Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Two days ago, real estate firm <a href="https://www.smartkarma.com/entities/hoosiers-holdings" target="_blank" data-smartkarma-citation="entities:9163:1" rel="noopener">Hoosiers Holdings (3284 JP)</a> announced an increase in their <a href="https://pdf.irpocket.com/C3284/HTFv/flrZ/POPX.pdf" target="_blank" rel="noopener">forecast</a> for OP, and net income in the year to 31 March 2021. Revenue was expected unchanged from the previous forecast at ¥80bn, OP is up 20% to ¥4.2bn, and net income is forecast to be ¥2.4bn, up one-third. They also increased a forecast dividend increase. lifting the H2 dividend from ¥7/share to ¥11/share. The stock opened up 6% the next day, but fell during the day and then fell some more today so the stock is only 1.5% higher than that news.Today after the close, the company released a revised Shareholder Returns Policy (<a href="https://pdf.irpocket.com/C3284/HTFv/lQzd/kIav.pdf" target="_blank" rel="noopener">Japanese</a>), which lifts the payout ratio to 40%, or more, and the Distribution of Equity rate to 4%, or more, per year. There is a longer <a href="https://pdf.irpocket.com/C3284/HTFv/lQzd/Llxd.pdf" target="_blank" rel="noopener">presentation</a> explaining the policy, including a large buyback. The company also <a href="https://pdf.irpocket.com/C3284/HTFv/lQzd/o1s4.pdf" target="_blank" rel="noopener">finalised</a> plans to get out of the biomass renewable energy operations.The company also released a big picture <a href="https://pdf.irpocket.com/C3284/HTFv/lQzd/CCy7.pdf" target="_blank" rel="noopener">summary</a> of its next Mid Term Management Plan which goes from April 1 to March 2026, including plans to lift revenues about 15% but to improve profitability by 150-200%, depending on the measure.<div class="content-highlight">
The company also <a href="https://pdf.irpocket.com/C3284/HTFv/lQzd/niZK.pdf" target="_blank" rel="noopener">announced</a> a plan to conduct a buyback of 21,637,500 of its own shares (37.6% of shares out) in a tender offer at ¥684/share, with the intention to cancel ~95% of the shares it buys back. 
This is big news.
</div>Not coincidentally, this is quite similar to the size of the position held by entities controlled by activist Yoshiaki Murakami, which was 21,570,200 shares as of most recently according to the announcement. Nota Bene: for most investors, you won't want to consider this a partial put option. There's a reason for that.More below.

Two days ago, real estate firm Hoosiers Holdings (3284 JP) announced an increase in their forecast for OP, and net income in the year to 31 March 2021. Revenue was expected unchanged from the previous forecast at ¥80bn, OP is up 20% to ¥4.2bn, and net income is forecast to be ¥2.4bn, up one-third. They also increased a forecast dividend increase. lifting the H2 dividend from ¥7/share to ¥11/share. The stock opened up 6% the next day, but fell during the day and then fell some more today so the stock is only 1.5% higher than that news.Today after the close, the company released a revised Shareholder Returns Policy (Japanese), which lifts the payout ratio to 40%, or more, and the Distribution of Equity rate to 4%, or more, per year. There is a longer presentation explaining the policy, including a large buyback. The company also finalised plans to get out of the biomass renewable energy operations.The company also released a big picture summary of its next Mid Term Management Plan which goes from April 1 to March 2026, including plans to lift revenues about 15% but to improve profitability by 150-200%, depending on the measure.
The company also announced a plan to conduct a buyback of 21,637,500 of its own shares (37.6% of shares out) in a tender offer at ¥684/share, with the intention to cancel ~95% of the shares it buys back. 
This is big news.
Not coincidentally, this is quite similar to the size of the position held by entities controlled by activist Yoshiaki Murakami, which was 21,570,200 shares as of most recently according to the announcement. Nota Bene: for most investors, you won't want to consider this a partial put option. There's a reason for that.More below.

Hoosiers (3284) Tender Offer Buyback To Buy Out Activist Murakami

Kudos to <a href="https://www.smartkarma.com/profiles/janaghan-jeyakumar-cfa" target="_blank" data-smartkarma-citation="accounts:3173" rel="noopener">Janaghan Jeyakumar, CFA</a> who wrote about this deal on 5 November asking the question <a href="https://www.smartkarma.com/insights/japan-asia-3751-jp-management-buyout-should-there-be-a-bump" target="_blank" data-smartkarma-citation="insights:44928" rel="noopener">Japan Asia (3751 JP) Management Buyout: Should There Be a BUMP?</a> where the obvious answer was yes because a) it was too cheap, and b) the substantial debt meant that buying it one turn of EBITDA higher meant a 40% bump in share price, and c) it wasn't going to be that easy to get to the minimum because the acquirers did not have that many friendly shareholders on the register. 
Renowned Japanese activist Yoshiaki Murakami agreed with the idea it was cheap, bought 5%, then bought more, and earlier this month had accumulated more than 20%. He met with them, and finally decided to launch his own tender offer at +40% after the chairman refused to raise the price and Carlyle could not provide a "rational solution" (the letter by Murakami is definitely worth reading). Today, we have new news. The bid by the Chairman and Carlyle is now doubled, from ¥600/share to ¥1,200/share. 
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There are, to be sure, a few small tweaks to the deal behind the scenes, and more money is good for shareholders, but all the tweaks involve moving around assets between the parties who buy the company from shareholders and only does it AFTER the deal is done. It does not involve anything but the agreement of who gets what after the deal is done.
This is literally just one party being shamed into not getting a free $150mm+ at the expense of the shareholders. 
But the chairman - supported by the directors and independent directors - decided that it was OK for the shareholders to be given ¥600/share in the first place instead of ¥1,200/share. Then they supported the deal when questioned, and when someone prominent had built up a 20% stake making their life difficult, they couldn't be bothered to come to the table in any real manner. 
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When a Private Equity Fund and a Chairman decide to buy a company from its shareholders, independent directors need to get better advice. They need to listen to shareholders or people who speak to or for shareholders. Theoretically, that's their job but in Japan they seem particularly bad at doing so. But the shareholders are the ones who make a deal successful or not.
It should also be a wake-up call for Real Investors.
If you make noise on a deal, rather than accept it "because there is nothing I can do is there" then you encourage others to do so too. As I argued in <a href="https://www.smartkarma.com/insights/japan-needs-more-cowbell" target="_blank" data-smartkarma-citation="insights:41191" rel="noopener">Japan Needs More Cowbell</a> and in an FT Alphaville <a href="https://www.ft.com/content/dd680521-a9cc-4b1c-922d-4787d2a314f6" target="_blank" rel="noopener">Opinion</a> a year ago, Japan's investors need to take their opinions and needs to the wider market. If you own it and you 
Murakami-san is getting a 75% return on his 3-month investment in <a href="https://www.smartkarma.com/entities/japan-asia-group-ltd" target="_blank" data-smartkarma-citation="entities:12428:1" rel="noopener">Japan Asia (3751 JP)</a> because of his efforts, and his diligence in pointing out the deficiencies of the bid. He bought 20% of the company and he had at it.
That's good for Murakami-san. And it could be good for the market. But investors have to make use of this. Active shareholders should be active, not passive. 
More below the fold.

Kudos to Janaghan Jeyakumar, CFA who wrote about this deal on 5 November asking the question Japan Asia (3751 JP) Management Buyout: Should There Be a BUMP? where the obvious answer was yes because a) it was too cheap, and b) the substantial debt meant that buying it one turn of EBITDA higher meant a 40% bump in share price, and c) it wasn't going to be that easy to get to the minimum because the acquirers did not have that many friendly shareholders on the register. 
Renowned Japanese activist Yoshiaki Murakami agreed with the idea it was cheap, bought 5%, then bought more, and earlier this month had accumulated more than 20%. He met with them, and finally decided to launch his own tender offer at +40% after the chairman refused to raise the price and Carlyle could not provide a "rational solution" (the letter by Murakami is definitely worth reading).  Today, we have new news. The bid by the Chairman and Carlyle is now doubled, from ¥600/share to ¥1,200/share. 



There are, to be sure, a few small tweaks to the deal behind the scenes, and more money is good for shareholders, but all the tweaks involve moving around assets between the parties who buy the company from shareholders and only does it AFTER the deal is done. It does not involve anything but the agreement of who gets what after the deal is done.
This is literally just one party being shamed into not getting a free $150mm+ at the expense of the shareholders. 
But the chairman - supported by the directors and independent directors - decided that it was OK for the shareholders to be given ¥600/share in the first place instead of ¥1,200/share. Then they supported the deal when questioned, and when someone prominent had built up a 20% stake making their life difficult, they couldn't be bothered to come to the table in any real manner. 




When a Private Equity Fund and a Chairman decide to buy a company from its shareholders, independent directors need to get better advice. They need to listen to shareholders or people who speak to or for shareholders. Theoretically, that's their job but in Japan they seem particularly bad at doing so. But the shareholders are the ones who make a deal successful or not.
It should also be a wake-up call for Real Investors.
If you make noise on a deal, rather than accept it "because there is nothing I can do is there" then you encourage others to do so too. As I argued in Japan Needs More Cowbell and in an FT Alphaville Opinion a year ago, Japan's investors need to take their opinions and needs to the wider market. If you own it and you 
Murakami-san is getting a 75% return on his 3-month investment in Japan Asia (3751 JP) because of his efforts, and his diligence in pointing out the deficiencies of the bid. He bought 20% of the company and he had at it.
That's good for Murakami-san. And it could be good for the market. But investors have to make use of this. Active shareholders should be active, not passive. 
More below the fold. 

Japan Asia Group (3751): Murakami Wins the Mother Of All Bumps +100%

Just over two months ago, <a href="https://www.smartkarma.com/profiles/janaghan-jeyakumar-cfa" target="_blank" data-smartkarma-citation="accounts:3173" rel="noopener">Janaghan Jeyakumar, CFA</a> wrote on the MBO of <a href="https://www.smartkarma.com/entities/japan-asia-group-ltd" target="_blank" data-smartkarma-citation="entities:12428:1" rel="noopener">Japan Asia Group (3751 JP)</a> launched at JPY 600/share, asking the question <a href="https://www.smartkarma.com/insights/japan-asia-3751-jp-management-buyout-should-there-be-a-bump" target="_blank" data-smartkarma-citation="insights:44928" rel="noopener">Japan Asia (3751 JP) Management Buyout: Should There Be a BUMP?</a> 
The leading question had an obvious answer. Yes. 
Renowned Japan activist Yoshiaki Murakami and the various entities from which he and his crew deploy capital thought the price too low, as soon became obvious. 
Last week, after accumulating near 20%, they announced their intention to conduct a competing Tender Offer at a 40% premium to Carlyle's, which was extended. 
There are still a few hurdles, but the price of the shares has long eclipsed the Carlyle bid. Now shares are trading above the indicative JPY 840/share bid. 
There are interesting things afoot here.

Just over two months ago, Janaghan Jeyakumar, CFA wrote on the MBO of Japan Asia Group (3751 JP) launched at JPY 600/share, asking the question Japan Asia (3751 JP) Management Buyout: Should There Be a BUMP? 
The leading question had an obvious answer. Yes. 
Renowned Japan activist Yoshiaki Murakami and the various entities from which he and his crew deploy capital thought the price too low, as soon became obvious. 
Last week, after accumulating near 20%, they announced their intention to conduct a competing Tender Offer at a 40% premium to Carlyle's, which was extended. 
There are still a few hurdles, but the price of the shares has long eclipsed the Carlyle bid. Now shares are trading above the indicative JPY 840/share bid. 
There are interesting things afoot here. 

Murakami Fund's Tender for JAG (3751):  May Be Rangebound Near-Term

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

<a href="https://www.smartkarma.com/entities/japan-asia-group-ltd" target="_blank" data-smartkarma-citation="entities:12428:1" rel="noopener">Japan Asia (3751 JP)</a> announced today after market close that the management will be launching a Tender Offer for all the shares of the company with the backing of The Carlyle Group. 
The company engages in green community businesses in Japan. They mainly specialize in providing geospatial information solutions, urban planning technologies, and disaster risk reduction solutions to be used in social infrastructure development by public and private clients. Furthermore, they also operate multiple solar photovoltaic (PV) power stations which has become the main contributor to operating income in recent years. 
The Offer Price will be ¥600/share in cash translating to a market cap of ¥16.5bn (~US$158mn) and an enterprise value of ¥86.2bn (~US$830mn). 
The Tender Offer will commence on 6th November 2020 and is expected to close on 21st December 2020. The Transaction is subject to a minimum acceptance condition which requires the Acquirer to reach two-thirds control. 
This may look expensive but it is not. This is a very good deal for the buyers. 
More below the fold.

Japan Asia (3751 JP) announced today after market close that the management will be launching a Tender Offer for all the shares of the company with the backing of The Carlyle Group. 
The company engages in green community businesses in Japan. They mainly specialize in providing geospatial information solutions, urban planning technologies, and disaster risk reduction solutions to be used in social infrastructure development by public and private clients. Furthermore, they also operate multiple solar photovoltaic (PV) power stations which has become the main contributor to operating income in recent years. 
The Offer Price will be ¥600/share in cash translating to a market cap of ¥16.5bn (~US$158mn) and an enterprise value of ¥86.2bn (~US$830mn). 
The Tender Offer will commence on 6th November 2020 and is expected to close on 21st December 2020. The Transaction is subject to a minimum acceptance condition which requires the Acquirer to reach two-thirds control. 
This may look expensive but it is not. This is a very good deal for the buyers. 
More below the fold. 

Japan Asia (3751 JP) Management Buyout: Should There Be a BUMP?

Japan

Japan Asia Group Limited provides consulting services to both the private and public sectors relating to social infrastructure development. The Company also develops green communities as well as renewable energy plants. Japan Asia Group aditionally provides various financial services such as security brokerage.

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Japan Asia (3751 JP)

Hoosiers (3284) Tender Offer Buyback To Buy Out Activist Murakami

Hoosiers (3284) buying back 37% of shares out in an own-share tender offer. This is Murakami-san getting out of a stock he quasi-controls. At last....

Travis Lundy

Japan Asia Group (3751): Murakami Wins the Mother Of All Bumps +100%

JAG (3751 JP) shareholders hit the jackpot. The Chairman ups his investment 40-fold-plus and decides company actually belongs to shareholders. The...

Travis Lundy

Murakami Fund's Tender for JAG (3751): May Be Rangebound Near-Term

President Yamashita + Carlyle arranged a TOB which was too low-priced. Janaghan said it needed a bump. Famed activist Murakami-san agreed. He has...

Travis Lundy

Japan Asia (3751 JP) Management Buyout: Should There Be a BUMP?

This is yet another cheap MBO in Japan. It's too cheap. But it's a small cap with few owners who might agitate. If it gets to terms and retail...

Janaghan Jeyakumar, CFA

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