Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Equity Bottom-Up

The story of the ownership unwinding of McDonald's Japan&nbsp;has been a very long time coming.&nbsp;McDonald's Japan was started in 1971 by Japanese entrepreneur Den Fujita (who was the&nbsp;idol of Softbank head Matsuyoshi Son&nbsp;when he was young, because of Fujita's vision of bringing something new to Japan on a grand scale). He had a particular vision for McDonald's Japan which was both clear and largely antithetical to the US headquarters' vision for the business. And it continued that way, for decades. But it worked.&nbsp;Fujita started with his first and second stores in July 1971, got to 100 by 1976, 500 by 1985, 1000 stores by 1993, 3000 stores by 1999. Den Fujita retired in April 2003 at the age of 77, and a year later passed away, by which time,&nbsp;McDonald's Japan had grown to 3774 stores, a market share of&nbsp;60+% of the Japan hamburger market, with countless product developments which were copied (in style) by markets elsewhere around the world, and the whole fast food indeed high-turnover retail industry in Japan. Den Fujita had written a half dozen business books, and his business aphorisms were oft-quoted. And he was rich.He was an astute businessman and understood both control and taxation, and he had something of a reputation for it. When he passed away the following year, there was a hue and cry in the Japanese media for his family to pay inheritance taxes (which are quite steep in Japan once you get past a level of several million dollars, though there are deductions). The family was obliged to sell the family's stake to pay the taxes, and in July 2005, sold a 24.98% block in the company to&nbsp;Longreach Capital - a&nbsp;fund run by former&nbsp;UBS Securities head Mark Chiba (more on that below).&nbsp;From that point onward, the question of the eventual disposition of the North American parent's ownership was in question.&nbsp;Today, 10 plus years later, we finally got <a href="http://www.bloomberg.com/news/articles/2015-12-22/mcdonald-s-japan-plunges-after-report-u-s-parent-may-sell-stake" target="_blank">news</a>&nbsp;(BBG) that the McDonald's parent company, which owns 49.9%, is looking to sell down 15-33% of the company&nbsp;with first bids to determine priority negotiating rights expected January.&nbsp;Shares fell 7+% today (Nikkei Asia Review <a href="http://asia.nikkei.com/Business/Deals/McDonald-s-eyes-sale-of-partial-stake-in-troubled-Japanese-arm" target="_blank">article</a>).We finally have a restructuring event&nbsp;but don't buy this dip yet.More below the fold...&nbsp;

The story of the ownership unwinding of McDonald's Japan&nbsp;has been a very long time coming.&nbsp;McDonald's Japan was started in 1971 by Japanese entrepreneur Den Fujita (who was the&nbsp;idol of Softbank head Matsuyoshi Son&nbsp;when he was young, because of Fujita's vision of bringing something new to Japan on a grand scale). He had a particular vision for McDonald's Japan which was both clear and largely antithetical to the US headquarters' vision for the business. And it continued that way, for decades. But it worked.&nbsp;Fujita started with his first and second stores in July 1971, got to 100 by 1976, 500 by 1985, 1000 stores by 1993, 3000 stores by 1999. Den Fujita retired in April 2003 at the age of 77, and a year later passed away, by which time,&nbsp;McDonald's Japan had grown to 3774 stores, a market share of&nbsp;60+% of the Japan hamburger market, with countless product developments which were copied (in style) by markets elsewhere around the world, and the whole fast food indeed high-turnover retail industry in Japan. Den Fujita had written a half dozen business books, and his business aphorisms were oft-quoted. And he was rich.He was an astute businessman and understood both control and taxation, and he had something of a reputation for it. When he passed away the following year, there was a hue and cry in the Japanese media for his family to pay inheritance taxes (which are quite steep in Japan once you get past a level of several million dollars, though there are deductions). The family was obliged to sell the family's stake to pay the taxes, and in July 2005, sold a 24.98% block in the company to&nbsp;Longreach Capital - a&nbsp;fund run by former&nbsp;UBS Securities head Mark Chiba (more on that below).&nbsp;From that point onward, the question of the eventual disposition of the North American parent's ownership was in question.&nbsp;Today, 10 plus years later, we finally got news&nbsp;(BBG) that the McDonald's parent company, which owns 49.9%, is looking to sell down 15-33% of the company&nbsp;with first bids to determine priority negotiating rights expected January.&nbsp;Shares fell 7+% today (Nikkei Asia Review article).We finally have a restructuring event&nbsp;but don't buy this dip yet.More below the fold...&nbsp;

McDonald's Japan: Restructuring Event Coming But Don't Buy This Dip

Event-Driven

In the midst of last week's earnings reports by Japanese retailers, last Thursday's Nikkei had a couple of articles on convenience stores.One of them said "UNY and FamilyMart to Merge Next Year" noting that the two companies had finally reached an agreement and had resolved key business plans and the merger ratio by last Wednesday and went on to say "A formal agreement and announcement will likely come as early as next week." That's this week. There were other articles which also hinted at or confirmed resolution, and a further article over the weekend in a paper local to CircleK and Sunkus headquarters which suggested more detail on the CVS business.&nbsp;For investors looking&nbsp;at the merger ratio, it is now Second To Last Call on the 'Love Call Underdog'. &nbsp;There's a trade or two to do here (don't hesitate to call Lee - he's all over it).More below the fold...

In the midst of last week's earnings reports by Japanese retailers, last Thursday's Nikkei had a couple of articles on convenience stores.One of them said "UNY and FamilyMart to Merge Next Year" noting that the two companies had finally reached an agreement and had resolved key business plans and the merger ratio by last Wednesday and went on to say "A formal agreement and announcement will likely come as early as next week." That's this week. There were other articles which also hinted at or confirmed resolution, and a further article over the weekend in a paper local to CircleK and Sunkus headquarters which suggested more detail on the CVS business.&nbsp;For investors looking&nbsp;at the merger ratio, it is now Second To Last Call on the 'Love Call Underdog'. &nbsp;There's a trade or two to do here (don't hesitate to call Lee - he's all over it).More below the fold...

Second To Last Call on the "Love Call Underdog"?

Japan

Seven & i Holdings Co., Ltd. is a holding company which was established through the merger of Ito-Yokado Co., Seven Eleven Japan Co., and Denny's Japan. The Company plans, manages, and operates mainly convenience stores, supermarkets, and department stores.

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Seven & I Holdings (3382 JP)

McDonald's Japan: Restructuring Event Coming But Don't Buy This Dip

The story of the ownership unwinding of McDonald's Japan has been a very long time coming. McDonald's Japan was started in 1971 by Japanese...

Travis Lundy

Second To Last Call on the "Love Call Underdog"?

In the midst of last week's earnings reports by Japanese retailers, last Thursday's Nikkei had a couple of articles on convenience stores.One of...

Travis Lundy

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)