Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE:  Swire, Hitachi Metal, Jardine, Softbank, Bingo, Japan Asia, Mainstream

Travis Lundy

<a href="https://www.smartkarma.com/entities/hitachi-ltd" target="_blank" data-smartkarma-citation="entities:7797:1" rel="noopener">Hitachi Ltd (6501 JP)</a> has, for over a decade, been restructuring itself by selling subsidiaries here and buying them in there. There are two remaining after the somewhat recent sale of <a href="https://www.smartkarma.com/entities/hitachi-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:14457:1" rel="noopener">Hitachi Chemical (4217 JP)</a>, de-consolidation of <a href="https://www.smartkarma.com/entities/hitachi-capital-corp" target="_blank" data-smartkarma-citation="entities:14410:1" rel="noopener">Hitachi Capital (8586 JP)</a>, and buy-in of <a href="https://www.smartkarma.com/entities/hitachi-high-tech-corporation" target="_blank" data-smartkarma-citation="entities:7046:1" rel="noopener">Hitachi High-Tech (8036 JP)</a> (after a flurry of other deals to sell out stakes in <a href="https://www.smartkarma.com/entities/hitachi-kokusai-electric-inc" target="_blank" data-smartkarma-citation="entities:2523:1" rel="noopener">Hitachi Kokusai Electric (6756 JP)</a>, <a href="https://www.smartkarma.com/entities/hitachi-koki-co-ltd" target="_blank" data-smartkarma-citation="entities:18359:1" rel="noopener">Hitachi Koki (6581 JP)</a>, Hitachi Maxell and Clarion in the previous few years).
In October last year, I addressed the issue of the selldown of the last two <a href="https://www.smartkarma.com/entities/hitachi-metals-ltd" target="_blank" data-smartkarma-citation="entities:8561:1" rel="noopener">Hitachi Metals (5486 JP)</a> and <a href="https://www.smartkarma.com/entities/hitachi-construction-machinery" target="_blank" data-smartkarma-citation="entities:19433:1" rel="noopener">Hitachi Construction Machinery (6305 JP)</a> in <a href="https://www.smartkarma.com/insights/the-right-trade-may-be-hitachi" target="_blank" data-smartkarma-citation="insights:44551" rel="noopener">The Right Trade May Be Hitachi</a>, which argued that Hitachi itself was probably the better deal than the subs. Since then, Hitachi is up 39.3%, <a href="https://www.smartkarma.com/entities/hitachi-construction-machinery" target="_blank" data-smartkarma-citation="entities:19433:1" rel="noopener">Hitachi Construction Machinery (6305 JP)</a> is up 3.6%, and <a href="https://www.smartkarma.com/entities/hitachi-metals-ltd" target="_blank" data-smartkarma-citation="entities:8561:1" rel="noopener">Hitachi Metals (5486 JP)</a> is up 23%. 
<a href="https://www.smartkarma.com/profiles/mio-kato" target="_blank" data-smartkarma-citation="accounts:713" rel="noopener">Mio Kato</a> has written a few times about Hitachi Metals and about how one might not be able to expect a very high takeout price through the sale process that Hitachi was running. I wholly agreed with Mio, because I think it is not an easy asset to sell later, but I couldn't come up with a reason to sell the stock because I expect funding is available, costs can be cut, Hitachi might keep 20% and sell a call option to help with funding, and if a company needs a lot of work to restructure, I am sure that Bain Consulting could be prevailed upon to provide their consulting services for a price (one of the dirty little secrets of private equity is that GPs get management and incentive fees on assets and sales, but profits in the interim come with costs, and some of those costs can be allocated to the GP as well).
Hitachi took in bids earlier this spring after running an auction process and three weeks ago an <a href="https://www.ft.com/content/659a5857-9369-4f9b-8595-06bb89888772" target="_blank" rel="noopener">article</a> in the FT hit the tape saying "Bain nears $8bn deal to buy Hitachi Metals." That was around current market price give or take net debt so people were thinking there might not be a premium.
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Today, we got a deal announcement. Indeed, Bain is paying near US$8bn, but it is structured in such a way that Bain pays ¥1675/share to Hitachi and ¥2181/share to minorities, which produces a combined price just over ¥1900/share.
This approximates a decent result for everyone involved.  
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More below the fold.

Hitachi Ltd (6501 JP) has, for over a decade, been restructuring itself by selling subsidiaries here and buying them in there. There are two remaining after the somewhat recent sale of Hitachi Chemical (4217 JP), de-consolidation of Hitachi Capital (8586 JP), and buy-in of Hitachi High-Tech (8036 JP) (after a flurry of other deals to sell out stakes in Hitachi Kokusai Electric (6756 JP), Hitachi Koki (6581 JP), Hitachi Maxell and Clarion in the previous few years).
In October last year, I addressed the issue of the selldown of the last two Hitachi Metals (5486 JP) and Hitachi Construction Machinery (6305 JP) in The Right Trade May Be Hitachi, which argued that Hitachi itself was probably the better deal than the subs. Since then, Hitachi is up 39.3%, Hitachi Construction Machinery (6305 JP) is up 3.6%, and Hitachi Metals (5486 JP) is up 23%. 
Mio Kato has written a few times about Hitachi Metals and about how one might not be able to expect a very high takeout price through the sale process that Hitachi was running. I wholly agreed with Mio, because I think it is not an easy asset to sell later, but I couldn't come up with a reason to sell the stock because I expect funding is available, costs can be cut, Hitachi might keep 20% and sell a call option to help with funding, and if a company needs a lot of work to restructure, I am sure that Bain Consulting could be prevailed upon to provide their consulting services for a price (one of the dirty little secrets of private equity is that GPs get management and incentive fees on assets and sales, but profits in the interim come with costs, and some of those costs can be allocated to the GP as well).
Hitachi took in bids earlier this spring after running an auction process and three weeks ago an article in the FT hit the tape saying "Bain nears $8bn deal to buy Hitachi Metals." That was around current market price give or take net debt so people were thinking there might not be a premium.

Today, we got a deal announcement. Indeed, Bain is paying near US$8bn, but it is structured in such a way that Bain pays ¥1675/share to Hitachi and ¥2181/share to minorities, which produces a combined price just over ¥1900/share.
This approximates a decent result for everyone involved.  

More below the fold. 

Bain Bids Up BIG For Hitachi Metals (5486) - Now We Wait

Last night, Singapore-based fund Aslead Capital Pte announced that it would launch a Tender Offer on <a href="https://www.smartkarma.com/entities/fuji-kosan-company-ltd" target="_blank" data-smartkarma-citation="entities:17867:1" rel="noopener">Fuji Kosan Company (5009 JP)</a> to take at least a 40% stake and possibly full control after ownership and approaches did not lead to "satisfactory" measures to improve corporate value. 
The shareholder had been acquiring shares since last year. It first went above 5% in August 2020 and until yesterday had most recently reported a 14.83% stake on 4 February. 
The stock has an interesting set of investors, and was for many years in the early to mid-2010s a poster child for tiny cap deep value investment targets. 
As of the announcement, Aslead states that it owns 16.8% which means to get to 40.0%, it needs only 23.2% of shares out - of the 83.2% it does not own. 
The company has been building an 'interesting' set of shareholders and relationships. One activist sold last year to be replaced by another. There is someone infamous from the tabloids. This could be fun to watch. It will certainly trade through terms early. The question then is what next?
There is a behind-the-scenes link to the family office responsible for the single most fun <a href="https://www.smartkarma.com/messages/%20https:/y-n10.com/" target="_blank" rel="noopener">family office website</a> ever made (after you press enter, check on the left side to see the sound is on and if you need to read the text more smoothly switch from angled to vertical just above the sound on/off section).

Last night, Singapore-based fund Aslead Capital Pte announced that it would launch a Tender Offer on Fuji Kosan Company (5009 JP) to take at least a 40% stake and possibly full control after ownership and approaches did not lead to "satisfactory" measures to improve corporate value. 
The shareholder had been acquiring shares since last year. It first went above 5% in August 2020 and until yesterday had most recently reported a 14.83% stake on 4 February. 
The stock has an interesting set of investors, and was for many years in the early to mid-2010s a poster child for tiny cap deep value investment targets. 
As of the announcement, Aslead states that it owns 16.8% which means to get to 40.0%, it needs only 23.2% of shares out - of the 83.2% it does not own. 
The company has been building an 'interesting' set of shareholders and relationships. One activist sold last year to be replaced by another. There is someone infamous from the tabloids. This could be fun to watch. It will certainly trade through terms early. The question then is what next?
There is a behind-the-scenes link to the family office responsible for the single most fun family office website ever made (after you press enter, check on the left side to see the sound is on and if you need to read the text more smoothly switch from angled to vertical just above the sound on/off section). 

Aslead Capital Hostile Offer for Fuji Kosan (5009)

Japan

FUJI KOSAN COMPANY, LTD. distributes oil and petroleum products purchased from Nippon Oil and its affiliated companies.  The Company's products include fuels, lubricants, and asphalts.  Fuji Kosan also leases construction machinery.

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Fuji Kosan Company (5009 JP)

Last Week in Event SPACE: Swire, Hitachi Metal, Jardine, Softbank, Bingo, Japan Asia, Mainstream

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Bain Bids Up BIG For Hitachi Metals (5486) - Now We Wait

Hitachi has agreed to sell Hitachi Metals to Bain/JIP/JIS. It is a complex transaction designed to get Hitachi out, get minorities a premium, get...

Travis Lundy

Aslead Capital Hostile Offer for Fuji Kosan (5009)

Fuji Kosan (5009) is the lastest smallcap value name to attract a hostile bidder putting a shot across the bow of recalcitrant management. A wake...

Travis Lundy

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