Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Today after the close, in a move where the headline surprised me somewhat, <a href="https://www.smartkarma.com/entities/mitsui-fudosan-co-ltd" target="_blank" data-smartkarma-citation="entities:565:1" rel="noopener">Mitsui Fudosan (8801 JP)</a> announced that it had met with Oasis Management - the largest shareholder in <a href="https://www.smartkarma.com/entities/tokyo-dome-corp" target="_blank" data-smartkarma-citation="entities:6421:1" rel="noopener">Tokyo Dome Corp (9681 JP)</a> upon which it is conducting a Tender Offer - and Yomiuri Shinbun Holdings (Mitsui Fudosan's future ownership partner) on the 7th of December and had asked for the support of Oasis in making the Tender Offer successful. The release today states... <blockquote>
In response, Oasis Management expressed its intention to endorse the Tender Offer and tender all shares of the common stock of Tokyo Dome held by funds managed by Oasis Management at the tender offer price (1,300 yen per share of common stock), and further mentioned to the Company that it is prepared to enter into a tender agreement with the Company subject to satisfactory completion of negotiation of the terms of the agreement and internal approval process.
On the basis of this discussion with Oasis Management, the Company will start discussions with Oasis Management towards the execution of a tender agreement.
</blockquote>The release mentions that Mitsui Fudosan has entered into an agreement with Yomiuri Shinbun Holdings to transfer 20% of the entity post-tender so YSH becomes a 20% holder. It leaves it there. This obviously changes things. I thought the bid cheap and said as much in <a href="https://www.smartkarma.com/insights/tokyo-dome-sells-itself-for-the-wrong-price" target="_blank" data-smartkarma-citation="insights:45799" rel="noopener">Tokyo Dome Sells Itself For the Wrong Price</a>. More below the fold.

Today after the close, in a move where the headline surprised me somewhat, Mitsui Fudosan (8801 JP) announced that it had met with Oasis Management - the largest shareholder in Tokyo Dome Corp (9681 JP) upon which it is conducting a Tender Offer - and Yomiuri Shinbun Holdings (Mitsui Fudosan's future ownership partner) on the 7th of December and had asked for the support of Oasis in making the Tender Offer successful. The release today states... 
In response, Oasis Management expressed its intention to endorse the Tender Offer and tender all shares of the common stock of Tokyo Dome held by funds managed by Oasis Management at the tender offer price (1,300 yen per share of common stock), and further mentioned to the Company that it is prepared to enter into a tender agreement with the Company subject to satisfactory completion of negotiation of the terms of the agreement and internal approval process.
On the basis of this discussion with Oasis Management, the Company will start discussions with Oasis Management towards the execution of a tender agreement.
The release mentions that Mitsui Fudosan has entered into an agreement with Yomiuri Shinbun Holdings to transfer 20% of the entity post-tender so YSH becomes a 20% holder. It leaves it there. This obviously changes things. I thought the bid cheap and said as much in Tokyo Dome Sells Itself For the Wrong Price. More below the fold. 

Oasis Agrees To Tender Tokyo Dome (9681) - This Changes Things

This is big news. 
Every now and then one finds a situation where a shareholder calls an EGM which is hostile to management of the company. Shareholders who hold a certain number/percentage of shares (300 trading units or 1% of shares) for a certain period of time. 
The background is that Oasis Management has, it claims, been a shareholder of <a href="https://www.smartkarma.com/entities/tokyo-dome-corp" target="_blank" data-smartkarma-citation="entities:6421:1" rel="noopener">Tokyo Dome Corp (9681 JP)</a> since 2018. They went "substantial" with a 5+% stake in December 2019, and then raised their stake to 9.6% by late January 2020, whereupon they published a website called <a href="https://www.abettertokyodome.com/a-better-tokyo-dome" target="_blank" rel="noopener">A Better Tokyo Dome</a> and posted a large <a href="https://static1.squarespace.com/static/5dd62b05f226644911c6d4e1/t/5efabd9b2d98f71482b79156/1593490878125/OASIS+-+A+Better+Tokyo+Dome+Presentation.pdf" target="_blank" rel="noopener">presentation</a> which is worthwhile reading. They called on better F&amp;B and improved digitalisation of signage. 
There was no movement on this in the public domain until July when Tokyo Dome put out a document promising a "better" Tokyo Dome (<a href="https://contents.xj-storage.jp/xcontents/AS01950/42158d25/3e80/408f/8966/4330ff2fd156/20200720165516344s.pdf" target="_blank" rel="noopener">Japanese</a>, <a href="https://contents.xj-storage.jp/xcontents/AS01950/8cc6746f/a7cd/4a57/bfd9/e1361a46e7f7/20200729135840184s.pdf" target="_blank" rel="noopener">English</a>) for watching games amid the covid-19 pandemic. That presentation included enhanced safety precautions/measures, more cleaning, re-designed flow of people in certain areas, and ALSO talked about improving F&amp;B and upgrading digital signage. 
In October, it was <a href="https://contents.xj-storage.jp/xcontents/AS01950/a500919b/8a12/4c0c/95dc/152de0c9fd48/20201020165058050s.pdf" target="_blank" rel="noopener">announced</a> that Oasis had demanded the company call an Extraordinary General Meeting of shareholders with the agenda item to remove three directors, including the President Tsutomu Nagaoka and external directors Nobuhiro Mori and Tomofumi Akiyama. A record date of 11 November was <a href="https://contents.xj-storage.jp/xcontents/AS01950/800a3884/9eaf/43f0/bdb9/f7dff0c28164/20201021100821979s.pdf" target="_blank" rel="noopener">set</a>. On the 11th of November, the date and location was <a href="https://contents.xj-storage.jp/xcontents/AS01950/71ce4fcb/5ddb/4ce2/aaa3/97cf60c5129c/20201111142946366s.pdf" target="_blank" rel="noopener">confirmed</a> and the Company <a href="https://contents.xj-storage.jp/xcontents/AS01950/1ea8dcbb/2f52/44de/8b79/8f2a723b3cbe/20201111144033325s.pdf" target="_blank" rel="noopener">filed</a> with the Tokyo District Court for the appointment of an inspector. On the 26th, the company sent out the <a href="https://contents.xj-storage.jp/xcontents/AS01950/5147f8e0/836d/4140/bc3c/752593ad0394/20201126092033012s.pdf" target="_blank" rel="noopener">Convocation Notice</a> including Oasis explanation of their demands. 
Last week, indeed the day after the convocation notice, it was announced that <a href="https://www.smartkarma.com/entities/mitsui-fudosan-co-ltd" target="_blank" data-smartkarma-citation="entities:565:1" rel="noopener">Mitsui Fudosan (8801 JP)</a> and Yomiuri Shinbun would launch a Tender Offer to take Tokyo Dome Corp private at JPY 1300/share. This is the same price that Oasis offered as a proposal to take Tokyo Dome private earlier this year - something disclosed in the Target Opinion Statement. 
The transaction would end up (post-transaction) with Mitsui Fudosan owning 80% and Yomiuri Shinbun - the closely-held owner of the Yomiuri Giants baseball team (and of course the paper) - owning 20%. 
Shares jumped through terms immediately, trading up to 10% through terms on the third day after announcement. 
<h2>Now there is NEW News</h2>
Shareholder proxy advisor ISS has released a report which suggests voting FOR the Oasis proposals to remove the three directors. 
This is big. It doesn't happen that often. 
The Company immediately released a <a href="https://contents.xj-storage.jp/xcontents/AS01950/94fc1d93/b2c0/42f1/8c5a/a01c2afd0d08/20201203143125720s.pdf" target="_blank" rel="noopener">document</a> called The Company’s Views Regarding ISS (Proxy-Advisory Firm)’s Recommendation of Supporting Proposed Agenda Items Submitted to the Company’s Extraordinary General Meeting of Shareholders (Shareholders’ Proposals). Shareholders should, of course read both documents. 
More discussion below the fold.

This is big news. 
Every now and then one finds a situation where a shareholder calls an EGM which is hostile to management of the company. Shareholders who hold a certain number/percentage of shares (300 trading units or 1% of shares) for a certain period of time. 
The background is that Oasis Management has, it claims, been a shareholder of Tokyo Dome Corp (9681 JP) since 2018. They went "substantial" with a 5+% stake in December 2019, and then raised their stake to 9.6% by late January 2020, whereupon they published a website called A Better Tokyo Dome and posted a large presentation which is worthwhile reading. They called on better F&amp;B and improved digitalisation of signage. 
There was no movement on this in the public domain until July when Tokyo Dome put out a document promising a "better" Tokyo Dome (Japanese, English) for watching games amid the covid-19 pandemic. That presentation included enhanced safety precautions/measures, more cleaning, re-designed flow of people in certain areas, and ALSO talked about improving F&amp;B and upgrading digital signage. 
In October, it was announced that Oasis had demanded the company call an Extraordinary General Meeting of shareholders with the agenda item to remove three directors, including the President Tsutomu Nagaoka and external directors Nobuhiro Mori and Tomofumi Akiyama. A record date of 11 November was set. On the 11th of November, the date and location was confirmed and the Company filed with the Tokyo District Court for the appointment of an inspector. On the 26th, the company sent out the Convocation Notice including Oasis explanation of their demands. 
Last week, indeed the day after the convocation notice, it was announced that Mitsui Fudosan (8801 JP) and Yomiuri Shinbun would launch a Tender Offer to take Tokyo Dome Corp private at JPY 1300/share. This is the same price that Oasis offered as a proposal to take Tokyo Dome private earlier this year - something disclosed in the Target Opinion Statement. 
The transaction would end up (post-transaction) with Mitsui Fudosan owning 80% and Yomiuri Shinbun - the closely-held owner of the Yomiuri Giants baseball team (and of course the paper) - owning 20%. 
Shares jumped through terms immediately, trading up to 10% through terms on the third day after announcement. 
Now there is NEW News
Shareholder proxy advisor ISS has released a report which suggests voting FOR the Oasis proposals to remove the three directors. 
This is big. It doesn't happen that often. 
The Company immediately released a document called The Company’s Views Regarding ISS (Proxy-Advisory Firm)’s Recommendation of Supporting Proposed Agenda Items Submitted to the Company’s Extraordinary General Meeting of Shareholders (Shareholders’ Proposals). Shareholders should, of course read both documents. 
More discussion below the fold. 

ISS Takes Umbrage with Tokyo Dome, Recommends Booting the CEO from the Board

Friday morning, the Nikkei said there was a deal in the offing where Mitsui Fudosan would bid for <a href="https://www.smartkarma.com/entities/tokyo-dome-corp" target="_blank" data-smartkarma-citation="entities:6421:1" rel="noopener">Tokyo Dome Corp (9681 JP)</a>.  As someone concerned with the governance weakness shown too many times in Japanese takeover situations, I am almost automatically disappointed to see such headlines. It leads me to expect that later the same day I will be mumbling words at my monitor that I should not say aloud. 
I did Friday.
My constant question is HOW can independent directors of companies with unique and valuable assets deign to sell them at such inexpensive prices? Often those unique and valuable assets are uniquely valuable items such as cash, portfolios of listed securities, and land and property assets with an easily external valuation. 
Sometimes cash and securities get tossed into a DCF as being assets which need to be discounted 9-11% a year on their ability to throw off cash, never mind the fact that the equity holdings are purchased at cash flow yields of 2-3% and bonds are bought with yields of 0-1%. Real estate holdings are usually purchased at yields of 4-6%. So automatically, anything of any real value and inherently low cash-flow yield gets marked down for the friendly buyer. Extra cash is almost never dividended out, and there is never (with the one exception of the takeover of <a href="https://www.smartkarma.com/entities/asatsu-dk-inc" target="_blank" data-smartkarma-citation="entities:8715:1" rel="noopener">Asatsu Dk Inc (9747 JP)</a> a few years ago) any tally of what the non-operating assets are worth to create an Adjusted Enterprise Value. 
This time is no different. 
This is a big fat piece of land in central Tokyo, and a fair number of unique, quite unreplaceable assets and businesses which should command a moat. And earnings have been penalized for years by a total lack of effective maintenance and stewardship by management. 
Oasis proposed buying the company at ¥1300/share in January but said the stock was worth well over ¥2000/share in its public <a href="https://static1.squarespace.com/static/5dd62b05f226644911c6d4e1/t/5efabd9b2d98f71482b79156/1593490878125/OASIS+-+A+Better+Tokyo+Dome+Presentation.pdf" target="_blank" rel="noopener">presentation</a> at the same time. Mitsui Fudosan - a professional strategic owner of prime property assets - bid ¥1200/share earlier this month before being asked to bid ¥1350/share. They bid ¥1300/share.
I am not sure the conversation ends there.
My analysis continues below.

Friday morning, the Nikkei said there was a deal in the offing where Mitsui Fudosan would bid for Tokyo Dome Corp (9681 JP).  As someone concerned with the governance weakness shown too many times in Japanese takeover situations, I am almost automatically disappointed to see such headlines. It leads me to expect that later the same day I will be mumbling words at my monitor that I should not say aloud. 
I did Friday.
My constant question is HOW can independent directors of companies with unique and valuable assets deign to sell them at such inexpensive prices? Often those unique and valuable assets are uniquely valuable items such as cash, portfolios of listed securities, and land and property assets with an easily external valuation. 
Sometimes cash and securities get tossed into a DCF as being assets which need to be discounted 9-11% a year on their ability to throw off cash, never mind the fact that the equity holdings are purchased at cash flow yields of 2-3% and bonds are bought with yields of 0-1%. Real estate holdings are usually purchased at yields of 4-6%. So automatically, anything of any real value and inherently low cash-flow yield gets marked down for the friendly buyer. Extra cash is almost never dividended out, and there is never (with the one exception of the takeover of Asatsu Dk Inc (9747 JP) a few years ago) any tally of what the non-operating assets are worth to create an Adjusted Enterprise Value. 
This time is no different. 
This is a big fat piece of land in central Tokyo, and a fair number of unique, quite unreplaceable assets and businesses which should command a moat. And earnings have been penalized for years by a total lack of effective maintenance and stewardship by management. 
Oasis proposed buying the company at ¥1300/share in January but said the stock was worth well over ¥2000/share in its public presentation at the same time. Mitsui Fudosan - a professional strategic owner of prime property assets - bid ¥1200/share earlier this month before being asked to bid ¥1350/share. They bid ¥1300/share.
I am not sure the conversation ends there.
My analysis continues below.

Tokyo Dome Sells Itself For the Wrong Price

David Blennerhassett

Last Week in Event SPACE: Tokyo Dome, ESR/Sabana, NTT Docomo, Evergrande, LG Corp, China Resources

The Nikkei Asia <a href="https://asia.nikkei.com/Business/Business-deals/1bn-bid-for-Tokyo-Dome-planned-by-developer-Mitsui-Fudosan" target="_blank" rel="noopener">reported</a> this morning (Japanese article link <a href="https://www.nikkei.com/article/DGXMZO66704090X21C20A1MM8000" target="_blank" rel="noopener">here</a>) that <a href="https://www.smartkarma.com/entities/mitsui-fudosan-co-ltd" target="_blank" data-smartkarma-citation="entities:565:1" rel="noopener">Mitsui Fudosan (8801 JP)</a> intended to partner with someone to launch a Tender Offer to take private <a href="https://www.smartkarma.com/entities/tokyo-dome-corp" target="_blank" data-smartkarma-citation="entities:6421:1" rel="noopener">Tokyo Dome Corp (9681 JP)</a>, spending "more than ¥100bn" (vs the ¥85.9bn of yesterday's close) based on the idea that there would be a premium to market price. The Tender Offer could start before 2020 ends.The bigger story here, of course, is that hedge fund Oasis Management has been on the case, urging Tokyo Dome management to do more to improve value for shareholders. Oasis said earlier this month they had been trying to engage with Tokyo Dome since 2018. They went over 5% in December 2019 and according to filings lifted their stake to 9.71% in January 2020. Covid-19 later hit Japan and as a result, the number of events and therefore visitor count at the various features and venues within Tokyo Dome have slowed, and the company is on its back foot. Early this year, Oasis set up a website with a fair bit of material for their case at <a href="https://www.abettertokyodome.com/" target="_blank" rel="noopener">abettertokyodome.com</a>. There main presentation is linked <a href="https://static1.squarespace.com/static/5dd62b05f226644911c6d4e1/t/5efabd9b2d98f71482b79156/1593490878125/OASIS+-+A+Better+Tokyo+Dome+Presentation.pdf" target="_blank" rel="noopener">here</a>. The claims are clear, and frankly, anyone who has been to Tokyo Dome recently will know exactly what Oasis is pointing at in terms of efforts which could make Tokyo Dome a better place to visit and a better company. Among the proposals by Oasis, there are substantially improved digital signage to improve ad revenue, a naming rights agreement like seen at other major Japan venues which could bring in ¥500mm a year or more, overhauled technology to match other world-class venues, substantially improved F&amp;B strategy, etc.  The deck was really an informative read when presented in January of this year and the opportunity seemed clear to me. The onset of covid-19 was a highly unfortunate development in the timeline, and this has disrupted what might have been a much more lively activist discussion. As it is, in October, Oasis called for a shareholder meeting for Tokyo Dome, asking to replace three directors including President Tsutomu Nagaoka. On 10 November, Tokyo Dome held a press conference which saw some floundering, and Oasis <a href="https://www.businesswire.com/news/home/20201111005501/en/Oasis-Key-Messages-for-Tokyo-Dome-Shareholders-Regarding-the-EGM-on-December-17-2020" target="_blank" rel="noopener">responded</a> the day after. The shareholder meeting is now set for 17 December. It is somehow not surprising that Corporate Japan is circling the wagons. Tokyo Dome is indicated limit up at ¥1047 now. The past 15+ years looks like the below.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/563/original/Screenshot%202020-11-27%20at%2010.27.27%20AM.png?1606444069" class="editor-image img-responsive" data-smartkarma-image-id="174563"></figure></section>As a reminder, the stock traded at ¥5000+ in the 1990s.The companies (<a href="https://www.mitsuifudosan.co.jp/corporate/ir/library/news/2020/pdf/news_201127.pdf" target="_blank" rel="noopener">Mitsui Fudosan</a>, <a href="https://contents.xj-storage.jp/xcontents/AS01950/1667e514/ffcc/4644/b6a6/6313ea0899ad/140120201127428865.pdf" target="_blank" rel="noopener">Tokyo Dome</a>) have both responded to the article first thing this morning saying that they will be holding board meetings to discuss this situation later today and will announce anything which needs to be announced as soon as possible thereafter.The old saying goes "Where there is smoke there is fire" but the question is whether it will be hot enough. As a pure tear-down project, the real estate and history of location/brand would likely be worth well more than ¥100bn. Word in the local press is that Mitsui's partner will be Yomiuri Shinbun, which is taking subsidiary/affiliate <a href="https://www.smartkarma.com/entities/yomiuri-land-co-ltd" target="_blank" data-smartkarma-citation="entities:12813:1" rel="noopener">Yomiuri Land (9671 JP)</a> private as discussed in <a href="https://www.smartkarma.com/insights/yomiuri-land-9671-takeover-probably-the-wrong-price-but-whaddya-gonna-do" target="_blank" data-smartkarma-citation="insights:45025" rel="noopener">Yomiuri Land (9671) Takeover - Probably The Wrong Price But Whaddya Gonna Do?</a>. Yomiuri Land is a cross-holder in Tokyo Dome.I expect I will be writing another episode of <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> shortly. It is depressing to me that one needs to write it so often, but needs, I expect, must.More on the situation and the potential valuation methodology/constraints below the fold.

The Nikkei Asia reported this morning (Japanese article link here) that Mitsui Fudosan (8801 JP) intended to partner with someone to launch a Tender Offer to take private Tokyo Dome Corp (9681 JP), spending "more than ¥100bn" (vs the ¥85.9bn of yesterday's close) based on the idea that there would be a premium to market price. The Tender Offer could start before 2020 ends.The bigger story here, of course, is that hedge fund Oasis Management has been on the case, urging Tokyo Dome management to do more to improve value for shareholders. Oasis said earlier this month they had been trying to engage with Tokyo Dome since 2018. They went over 5% in December 2019 and according to filings lifted their stake to 9.71% in January 2020. Covid-19 later hit Japan and as a result, the number of events and therefore visitor count at the various features and venues within Tokyo Dome have slowed, and the company is on its back foot. Early this year, Oasis set up a website with a fair bit of material for their case at abettertokyodome.com. There main presentation is linked here. The claims are clear, and frankly, anyone who has been to Tokyo Dome recently will know exactly what Oasis is pointing at in terms of efforts which could make Tokyo Dome a better place to visit and a better company. Among the proposals by Oasis, there are substantially improved digital signage to improve ad revenue, a naming rights agreement like seen at other major Japan venues which could bring in ¥500mm a year or more, overhauled technology to match other world-class venues, substantially improved F&amp;B strategy, etc.  The deck was really an informative read when presented in January of this year and the opportunity seemed clear to me. The onset of covid-19 was a highly unfortunate development in the timeline, and this has disrupted what might have been a much more lively activist discussion. As it is, in October, Oasis called for a shareholder meeting for Tokyo Dome, asking to replace three directors including President Tsutomu Nagaoka. On 10 November, Tokyo Dome held a press conference which saw some floundering, and Oasis responded the day after. The shareholder meeting is now set for 17 December. It is somehow not surprising that Corporate Japan is circling the wagons. Tokyo Dome is indicated limit up at ¥1047 now. The past 15+ years looks like the below.As a reminder, the stock traded at ¥5000+ in the 1990s.The companies (Mitsui Fudosan, Tokyo Dome) have both responded to the article first thing this morning saying that they will be holding board meetings to discuss this situation later today and will announce anything which needs to be announced as soon as possible thereafter.The old saying goes "Where there is smoke there is fire" but the question is whether it will be hot enough. As a pure tear-down project, the real estate and history of location/brand would likely be worth well more than ¥100bn. Word in the local press is that Mitsui's partner will be Yomiuri Shinbun, which is taking subsidiary/affiliate Yomiuri Land (9671 JP) private as discussed in Yomiuri Land (9671) Takeover - Probably The Wrong Price But Whaddya Gonna Do?. Yomiuri Land is a cross-holder in Tokyo Dome.I expect I will be writing another episode of Japan Needs More Cowbell shortly. It is depressing to me that one needs to write it so often, but needs, I expect, must.More on the situation and the potential valuation methodology/constraints below the fold.

Mitsui Fudosan Tender For Tokyo Dome (9681) Mooted

Japan

Mitsui Fudosan Co., Ltd. provides overall real estate services such as leasing, subdivision, construction, sales, and maintenance of office buildings and residential houses.  The Company also manufactures building materials, operates commercial facilities including hotels and golf places, and provides financial services such as securitization of real estate properties.

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Mitsui Fudosan (8801 JP)

Oasis Agrees To Tender Tokyo Dome (9681) - This Changes Things

Mitsui Fudosan announced Oasis Management - holder of nearly 10% of shares out (as of the last large shareholder filing) - has indicated an intent...

Travis Lundy

ISS Takes Umbrage with Tokyo Dome, Recommends Booting the CEO from the Board

ISS has sided with Oasis in its fight to remove somewhat non-independent and "over-ripe" nominally independent directors at this month's EGM. This...

Travis Lundy

Tokyo Dome Sells Itself For the Wrong Price

Tokyo Dome is the subject of an activist effort to improve shareholder value for everyone with a stated target from improvements of 140+%. So Tokyo...

Travis Lundy

Last Week in Event SPACE: Tokyo Dome, ESR/Sabana, NTT Docomo, Evergrande, LG Corp, China Resources

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

Mitsui Fudosan Tender For Tokyo Dome (9681) Mooted

It appears Mitsui Fudosan and Yomiuri Land will be bidding for Tokyo Dome in order to fend off the activism of 9.7% holder Oasis. That's a pity....

Travis Lundy

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