Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

In May 2016, <a href="https://www.smartkarma.com/entities/hitachi-ltd" target="_blank" data-smartkarma-citation="entities:7797:1" rel="noopener">Hitachi Ltd (6501 JP)</a>  <a href="https://www.hitachi.com/New/cnews/month/2016/05/f_160513a.pdf" target="_blank" rel="noopener">announced</a> a transaction whereby they sold a stake in <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> to <a href="https://www.smartkarma.com/entities/mitsubishi-ufj-financial-group" target="_blank" data-smartkarma-citation="entities:218:1" rel="noopener">Mitsubishi UFJ Financial (MUFG) (8306 JP)</a> and <a href="https://www.smartkarma.com/entities/mitsubishi-ufj-lease-finance" target="_blank" data-smartkarma-citation="entities:1467:1" rel="noopener">Mitsubishi UFJ Lease &amp; Finance (8593 JP)</a> to de-consolidate their holding, but would retain a 'negative control' stake of 33.4%. The result was a business and capital alliance designed to achieve more scale for the leasing companies and to improve the capital efficiency of Hitachi itself. The moves by Hitachi to improve its capital efficiency have come fast and furious the last few years with sales of <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>, <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>, a 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>, and a selldown to de-consolidate <a href="https://www.smartkarma.com/entities/hitachi-transport-system-ltd" target="_blank" data-smartkarma-citation="entities:2395:1" rel="noopener">Hitachi Transport System (9086 JP)</a> in 2016, and now more recently there is media speculation about the eventual disposition of <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>.When earnings were presented in May this year, there was a small section in the presentation deck on the bottom half of p15 of the Update on the Mid-Term Management Plan <a href="http://www.hitachi.com/New/cnews/month/2020/05/200529a/f_200529apre.pdf" target="_blank" rel="noopener">presentation </a>(the <a href="http://www.hitachi.co.jp/New/cnews/month/2020/05/0529a/f_0529apre.pdf" target="_blank" rel="noopener">Japanese</a> version has an extra word which helps clarify) talking about sales of property and assets and this got people excited. I went through it in some detail in <a href="https://www.smartkarma.com/insights/hitachi-s-capital-case-liquidating-land-policy-holdings-what-about-the-subs" target="_blank" data-smartkarma-citation="insights:39920" rel="noopener">Hitachi's Capital Case - Liquidating Land &amp; Policy Holdings? What About the Subs?</a> and that indicated there was time for the remaining subs.<h2>The NEW News</h2>Today during business hours, there was a news story out on Diamond Online followed by a quick story on Bloomberg saying that <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 <a href="https://www.smartkarma.com/entities/mitsubishi-ufj-lease-finance" target="_blank" data-smartkarma-citation="entities:1467:1" rel="noopener">Mitsubishi UFJ Lease &amp; Finance (8593 JP)</a> had decided to merge, and <a href="https://www.smartkarma.com/entities/mitsubishi-corp" target="_blank" data-smartkarma-citation="entities:20668:1" rel="noopener">Mitsubishi Corp (8058 JP)</a> and <a href="https://www.smartkarma.com/entities/mitsubishi-ufj-financial-group" target="_blank" data-smartkarma-citation="entities:218:1" rel="noopener">Mitsubishi UFJ Financial (MUFG) (8306 JP)</a> would each own 20% of the new merged company. The <a href="https://www.hitachi-capital.co.jp/hcc/english/newsrelease/2020/20200924e.pdf" target="_blank" rel="noopener">announcement</a> came after the close. The two companies would merge at a share exchange ratio of 1.0:5.1, with the effective date of the Merger on 1 April 2021, and shareholder meetings for each company to approve the deal in late February 2021, but it does not discuss the idea of Mitsubishi Corp owning 20% of the combined company (it already owns 20% of MUFJ Lease but its stake would be diluted in the merger.As always, more below the fold.

In May 2016, Hitachi Ltd (6501 JP)  announced a transaction whereby they sold a stake in Hitachi Capital (8586 JP) to Mitsubishi UFJ Financial (MUFG) (8306 JP) and Mitsubishi UFJ Lease &amp; Finance (8593 JP) to de-consolidate their holding, but would retain a 'negative control' stake of 33.4%. The result was a business and capital alliance designed to achieve more scale for the leasing companies and to improve the capital efficiency of Hitachi itself. The moves by Hitachi to improve its capital efficiency have come fast and furious the last few years with sales of Hitachi Kokusai Electric (6756 JP), Hitachi Koki (6581 JP), Hitachi Chemical (4217 JP), a buy-in of Hitachi High-Tech (8036 JP), and a selldown to de-consolidate Hitachi Transport System (9086 JP) in 2016, and now more recently there is media speculation about the eventual disposition of Hitachi Metals (5486 JP) and Hitachi Construction Machinery (6305 JP).When earnings were presented in May this year, there was a small section in the presentation deck on the bottom half of p15 of the Update on the Mid-Term Management Plan presentation (the Japanese version has an extra word which helps clarify) talking about sales of property and assets and this got people excited. I went through it in some detail in Hitachi's Capital Case - Liquidating Land &amp; Policy Holdings? What About the Subs? and that indicated there was time for the remaining subs.The NEW NewsToday during business hours, there was a news story out on Diamond Online followed by a quick story on Bloomberg saying that Hitachi Capital (8586 JP) and Mitsubishi UFJ Lease &amp; Finance (8593 JP) had decided to merge, and Mitsubishi Corp (8058 JP) and Mitsubishi UFJ Financial (MUFG) (8306 JP) would each own 20% of the new merged company. The announcement came after the close. The two companies would merge at a share exchange ratio of 1.0:5.1, with the effective date of the Merger on 1 April 2021, and shareholder meetings for each company to approve the deal in late February 2021, but it does not discuss the idea of Mitsubishi Corp owning 20% of the combined company (it already owns 20% of MUFJ Lease but its stake would be diluted in the merger.As always, more below the fold.

Hitachi's Hitachi Capital Capital Case - A Merger With MUFG Lease

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
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The Nikkei reported on the 20th that Hitachi was looking to sell Hitachi Metals and had contacted foreign investment banks to do so. This is an interesting scenario as Bloomberg had previously reported that Hitachi Metals was itself looking to sell its Waupaca unit which is one of the businesses which is struggling the most at the moment. We discuss the possibilities below.

The Nikkei reported on the 20th that Hitachi was looking to sell Hitachi Metals and had contacted foreign investment banks to do so. This is an interesting scenario as Bloomberg had previously reported that Hitachi Metals was itself looking to sell its Waupaca unit which is one of the businesses which is struggling the most at the moment. We discuss the possibilities below.

After the close on Friday, <a href="https://www.smartkarma.com/entities/hitachi-ltd" target="_blank" data-smartkarma-citation="entities:7797:1" rel="noopener">Hitachi Ltd (6501 JP)</a> released its <a href="http://www.hitachi.com/New/cnews/month/2020/05/200529.html" target="_blank" rel="noopener">full-year earnings</a> (with a <a href="http://www.hitachi.com/New/cnews/month/2020/05/200529/2019_An.pdf" target="_blank" rel="noopener">news release</a>, <a href="http://www.hitachi.com/New/cnews/month/2020/05/200529/2019_Anpre.pdf" target="_blank" rel="noopener">presentation</a>, and <a href="http://www.hitachi.com/New/cnews/month/2020/05/200529/2019_Ansup.pdf" target="_blank" rel="noopener">supplemental materials</a>). It also released an update on <a href="http://www.hitachi.com/New/cnews/month/2020/05/200529a.html" target="_blank" rel="noopener">Progress of the Mid-Term Management Plan</a>, with a webcast and a <a href="http://www.hitachi.com/New/cnews/month/2020/05/200529a/f_200529apre.pdf" target="_blank" rel="noopener">presentation deck</a>.An all-caps headline on the 'berg proclaimed<div class="content-highlight">        *HITACHI MULLS CUTTING CROSS SHAREHOLDINGS, SELLING PROPERTIES</div>I got several questions within the hour. There was a small section on the bottom half of p15 of the Update on the Mid-Term Management Plan <a href="http://www.hitachi.com/New/cnews/month/2020/05/200529a/f_200529apre.pdf" target="_blank" rel="noopener">presentation</a> (<a href="http://www.hitachi.co.jp/New/cnews/month/2020/05/0529a/f_0529apre.pdf" target="_blank" rel="noopener">Japanese</a> version has an extra word which helps clarify).So a little more digging was in order. There was plenty of discussion of cash management, and in the Q&amp;A there were questions about the ongoing structural reorganisation, including talk of the listed subsidiaries. The contents surprised even me.I did not expect to be so underwhelmed.

After the close on Friday, Hitachi Ltd (6501 JP) released its full-year earnings (with a news release, presentation, and supplemental materials). It also released an update on Progress of the Mid-Term Management Plan, with a webcast and a presentation deck.An all-caps headline on the 'berg proclaimed        *HITACHI MULLS CUTTING CROSS SHAREHOLDINGS, SELLING PROPERTIESI got several questions within the hour. There was a small section on the bottom half of p15 of the Update on the Mid-Term Management Plan presentation (Japanese version has an extra word which helps clarify).So a little more digging was in order. There was plenty of discussion of cash management, and in the Q&amp;A there were questions about the ongoing structural reorganisation, including talk of the listed subsidiaries. The contents surprised even me.I did not expect to be so underwhelmed.

Hitachi's Capital Case - Liquidating Land & Policy Holdings? What About the Subs?

<div>
In early December, <a href="https://www.smartkarma.com/entities/hitachi-ltd" target="_blank" data-smartkarma-citation="entities:7797:1" rel="noopener">Hitachi Ltd (6501 JP)</a> and <a href="https://www.smartkarma.com/entities/showa-denko-k-k" target="_blank" data-smartkarma-citation="entities:1496:1" rel="noopener">Showa Denko K K (4004 JP)</a> offered a press release to say that the two had agreed on exclusive negotiating rights for Showa Denko to buy Hitachi's stake in <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>.  Rumored prices were in the range of up to JPY 1 trillion for the whole company.
On 19 December 2019, we got the number - Showa Denko announced (<a href="https://www.sdk.co.jp/assets/files/english/news/2019/20191218_newsrelease_e.pdf" target="_blank" rel="noopener">English</a>, <a href="https://www.sdk.co.jp/assets/files/news/2019/20191218_newsrelease_j.pdf" target="_blank" rel="noopener">Japanese</a>) the planned commencement of a ¥964bn Tender Offer for all of the shares of Hitachi Chemical at a price of ¥4630/share.
After three months of anti-trust filings and reviews, today <a href="https://www.smartkarma.com/entities/showa-denko-k-k" target="_blank" data-smartkarma-citation="entities:1496:1" rel="noopener">Showa Denko K K (4004 JP)</a> announced (<a href="https://www.sdk.co.jp/assets/files/news/2020/20200323_sdknewsrelease_j.pdf" target="_blank" rel="noopener">Japanese</a>, <a href="https://www.sdk.co.jp/assets/files/english/news/2020/20200323_sdknewsrelease_e.pdf" target="_blank" rel="noopener">English</a>) that the Tender Offer would commence tomorrow 24 March 2020.
Lots of details about the deal and trade below.

</div>


In early December, Hitachi Ltd (6501 JP) and Showa Denko K K (4004 JP) offered a press release to say that the two had agreed on exclusive negotiating rights for Showa Denko to buy Hitachi's stake in Hitachi Chemical (4217 JP).  Rumored prices were in the range of up to JPY 1 trillion for the whole company.
On 19 December 2019, we got the number - Showa Denko announced (English, Japanese) the planned commencement of a ¥964bn Tender Offer for all of the shares of Hitachi Chemical at a price of ¥4630/share.
After three months of anti-trust filings and reviews, today Showa Denko K K (4004 JP) announced (Japanese, English) that the Tender Offer would commence tomorrow 24 March 2020.
Lots of details about the deal and trade below.



Hitachi Chem Tender Launch Will Make Arbs Happy

Bloomberg reported this morning that Hitachi Metals was exploring the sale of its Waupaca unit in North America for about USD1bn. We had previously commented that the company appeared to be dressing itself up for a sale and this news strengthens that impression.

Bloomberg reported this morning that Hitachi Metals was exploring the sale of its Waupaca unit in North America for about USD1bn. We had previously commented that the company appeared to be dressing itself up for a sale and this news strengthens that impression.

Hitachi Metals – Waupaca Sale Would Make Specialty Metals Segment More Saleable

Japan

Hitachi Metals Ltd. manufactures a wide range of specialty steel and metal products, including industrial machinery, magnetic and electronic materials and parts, and aluminium castings and wheels.  The Company's products are marketed to a variety of users including the automobile, aerospace, nuclear, and computer industries worldwide.  The Company is a subsidiary of Hitachi, Ltd.

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Hitachi Metals (5486 JP)

Hitachi's Hitachi Capital Capital Case - A Merger With MUFG Lease

In May 2016, Hitachi

Travis Lundy

Hitachi Metals – Sale On

The Nikkei reported on the 20th that Hitachi was looking to sell Hitachi Metals and had contacted foreign investment banks to do so. This is an...

Mio Kato

Hitachi's Capital Case - Liquidating Land & Policy Holdings? What About the Subs?

After the close on Friday, Hitachi Ltd (6501 JP) released its full-year earnings (with a news release, presentation, and supplemental materials)....

Travis Lundy

Hitachi Chem Tender Launch Will Make Arbs Happy

In early December, Hitachi Ltd (6501 JP) and Showa Denko K K (4004 JP) offered a press release to say that the two had agreed on exclusive...

Travis Lundy

Hitachi Metals – Waupaca Sale Would Make Specialty Metals Segment More Saleable

Bloomberg reported this morning that Hitachi Metals was exploring the sale of its Waupaca unit in North America for about USD1bn. We had previously...

Mio Kato

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