Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>The <a href="https://www.smartkarma.com/entities/katakura-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:2007:1" rel="noopener">Katakura Industries (3001 JP)</a> MBO was launched in early November at a price which was too light but activist/long-time holder Oasis agreed to sell (with an up-and-out exception).  </li>
<li>Another would-be activist bought Oasis' shares at a premium to the Tender, encouraging hopes of a bump in the Tender Offer Price. </li>
<li>Yesterday, the bidder dashed those hopes, and today the shares fell, but not to the TOB Price. This has longer-term designs.</li>
</ul>


The Katakura Industries (3001 JP) MBO was launched in early November at a price which was too light but activist/long-time holder Oasis agreed to sell (with an up-and-out exception).  
Another would-be activist bought Oasis' shares at a premium to the Tender, encouraging hopes of a bump in the Tender Offer Price. 
Yesterday, the bidder dashed those hopes, and today the shares fell, but not to the TOB Price. This has longer-term designs.


Katakura Tender Offer Bump Now Looks Off. It Is Take-The-Loss or Hold-On-For-Later

<ul>
<li>UK-Based Japanese share activist AVI said publicly yesterday that the price Mitsui OSK announced to take out minorities in <a href="https://www.smartkarma.com/entities/daibiru-corp" target="_blank" data-smartkarma-citation="entities:19065:1" rel="noopener">Daibiru Corp (8806 JP)</a> should be ¥3,000/share not ¥2,200/share.</li>
<li>Today AVI launched a website at <a href="https://www.assetvalueinvestors.com/stopexploitingdaibiru/" target="_blank" rel="noopener">https://www.assetvalueinvestors.com/stopexploitingdaibiru/</a> in which they make their <a href="https://www.assetvalueinvestors.com/content/uploads/2021/12/Daibiru-Public-Presentation_202112_ENG_vF.pdf" target="_blank" rel="noopener">case</a>. </li>
<li>They've got a point. And it is definitely a good point. But the shareholder structure means this is a short-gamma situation for bumpitrageurs.</li>
</ul>


UK-Based Japanese share activist AVI said publicly yesterday that the price Mitsui OSK announced to take out minorities in Daibiru Corp (8806 JP) should be ¥3,000/share not ¥2,200/share.
Today AVI launched a website at https://www.assetvalueinvestors.com/stopexploitingdaibiru/ in which they make their case. 
They've got a point. And it is definitely a good point. But the shareholder structure means this is a short-gamma situation for bumpitrageurs.


Mitsui OSK TOB for Daibiru (8806) Gets Loose from Its Mooring

<p>In early February 2021, the CEO of <a href="https://www.smartkarma.com/entities/sakai-ovex-co-ltd" target="_blank" data-smartkarma-citation="entities:20002:1" rel="noopener">Sakai Ovex (3408 JP)</a>, who owned very few shares, and an activist investor decided to launch an MBO for the company at ¥2,850/share. </p><p>The stock had been trading cheap, and the price was "high" but the price was wrong. It needed to be 40% higher - at a minimum - in my opinion. I wrote a detailed breakdown of why I thought so in <a href="https://www.smartkarma.com/insights/sakai-ovex-mbo-wrong-price-and-the-bidder-knows-it" target="_blank" data-smartkarma-citation="insights:47961" rel="noopener"><strong>Sakai Ovex MBO - Wrong Price (And the Bidder Knows It)</strong></a>. The management forecasts had been low-balled and I called that out, and the equity affiliate earnings somewhat ignored. Get rid of the financial assets and the Offer Price was at negative enterprise value.  </p><p>My conclusions on 9 February were as follows:</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/220/719/original/Screenshot+2021-07-27+at+7.01.29+PM.png?1627383716" class="editor-image img-responsive" data-smartkarma-image-id="220719"></figure><p></p></section><p>Not long after that, the bidders offered a very weak bump to ¥3,000/share, discussed in <strong><a href="https://www.smartkarma.com/insights/savai-ovex-mbo-a-very-weak-bump" target="_blank" data-smartkarma-citation="insights:48933" rel="noopener">Savai Ovex MBO - A Very Weak Bump</a></strong>. This was not enough. The shares traded above terms and revised terms, only falling below when the Tender Offer went ex-. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/220/688/original/Sakai+Ovex+THEN.png?1627372930" class="editor-image img-responsive" data-smartkarma-image-id="220688"></figure><p></p></section><p>In the end, the bid was not successful. They ended up missing by 3% of the shares. BUT.... in the process, they gained an activist in Murakami-san, who did indeed pop in to own 6.9%, through City Index Eleventh, discussed in <strong><a href="https://www.smartkarma.com/insights/sakai-ovex-tender-offer-fails-but-the-stock-gains-an-activist" target="_blank" data-smartkarma-citation="insights:49739" rel="noopener">Sakai Ovex Tender Offer Fails But The Stock Gains an Activist</a></strong>after the Tender failed. CIE later revised their position to 7.93% which meant they were the fulcrum investor to get this deal over the line the next time, and now they own 8.33% according to today's document.</p><h3>Since Then...</h3><p>The shares have traded at or around ¥3,000/share ± ¥100/share for the past three months, trading in lower-than-pre-announcement volumes.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/220/689/original/Screenshot+2021-07-27+at+4.05.48+PM.png?1627373210" class="editor-image img-responsive" data-smartkarma-image-id="220689"></figure></section><p>Earnings were decent when reported in May. And the forecast for the year to March 2022 turned out to be substantially higher (revenues nearly 10% higher than the management forecast included in the Tender Offer documentation, and OP 35% higher).</p><p>And today we have new news.</p><p>The Bidders are back. And now City Index Eleventh is joining them. It pays to be the fulcrum investor. </p><p>And now they are bidding ¥3,810. Which is still cheap. </p><p>Much more below the fold. </p>

In early February 2021, the CEO of Sakai Ovex (3408 JP), who owned very few shares, and an activist investor decided to launch an MBO for the company at ¥2,850/share. The stock had been trading cheap, and the price was "high" but the price was wrong. It needed to be 40% higher - at a minimum - in my opinion. I wrote a detailed breakdown of why I thought so in Sakai Ovex MBO - Wrong Price (And the Bidder Knows It). The management forecasts had been low-balled and I called that out, and the equity affiliate earnings somewhat ignored. Get rid of the financial assets and the Offer Price was at negative enterprise value.  My conclusions on 9 February were as follows:Not long after that, the bidders offered a very weak bump to ¥3,000/share, discussed in Savai Ovex MBO - A Very Weak Bump. This was not enough. The shares traded above terms and revised terms, only falling below when the Tender Offer went ex-. In the end, the bid was not successful. They ended up missing by 3% of the shares. BUT.... in the process, they gained an activist in Murakami-san, who did indeed pop in to own 6.9%, through City Index Eleventh, discussed in Sakai Ovex Tender Offer Fails But The Stock Gains an Activistafter the Tender failed. CIE later revised their position to 7.93% which meant they were the fulcrum investor to get this deal over the line the next time, and now they own 8.33% according to today's document.Since Then...The shares have traded at or around ¥3,000/share ± ¥100/share for the past three months, trading in lower-than-pre-announcement volumes.Earnings were decent when reported in May. And the forecast for the year to March 2022 turned out to be substantially higher (revenues nearly 10% higher than the management forecast included in the Tender Offer documentation, and OP 35% higher).And today we have new news.The Bidders are back. And now City Index Eleventh is joining them. It pays to be the fulcrum investor. And now they are bidding ¥3,810. Which is still cheap. Much more below the fold. 

Sakai Ovex MBO Reloaded - Up 27% from Last Weak Bump But Still Cheap

<p>On Thursday 25 March after the close, it was <a href="http://www.sakaiovex.co.jp/ir/3138_sakai.pdf" target="_blank" rel="noopener">announced</a> that the MBO/Takeover/Tender Offer for <a href="https://www.smartkarma.com/entities/sakai-ovex-co-ltd" target="_blank" data-smartkarma-citation="entities:20002:1" rel="noopener">Sakai Ovex (3408 JP)</a> which had been bumped in price from ¥2850 to ¥3000 had, in fact failed. </p><p>The company announced that it was reinstating the March-end dividend that it had previously</p><p>From the beginning, the takeover was too cheap. I discussed the original bid in <a href="https://www.smartkarma.com/insights/sakai-ovex-mbo-wrong-price-and-the-bidder-knows-it" target="_blank" data-smartkarma-citation="insights:47961" rel="noopener">Sakai Ovex MBO - Wrong Price (And the Bidder Knows It)</a>. The shares traded through terms almost immediately, then higher. Then it was bumped +5.26%, which I thought was weak (discussed in <a href="https://www.smartkarma.com/insights/savai-ovex-mbo-a-very-weak-bump" target="_blank" data-smartkarma-citation="insights:48933" rel="noopener">Savai Ovex MBO - A Very Weak Bump</a>) but shares traded down to terms and just below as the Tender Offer was ending. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/197/733/original/Screenshot+2021-03-28+at+9.01.40+PM.png?1616937800" class="editor-image img-responsive" data-smartkarma-image-id="197733"></figure></section><p>The Tender Offer ended up getting ~63+% of the shares out, which was less than the 66.67% necessary to complete successfully. </p><p>That the tender offer got to that level and was not extended on a technicality is somewhat telling.</p><p>That 37% of shareholders did NOT tender is quite interesting. </p><p>Then on Friday, after the stock dipped hard and bounced back decently, we got new news of an activist having bought 6.2% of the shares out. </p><p>This changes things. </p><p>More discussion below.</p>

On Thursday 25 March after the close, it was announced that the MBO/Takeover/Tender Offer for Sakai Ovex (3408 JP) which had been bumped in price from ¥2850 to ¥3000 had, in fact failed. The company announced that it was reinstating the March-end dividend that it had previouslyFrom the beginning, the takeover was too cheap. I discussed the original bid in Sakai Ovex MBO - Wrong Price (And the Bidder Knows It). The shares traded through terms almost immediately, then higher. Then it was bumped +5.26%, which I thought was weak (discussed in Savai Ovex MBO - A Very Weak Bump) but shares traded down to terms and just below as the Tender Offer was ending. The Tender Offer ended up getting ~63+% of the shares out, which was less than the 66.67% necessary to complete successfully. That the tender offer got to that level and was not extended on a technicality is somewhat telling.That 37% of shareholders did NOT tender is quite interesting. Then on Friday, after the stock dipped hard and bounced back decently, we got new news of an activist having bought 6.2% of the shares out. This changes things. More discussion below.

Sakai Ovex Tender Offer Fails But The Stock Gains an Activist

<p>Almost exactly a month ago, an MBO was launched on <a href="https://www.smartkarma.com/entities/sakai-ovex-co-ltd" target="_blank" data-smartkarma-citation="entities:20002:1" rel="noopener">Sakai Ovex (3408 JP)</a> at ¥2850/share.</p>
<p>It was launched at an all-time high, but it was the wrong price. And one of the well-known value players in Japan <em>knew</em> it was the wrong price, because he was the bidder as was discussed in <a href="https://www.smartkarma.com/insights/sakai-ovex-mbo-wrong-price-and-the-bidder-knows-it" target="_blank" data-smartkarma-citation="insights:47961" rel="noopener">Sakai Ovex MBO - Wrong Price (And the Bidder Knows It)</a>.</p>
<p>I suggested a bump might be necessary.</p>
<p>The shares immediately jumped through terms, and shares have traded through terms every day since then with both VWAP and closing price above the ¥2850/share Tender Offer Price every day since announcement. 40% of shares out and 50% of float has traded, but nobody has announced a Large Shareholder Filing on the buy side since the original announcement. </p>
<section class="figure">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/192/793/original/Screenshot+2021-03-08+at+4.53.54+PM.png?1615193999" class="editor-image img-responsive" data-smartkarma-image-id="192793"></figure>
</section>
<p>Today brought new news.</p>
<h2>The NEW News</h2>
<p>Today, the Bidder for Sakai Ovex <a href="https://disclosure.edinet-fsa.go.jp/E01EW/BLMainController.jsp?uji.verb=W00Z1020initialize&amp;uji.bean=ek.bean.EKW00Z1020Bean&amp;TID=W00Z1020&amp;PID=W1E63041&amp;SESSIONKEY=1615194046039&amp;lgKbn=2&amp;dflg=0&amp;iflg=&amp;row=100&amp;idx=0&amp;str=&amp;kbn=1&amp;flg=&amp;syoruiKanriNo=S100KXCF" target="_blank" rel="noopener">announced</a> they had raised their bid from ¥2850/share to ¥3000/share, for a bump of 5.26%. </p>
<p>A little arithmetic will tell you this is STILL the wrong price. </p>
<p>More below the fold. </p>

Almost exactly a month ago, an MBO was launched on Sakai Ovex (3408 JP) at ¥2850/share.
It was launched at an all-time high, but it was the wrong price. And one of the well-known value players in Japan knew it was the wrong price, because he was the bidder as was discussed in Sakai Ovex MBO - Wrong Price (And the Bidder Knows It).
I suggested a bump might be necessary.
The shares immediately jumped through terms, and shares have traded through terms every day since then with both VWAP and closing price above the ¥2850/share Tender Offer Price every day since announcement. 40% of shares out and 50% of float has traded, but nobody has announced a Large Shareholder Filing on the buy side since the original announcement. 



Today brought new news.
The NEW News
Today, the Bidder for Sakai Ovex announced they had raised their bid from ¥2850/share to ¥3000/share, for a bump of 5.26%. 
A little arithmetic will tell you this is STILL the wrong price. 
More below the fold. 

Japan

SAKAI OVEX CO., LTD. processes synthetic fabrics, focusing on the dyeing process.  The Company also designs, manufactures, and sells apparel and textile products on Original Equipment Manufacturer(OEM) basis.  Sakai Ovex also plans and produces factory automation system.

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Sakai Ovex (3408 JP)

Katakura Tender Offer Bump Now Looks Off. It Is Take-The-Loss or Hold-On-For-Later

The Katakura MBO looks like it will not get a bump to its too-light price despite a large holder having bought shares 9.3% through terms. That...

Travis Lundy

Mitsui OSK TOB for Daibiru (8806) Gets Loose from Its Mooring

Mitsui OSK's Tender Offer for Daibiru was low but supported by a substantial cross-held position - likely enough to get this past 2/3 IF the shares...

Travis Lundy

Sakai Ovex MBO Reloaded - Up 27% from Last Weak Bump But Still Cheap

The Bidders for Sakai Ovex are back, this time bidding 27% more than the previous bumped price from March, and 36% more than the original Feb MBO...

Travis Lundy

Sakai Ovex Tender Offer Fails But The Stock Gains an Activist

Sakai Ovex MBO came out at the wrong price and the bump was too small. So now it's a failed tender, but overhang may not be big, and now there's an...

Travis Lundy

Savai Ovex MBO - A Very Weak Bump

The Sakai Ovex (3408) MBO gets a 5% bump. That's a little bump. Not a big bump. It needs a big bump. This is still WAY cheap. The right bump is...

Travis Lundy

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