www.smartkarma.com/insights/the-alpine-agm-vote-results-what-they-tell-you" target="_blank" data-smartkarma-citation="insights:21552">The Alpine AGM Vote Results - What They Tell You</a></td>
</tr>
<tr>
<td>15-Jul-2018</td>
<td><a href="https://www.smartkarma.com/insights/alpine-6916-jp-squeezer-vs-squeezee" target="_blank" data-smartkarma-citation="insights:22151">Alpine (6816 JP) - Squeezer Vs Squeezee</a></td>
</tr>
<tr>
<td>28-Sep-2018</td>
<td><a href="https://www.smartkarma.com/insights/alps-tosses-alpine-shareholders-a-peanut-i-d-toss-it-back" target="_blank" data-smartkarma-citation="insights:24548">Alps Tosses Alpine Shareholders a Peanut. I'd Toss It Back.</a></td>
</tr>
<tr>
<td>11-Oct-2018</td>
<td><a href="https://www.smartkarma.com/insights/alps-alpine-bigger-better-faster-stronger" target="_blank" data-smartkarma-citation="insights:24929">Alps &amp; Alpine: Bigger, Better, Faster, Stronger</a></td>
</tr>
<tr>
<td>16-Oct-2018</td>
<td><a href="https://www.smartkarma.com/insights/alpine-merger-situation-gets-interestinger" target="_blank" data-smartkarma-citation="insights:25073">Alpine Merger Situation Gets Interestinger</a></td>
</tr>
<tr>
<td>5-Nov-2018</td>
<td><a href="https://www.smartkarma.com/insights/alpine-earnings-up-investors-want-clarionity" target="_blank" data-smartkarma-citation="insights:25450">Alpine Earnings Up - Investors Want CLARIONITY</a></td>
</tr>
</tbody></table>

In the sordid and ongoing war for the hearts and minds of investors in Alpine Electronics (6816 JP), after Alpine released an English-language commentary (a Form 425 in US terms) on November 15th reiterating its reasons why the proposed merger with parent Alps Electric (6770 JP) was imperative and fair, it was a question of who was going to spend time parsing the language to de-bunk it. Oasis has done so therefore I don't have to. Taken in combination with the presentation (see links here) from their Investor Day in Tokyo two weeks ago on 7 November), there are important angles investors should consider when making their decision. More importantly for many investors, shareholder proxy advisory firm ISS has come out with its voting recommendations for the December 5th vote on the merger for Alpine shareholders after meeting with both Oasis and Alpine. The recommendations leave current market observers in a quandary. Investors today are being asked to make a bet on whether a) lead activist and once again #2 shareholder Oasis can rally enough support to block the merger by seeing 33.34% of votes cast against, and b) whether they can get to the 50.1% required to push through the special ¥300/share dividend.As of yesterday's closing price of ¥1,798/share, the numbers that Alpine shareholders would be giving up are not cheap. For every ¥100 spent buying stock, Alpine shareholders today get ¥2,288 of book value. If they vote for the merger, they are voting for receiving ¥100 of cash in the special dividend, and are voting to exchange the ¥2,188 of remaining book value per share for ¥1,094.8 of book value of Alps (Alps' ¥1610 of BVPS multiplied by the 0.68 ratio). That means Alpine has to return less than half the ROE of Alps in perpetuity for that to work.If you think the ROE assumptions are bad, what if you changed the E in ROE?
ALPINE PER SHARE VALUES


comment
value per share (¥)


Market Value of Alpine (per share)
price 21-Nov
1,798



Cash and Securities Value (per share)




       Cash
30-Sep-18
746


       Listed Securities
Now
476


       Unlisted JV Securities (current FX)
Now
246


     TOTAL

1,467



Ex-Cash &amp; Securities MarketCap Per Share (i.e. Adjusted EV)
Now
331



Additional Net Current Assets Less ALL Liabilities
30-Sep-18 - Now
418



Trailing 12mo OP

258


Trailing 12mo EBITDA

360

Because Alpine shares are trading flat to terms, that tells you the numbers above are the wrong terms. If you thought Alpine shares were expensive at &lt;1x EV/Adjusted EBITDA because Alps shares were even cheaper, you'd buy Alps without worrying about the Alps/Alpine relationship.If you have not read the Oasis documents, both the rebuttal and the Nov7 presentation are worthwhile.Otherwise, the previous insights on Smartkarma on this situation are also worthwhile...
Some In-Depth Insights on Smartkarma About the Alpine/Alps Merger Event Leading to Today

Date
Title


30-Oct-2017
Alps Deal for Alpine Not Fair - Oasis Is Right


31-Oct-2017
Alpine &amp; Alps Earnings Revisions - Moooar Value for Alpine


29-Apr-2018
What To Do With The Alpine/Alps Ratio Part I:  This One Went To 11! And Beyond!


29-Apr-2018
What To Do With The Alpine/Alps Ratio Part II:  Where To From Here?


17-Jun-2018
Alpine AGM Upcoming - What To Do, How To Trade


26-Jun-2018
The Alpine AGM Vote Results - What They Tell You


15-Jul-2018
Alpine (6816 JP) - Squeezer Vs Squeezee


28-Sep-2018
Alps Tosses Alpine Shareholders a Peanut. I'd Toss It Back.


11-Oct-2018
Alps &amp; Alpine: Bigger, Better, Faster, Stronger


16-Oct-2018
Alpine Merger Situation Gets Interestinger


5-Nov-2018
Alpine Earnings Up - Investors Want CLARIONITY



Alpine/Alps - ISS Says Take the Money and Run (From the Merger)

<p>Last week, <a href="https://www.smartkarma.com/entities/2704" target="_blank" data-smartkarma-citation="entities:2704:1">Alpine Electronics (6816 JP)</a> announced FY18 H1 earnings which were above company and Street forecasts. <a href="https://www.smartkarma.com/entities/12001" target="_blank" data-smartkarma-citation="entities:12001:1">Alps Electric (6770 JP)</a> H1 also beat Street H1 estimates and their own forecast. Both companies kept their full-year forecasts unchanged. </p>
<p>Alpine had forecast ¥147bn of revenues, ¥6bn of OP, and ¥4bn of Net Profit. The company beat their own revenue forecast by only 1% but beat the OP and NP forecasts by 27% and 24.4%, respectively. It is to note that Alpine OPM dropped in Q2 vs the same quarter in the previous year despite sales being higher and Alpine OP dropped sequentially from Q1 to Q2 on higher SG&amp;A.</p>
<p>This is the 5th straight quarter since the announcement of the merger that Alpine has beat its own and Street forecasts for revenue and OP. Alps beat in Q2 this year because it had revised down its forecasts quite dramatically vs MTP and vs the <em>original</em> Street forecasts. </p>
<p>And while the Alpine/Alps share price ratio was decided in July 2017 based on forward forecasts compiled by management, every quarter has seen the Alpine/Alps profit ratio climbing that much further away from the original forecast.</p>
<p><em>Alpine management has effectively mis-forecast every quarter to the downside. </em>Despite that, full-year forecasts remain unchanged. </p>
<table class="table table-striped">
<tbody>
<tr>
<td colspan="8" style="width: 306px;">
<h2>Alpine vs Alps (ex-listco subs) Revenue &amp; OP Forecasts and Results</h2>
</td>
</tr>
<tr>
<td colspan="8" style="width: 306px;"></td>
</tr>
<tr>
<td colspan="8" style="text-align: center; width: 306px;"><em>NOTA BENE: These ratios are in ¥ billions, not adjusted for share count, but the fact that they go up matters a lot</em></td>
</tr>
<tr>
<td colspan="8" style="width: 306px;"></td>
</tr>
<tr>
<td style="width: 306px;"></td>
<td style="text-align: center; width: 65px;"><strong>Fiscal<br>Year</strong></td>
<td style="text-align: right; width: 78.9896px;">
<strong>Merger</strong><br><strong>Anncmt</strong>
</td>
<td style="text-align: right; width: 90.0104px;"><strong>Oct-17</strong></td>
<td style="text-align: right; width: 104px;"><strong>Jan-18</strong></td>
<td style="text-align: right; width: 101px;">
<strong>Apr-18</strong><br><strong>Actual</strong>
</td>
<td style="text-align: right; width: 94px;"><strong>Jul-18</strong></td>
<td style="text-align: right; width: 109px;"><strong>Oct-18</strong></td>
</tr>
<tr>
<td colspan="8" style="text-align: right; width: 948px;">
<h2>Alpine vs Alps ex-listco sub Revenue</h2>
</td>
</tr>
<tr>
<td style="width: 306px;">     Street</td>
<td style="text-align: center; width: 65px;">2018FY</td>
<td style="text-align: right; width: 78.9896px;">
<h2>0.5467</h2>
</td>
<td style="text-align: right; width: 90.0104px;">0.5393</td>
<td style="text-align: right; width: 104px;">0.5346</td>
<td style="text-align: right; width: 101px;">0.5642</td>
<td style="text-align: right; width: 94px;"></td>
<td style="text-align: right; width: 109px;"></td>
</tr>
<tr>
<td style="width: 306px;">     Company</td>
<td style="text-align: center; width: 65px;">2018FY</td>
<td style="text-align: right; width: 78.9896px;">
<h2>0.5531</h2>
</td>
<td style="text-align: right; width: 90.0104px;">0.5644</td>
<td style="text-align: right; width: 104px;">0.5567</td>
<td style="text-align: right; width: 101px;"></td>
<td style="text-align: right; width: 94px;"></td>
<td style="text-align: right; width: 109px;"></td>
</tr>
<tr>
<td style="width: 306px;">     Actual</td>
<td style="text-align: center; width: 65px;">2018FY</td>
<td style="text-align: right; width: 78.9896px;"></td>
<td style="text-align: right; width: 90.0104px;"></td>
<td style="text-align: right; width: 104px;"></td>
<td style="text-align: right; width: 101px;">
<h2>0.5782</h2>
</td>
<td style="text-align: right; width: 94px;"></td>
<td style="text-align: right; width: 109px;"></td>
</tr>
<tr>
<td colspan="8" style="text-align: right; width: 948px;"></td>
</tr>
<tr>
<td style="width: 306px;">     Street</td>
<td style="text-align: center; width: 65px;">2019FY</td>
<td style="text-align: right; width: 78.9896px;">
<h2>0.5273</h2>
</td>
<td style="text-align: right; width: 90.0104px;">0.5206</td>
<td style="text-align: right; width: 104px;">0.5430</td>
<td style="text-align: right; width: 101px;">0.5725</td>
<td style="text-align: right; width: 94px;">0.5982</td>
<td style="text-align: right; width: 109px;"></td>
</tr>
<tr>
<td style="width: 306px;">     Company</td>
<td style="text-align: center; width: 65px;">2019FY</td>
<td style="text-align: right; width: 78.9896px;"></td>
<td style="text-align: right; width: 90.0104px;"></td>
<td style="text-align: right; width: 104px;"></td>
<td style="text-align: right; width: 101px;">0.6230</td>
<td style="text-align: right; width: 94px;">0.6175</td>
<td style="text-align: right; width: 109px;">
<h2>0.6175</h2>
</td>
</tr>
<tr>
<td style="width: 306px;">     Actual</td>
<td style="text-align: center; width: 65px;">2019H1</td>
<td style="text-align: right; width: 78.9896px;"></td>
<td style="text-align: right; width: 90.0104px;"></td>
<td style="text-align: right; width: 104px;"></td>
<td style="text-align: right; width: 101px;"></td>
<td style="text-align: right; width: 94px;"></td>
<td style="text-align: right; width: 109px;">
<h2>0.7147</h2>
</td>
</tr>
<tr>
<td colspan="8" style="width: 306px;">The Alpine/Alps "Parent" Revenue Ratio was forecast at 0.5467 and 0.5531 in FY18, came to 0.5782 in FY18, is forecast at 0.6175 in FY19 and H1 results are 0.7147. Alpine is producing extremely well compared to forecasts since the merger announcement.</td>
</tr>
<tr>
<td colspan="8" style="text-align: right; width: 948px;"></td>
</tr>
<tr>
<td style="text-align: left; width: 948px;">
<h2></h2>
</td>
<td style="text-align: center; width: 948px;">
<strong>Fiscal</strong><br><strong>Year</strong>
</td>
<td style="text-align: right; width: 948px;">
<strong>Merger</strong><br><strong>Anncmt</strong>
</td>
<td style="text-align: right; width: 948px;"><strong>Oct-17</strong></td>
<td style="text-align: right; width: 948px;"><strong>Jan-18</strong></td>
<td style="text-align: right; width: 948px;"><strong>Apr-18</strong></td>
<td style="text-align: right; width: 948px;"><strong>Jul-18</strong></td>
<td style="text-align: right; width: 948px;"><strong>Oct-18</strong></td>
</tr>
<tr>
<td colspan="8" style="text-align: left; width: 948px;">
<h2>Alpine vs Alps ex-listco sub OP Ratio</h2>
</td>
</tr>
<tr>
<td style="width: 306px;">     Street</td>
<td style="text-align: center; width: 65px;">2018FY</td>
<td style="text-align: right; width: 78.9896px;">
<h2>0.1415</h2>
</td>
<td style="text-align: right; width: 90.0104px;">0.1540</td>
<td style="text-align: right; width: 104px;">0.1670</td>
<td style="text-align: right; width: 101px;">0.2113</td>
<td style="text-align: right; width: 94px;"></td>
<td style="text-align: right; width: 109px;"></td>
</tr>
<tr>
<td style="width: 306px;">     Company</td>
<td style="text-align: center; width: 65px;">2018FY</td>
<td style="text-align: right; width: 78.9896px;">
<h2>0.1318</h2>
</td>
<td style="text-align: right; width: 90.0104px;">0.1695</td>
<td style="text-align: right; width: 104px;">0.2007</td>
<td style="text-align: right; width: 101px;"></td>
<td style="text-align: right; width: 94px;"></td>
<td style="text-align: right; width: 109px;"></td>
</tr>
<tr>
<td style="width: 306px;">     Actual</td>
<td style="text-align: center; width: 65px;">2018FY</td>
<td style="text-align: right; width: 78.9896px;"></td>
<td style="text-align: right; width: 90.0104px;"></td>
<td style="text-align: right; width: 104px;"></td>
<td style="text-align: right; width: 101px;">
<h2>0.2583</h2>
</td>
<td style="text-align: right; width: 94px;"></td>
<td style="text-align: right; width: 109px;"></td>
</tr>
<tr>
<td colspan="8" style="width: 306px;"></td>
</tr>
<tr>
<td style="width: 306px;">     Street</td>
<td style="text-align: center; width: 65px;">2019FY</td>
<td style="text-align: right; width: 78.9896px;">
<h2>0.1561</h2>
</td>
<td style="text-align: right; width: 90.0104px;">0.1689</td>
<td style="text-align: right; width: 104px;">0.1959</td>
<td style="text-align: right; width: 101px;">0.2240</td>
<td style="text-align: right; width: 94px;">0.2639</td>
<td style="text-align: right; width: 109px;"></td>
</tr>
<tr>
<td style="width: 306px;">     Company</td>
<td style="text-align: center; width: 65px;">2019FY</td>
<td style="text-align: right; width: 78.9896px;"></td>
<td style="text-align: right; width: 90.0104px;"></td>
<td style="text-align: right; width: 104px;"></td>
<td style="text-align: right; width: 101px;">0.3103</td>
<td style="text-align: right; width: 94px;">0.2714</td>
<td style="text-align: right; width: 109px;">
<h2>0.2714</h2>
</td>
</tr>
<tr>
<td style="width: 306px;">     Actual</td>
<td style="text-align: center; width: 65px;">2019H1</td>
<td style="text-align: right; width: 78.9896px;"></td>
<td style="text-align: right; width: 90.0104px;"></td>
<td style="text-align: right; width: 104px;"></td>
<td style="text-align: right; width: 101px;"></td>
<td style="text-align: right; width: 94px;"></td>
<td style="text-align: right; width: 109px;">
<h2>0.3710</h2>
</td>
</tr>
<tr>
<td colspan="8" style="width: 306px;">
<p>The Alpine/Alps "Parent" OP Ratio was forecast at 0.1318 at the time of the merger announcement, and came out at 0.2583 (+96% vs forecast). The forecast for FY2019 was 0.3103, lowered to 0.2714 at Q1, but H1 came in at 0.3710 (180% higher than the FY18 ratio as of the time of the merger announcement and +138% from the Street forecast for FY19 at the time of the announcement. </p>
</td>
</tr>
</tbody>
</table>
<p></p>
<p>Currently, Alpine shares trade in limbo. For the first time in a long while, Alpine shares are effectively trading at terms of their merger ratio with Alps (including the special ¥100/share dividend). However, if a majority of Alpine shareholders were to support Proposal 3 (Oasis' proposal that there be an appropriation of surplus (i.e. a special dividend) to the tune of ¥300/share, then those who purchase today would be out of luck. Alpine shareholders would not get their Alps shares and would instead get an Alpine worth ¥300/share less. </p>
<p>The Convocation for the Shareholder Meeting on December 5th was released November 3rd. It is, unfortunately, just so much tripe. Despite significant outperformance of Alpine vs Alps in terms of profits, and most <em>particularly</em> in terms of profits vs respective forecasts, as discussed in <a href="https://www.smartkarma.com/insights/alpine-merger-situation-gets-interestinger" target="_blank" data-smartkarma-citation="insights:25073">Alpine Merger Situation Gets Interestinger</a> the relative share ratio "fair values" have gone against Alpine shareholders. The new fair value calculation offered by the Third-Party Committee's advisors suggests the 0.68 ratio is <em>above the top end of the fair value DCF ratio</em> of 0.45-0.65. This was in large part due to a significant reversal of the discount rates used (the low end of the discount rate range used for the cash-and financial asset-rich Alpine was higher than the high end of the discount rate range used for the net debt Alps. </p>
<div class="content-highlight">
<p>It remains shocking to me the Alpine independent directors can take information which is contrary to other analysis available (such as the original analysis which suggested Alpine's discount rate was lower than Alps'), and can take differing inputs (what appear to be different management forecasts) from the original, as well as different asset bases and business information (the vast outperformance of Alpine vs its own forecasts and the relative underperformance of Alps vs its own forecasts) and conclude that the ratio should remain unchanged.</p>
<p>And my criticism does not, in and of itself, suggest that the original ratio was wrong - it was. So all subsequent insistence by the companies on the ongoing appropriateness of the original ratio is wronger still. </p>
<p>Investors now have a month to decide what they will do. Will they just give up and succumb to an egregious lapse in corporate governance perpetrated by the boards of both Alpine and Alps (yes, Alps' board has a duty to the minority shareholders of Alpine under the Corporate Governance Code)? Or will Alpine shareholders fight for the value of their company?</p>
<p>Investors have just seen in the <a href="https://www.smartkarma.com/entities/21451" target="_blank" data-smartkarma-citation="entities:21451:1">Faurecia (EO FP)</a> deal for <a href="https://www.smartkarma.com/entities/7888" target="_blank" data-smartkarma-citation="entities:7888:1">Clarion Co Ltd (6796 JP)</a> that at least one global auto-related company is willing to pay a substantial premium to market, and 10x pre-synergies EBITDA for a business very similar.</p>
<p>Alps has promised even more synergies than Faurecia sees coming, <em><strong>but Alps is paying a negative EV/EBITDA ratio for post-synergies Alpine. </strong></em></p>
<p>While a deal between Alps and Alpine is not inherently a bad thing for Alpine investors, this one is. It could be the right deal, but it comes at the wrong price. </p>
<p>Investors have sought clarity on Alpine needs net cash and cross-holdings when similar companies have neither. They have sought clarity on why the change in business fortunes does not warrant a change in company forecast. They have received none. </p>
<p><strong>Now, Alpine investors <em>want</em> Clarionity.* Investors <em>need</em> Clarionity*.</strong></p>
</div>
<div class="content-remarks">
<p>*Clarionity is the valuation methodology used in Faurecia's takeout of Clarion, applied to Alpine.</p>
</div>
<p>Previous insights in the saga are...</p>
<div>
<table class="table table-striped">
<tbody>
<tr>
<td colspan="2">
<h2>Some In-Depth Insights on Smartkarma About the Alpine/Alps Merger Event Leading to Today</h2>
</td>
</tr>
<tr>
<td><strong>Date</strong></td>
<td><strong>Title</strong></td>
</tr>
<tr>
<td>30-Oct-2017</td>
<td><a href="https://www.smartkarma.com/insights/alps-deal-for-alpine-not-fair-oasis-is-right" target="_blank" data-smartkarma-citation="insights:14832">Alps Deal for Alpine Not Fair - Oasis Is Right</a></td>
</tr>
<tr>
<td>31-Oct-2017</td>
<td><a href="https://www.smartkarma.com/insights/alpine-alps-earnings-revisions-moooar-value-for-alpine" target="_blank" data-smartkarma-citation="insights:14881">Alpine &amp; Alps Earnings Revisions - Moooar Value for Alpine</a></td>
</tr>
<tr>
<td>29-Apr-2018</td>
<td><a href="https://www.smartkarma.com/insights/what-to-do-with-the-alpine-alps-ratio-part-i-this-one-went-to-11-and-beyond" target="_blank" data-smartkarma-citation="insights:19742">What To Do With The Alpine/Alps Ratio Part I:  This One Went To 11! And Beyond!</a></td>
</tr>
<tr>
<td>29-Apr-2018</td>
<td><a href="https://www.smartkarma.com/insights/what-to-do-with-the-alpine-alps-ratio-part-ii-where-to-from-here" target="_blank" data-smartkarma-citation="insights:19795">What To Do With The Alpine/Alps Ratio Part II:  Where To From Here?</a></td>
</tr>
<tr>
<td>17-Jun-2018</td>
<td><a href="https://www.smartkarma.com/insights/alpine-agm-upcoming-what-to-do-how-to-trade" target="_blank" data-smartkarma-citation="insights:21349">Alpine AGM Upcoming - What To Do, How To Trade</a></td>
</tr>
<tr>
<td>26-Jun-2018</td>
<td><a href="https://www.smartkarma.com/insights/the-alpine-agm-vote-results-what-they-tell-you" target="_blank" data-smartkarma-citation="insights:21552">The Alpine AGM Vote Results - What They Tell You</a></td>
</tr>
<tr>
<td>15-Jul-2018</td>
<td><a href="https://www.smartkarma.com/insights/alpine-6916-jp-squeezer-vs-squeezee" target="_blank" data-smartkarma-citation="insights:22151">Alpine (6816 JP) - Squeezer Vs Squeezee</a></td>
</tr>
<tr>
<td>28-Sep-2018</td>
<td><a href="https://www.smartkarma.com/insights/alps-tosses-alpine-shareholders-a-peanut-i-d-toss-it-back" target="_blank" data-smartkarma-citation="insights:24548">Alps Tosses Alpine Shareholders a Peanut. I'd Toss It Back.</a></td>
</tr>
<tr>
<td>11-Oct-2018</td>
<td><a href="https://www.smartkarma.com/insights/alps-alpine-bigger-better-faster-stronger" target="_blank" data-smartkarma-citation="insights:24929">Alps &amp; Alpine: Bigger, Better, Faster, Stronger</a></td>
</tr>
<tr>
<td>16-Oct-2018</td>
<td><a href="https://www.smartkarma.com/insights/alpine-merger-situation-gets-interestinger" target="_blank" data-smartkarma-citation="insights:25073">Alpine Merger Situation Gets Interestinger</a></td>
</tr>
</tbody>
</table>
<p></p>
</div>

Last week, Alpine Electronics (6816 JP) announced FY18 H1 earnings which were above company and Street forecasts. Alps Electric (6770 JP) H1 also beat Street H1 estimates and their own forecast. Both companies kept their full-year forecasts unchanged. 
Alpine had forecast ¥147bn of revenues, ¥6bn of OP, and ¥4bn of Net Profit. The company beat their own revenue forecast by only 1% but beat the OP and NP forecasts by 27% and 24.4%, respectively. It is to note that Alpine OPM dropped in Q2 vs the same quarter in the previous year despite sales being higher and Alpine OP dropped sequentially from Q1 to Q2 on higher SG&amp;A.
This is the 5th straight quarter since the announcement of the merger that Alpine has beat its own and Street forecasts for revenue and OP. Alps beat in Q2 this year because it had revised down its forecasts quite dramatically vs MTP and vs the original Street forecasts. 
And while the Alpine/Alps share price ratio was decided in July 2017 based on forward forecasts compiled by management, every quarter has seen the Alpine/Alps profit ratio climbing that much further away from the original forecast.
Alpine management has effectively mis-forecast every quarter to the downside. Despite that, full-year forecasts remain unchanged. 




Alpine vs Alps (ex-listco subs) Revenue &amp; OP Forecasts and Results






NOTA BENE: These ratios are in ¥ billions, not adjusted for share count, but the fact that they go up matters a lot






Fiscal Year

Merger Anncmt

Oct-17
Jan-18

Apr-18 Actual

Jul-18
Oct-18



Alpine vs Alps ex-listco sub Revenue



     Street
2018FY

0.5467

0.5393
0.5346
0.5642




     Company
2018FY

0.5531

0.5644
0.5567





     Actual
2018FY




0.5782








     Street
2019FY

0.5273

0.5206
0.5430
0.5725
0.5982



     Company
2019FY



0.6230
0.6175

0.6175



     Actual
2019H1






0.7147



The Alpine/Alps "Parent" Revenue Ratio was forecast at 0.5467 and 0.5531 in FY18, came to 0.5782 in FY18, is forecast at 0.6175 in FY19 and H1 results are 0.7147. Alpine is producing extremely well compared to forecasts since the merger announcement.









Fiscal Year


Merger Anncmt

Oct-17
Jan-18
Apr-18
Jul-18
Oct-18



Alpine vs Alps ex-listco sub OP Ratio



     Street
2018FY

0.1415

0.1540
0.1670
0.2113




     Company
2018FY

0.1318

0.1695
0.2007





     Actual
2018FY




0.2583








     Street
2019FY

0.1561

0.1689
0.1959
0.2240
0.2639



     Company
2019FY



0.3103
0.2714

0.2714



     Actual
2019H1






0.3710




The Alpine/Alps "Parent" OP Ratio was forecast at 0.1318 at the time of the merger announcement, and came out at 0.2583 (+96% vs forecast). The forecast for FY2019 was 0.3103, lowered to 0.2714 at Q1, but H1 came in at 0.3710 (180% higher than the FY18 ratio as of the time of the merger announcement and +138% from the Street forecast for FY19 at the time of the announcement. 





Currently, Alpine shares trade in limbo. For the first time in a long while, Alpine shares are effectively trading at terms of their merger ratio with Alps (including the special ¥100/share dividend). However, if a majority of Alpine shareholders were to support Proposal 3 (Oasis' proposal that there be an appropriation of surplus (i.e. a special dividend) to the tune of ¥300/share, then those who purchase today would be out of luck. Alpine shareholders would not get their Alps shares and would instead get an Alpine worth ¥300/share less. 
The Convocation for the Shareholder Meeting on December 5th was released November 3rd. It is, unfortunately, just so much tripe. Despite significant outperformance of Alpine vs Alps in terms of profits, and most particularly in terms of profits vs respective forecasts, as discussed in Alpine Merger Situation Gets Interestinger the relative share ratio "fair values" have gone against Alpine shareholders. The new fair value calculation offered by the Third-Party Committee's advisors suggests the 0.68 ratio is above the top end of the fair value DCF ratio of 0.45-0.65. This was in large part due to a significant reversal of the discount rates used (the low end of the discount rate range used for the cash-and financial asset-rich Alpine was higher than the high end of the discount rate range used for the net debt Alps. 

It remains shocking to me the Alpine independent directors can take information which is contrary to other analysis available (such as the original analysis which suggested Alpine's discount rate was lower than Alps'), and can take differing inputs (what appear to be different management forecasts) from the original, as well as different asset bases and business information (the vast outperformance of Alpine vs its own forecasts and the relative underperformance of Alps vs its own forecasts) and conclude that the ratio should remain unchanged.
And my criticism does not, in and of itself, suggest that the original ratio was wrong - it was. So all subsequent insistence by the companies on the ongoing appropriateness of the original ratio is wronger still. 
Investors now have a month to decide what they will do. Will they just give up and succumb to an egregious lapse in corporate governance perpetrated by the boards of both Alpine and Alps (yes, Alps' board has a duty to the minority shareholders of Alpine under the Corporate Governance Code)? Or will Alpine shareholders fight for the value of their company?
Investors have just seen in the Faurecia (EO FP) deal for Clarion Co Ltd (6796 JP) that at least one global auto-related company is willing to pay a substantial premium to market, and 10x pre-synergies EBITDA for a business very similar.
Alps has promised even more synergies than Faurecia sees coming, but Alps is paying a negative EV/EBITDA ratio for post-synergies Alpine. 
While a deal between Alps and Alpine is not inherently a bad thing for Alpine investors, this one is. It could be the right deal, but it comes at the wrong price. 
Investors have sought clarity on Alpine needs net cash and cross-holdings when similar companies have neither. They have sought clarity on why the change in business fortunes does not warrant a change in company forecast. They have received none. 
Now, Alpine investors want Clarionity.* Investors need Clarionity*.


*Clarionity is the valuation methodology used in Faurecia's takeout of Clarion, applied to Alpine.

Previous insights in the saga are...





Some In-Depth Insights on Smartkarma About the Alpine/Alps Merger Event Leading to Today



Date
Title


30-Oct-2017
Alps Deal for Alpine Not Fair - Oasis Is Right


31-Oct-2017
Alpine &amp; Alps Earnings Revisions - Moooar Value for Alpine


29-Apr-2018
What To Do With The Alpine/Alps Ratio Part I:  This One Went To 11! And Beyond!


29-Apr-2018
What To Do With The Alpine/Alps Ratio Part II:  Where To From Here?


17-Jun-2018
Alpine AGM Upcoming - What To Do, How To Trade


26-Jun-2018
The Alpine AGM Vote Results - What They Tell You


15-Jul-2018
Alpine (6816 JP) - Squeezer Vs Squeezee


28-Sep-2018
Alps Tosses Alpine Shareholders a Peanut. I'd Toss It Back.


11-Oct-2018
Alps &amp; Alpine: Bigger, Better, Faster, Stronger


16-Oct-2018
Alpine Merger Situation Gets Interestinger






Alpine Earnings Up - Investors Want CLARIONITY

Japan

Clarion Co., Ltd. mainly manufactures and sells car audio equipment under the brand name of Addzest and car navigation systems.  The Company also produces karaoke equipment, auto PC, and other audio-related equipment.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00