Most Read

There are 18 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 28 December. We had forecast all the index changes.
Estimated one-way turnover is 57.7% resulting in a one-way trade of INR 21.75bn (US$261m). 8 stocks have over 1x ADV to trade; 21 stocks have atleast 0.5x ADV to trade.
The adds have continued to outperform the deletes and the index and there could be further outperformance heading into year-end and buying from passive trackers.

Index Rebalance & ETF Flow Recap: NKY, TW Div+, ASX200, NZX50, Mom30, Top10EW, MVW, Rakuten Bank

There were a lot of rebalance implementations in China on Friday, plus a few upcoming index changes that were announced during the week.
There are a lot of implementations this week, with KOSPI 200 and KOSDAQ 150 on Thursday and then others across a bunch of countries on Friday.
There were big inflows to Tracker Fund of Hong Kong (2800 HK) during the week taking units outstanding to a new high. ETF inflows continue even as the market drops.

HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)

Tongcheng Travel Holdings (780 HK) is expected to replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the March review.
Constituent changes and capping changes will result in a one-way turnover of 2.32% and that will result in a round-trip trade of US$628m.
Short interest on Tongcheng Travel Holdings (780 HK) is near its lows while there has been some recent short covering in GDS Holdings (9698 HK).

KOSDAQ150 Index Rebalance Preview: Posco DX Listing Transfer

The KRX has preliminarily approved Posco DX (022100 KS)‘s listing transfer from the KOSDAQ Market to the KOSPI Market.
Posco DX (022100 KS) has announced that its stock will start trading on the KOSPI Market from the open on 2 January.
We expect Temc (425040 KS) to replace Posco DX (022100 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 28 December.

MVIS Australia A-REITs Index Rebalance: ASKing for a Reversal

There are no constituent changes for the Vaneck Vectors Australian Property ETF (MVA AU) in December but there are float and capping changes.
Abacus Storage King (ASK AU) is the biggest sell and is due to a drop in float, a reversal of the excessively high float assigned at the September rebalance.
Estimated one-way turnover is 4.5% and will result in a one-way trade of A$26m. There are a few stocks with over 1x ADV to trade.

MarketVector Vietnam Local Index Rebalance: One Add & Other Changes

CEO Group JSC (CEO VN) will be added to the MarketVector Vietnam Local Index at the close on 15 December.
Estimated one-way turnover is 5.24% and that results in a one-way trade of US$30m. There are a couple of stocks with more than 1x ADV to buy from passives.
The largest passive inflows will be in Vingroup Jsc (VIC VN), Vietnam Dairy Products JSC (VNM VN), CEO Group JSC (CEO VN) and Vinhomes (VHM VN).

The Psychology of Money: A Book Review

In this insight, I review a fantastic book written by Morgan Housel called The Psychology of Money (published in 2020).
“The most important part of every plan is planning on your plan not going according to the plan.”
Three parts of the book were particularly outstanding including letter to author’s son, the story of Rick Guerin, and how mice helped the Russians to defeat the mighty German army.

MBK Partners Raises Tender Offer Price of Hankook and Co to 24,000 Won

After market close on 15 December, MBK Partners raised the tender offer price of Hankook & Company by 20% to 24,000 won, which is now 51.4% higher than current price.
With Cho Yang-Rae’s recent acquisition of shares, Cho Hyun-beom, Cho Yang-rae, and related parties now own about 45.6% of Hankook & Co, up from 42.9% previously.
MBK Partners has requested an official investigation by the FSS, claiming that Cho Yang-rae and HY have violated the Capital Markets Act by recently purchasing shares of Hankook & Co.

Japan Weekly | Advantest, Ibiden, Recruit, Infroneer, Glosel

By Mark Chadwick

Market Watch: Japanese equities made minor gains as US Fed indicated potential rate cuts in 2024. BOJ next week, but no changes anticipated
Major Movers: Outsourcing leaps on MBO; Advantest +15% as Semicon Japan gets underway; Ibiden beneficiary of improved tech sentiment
Activist Watch: New positions for Murakami in Glosel; Nippon Active Value watching Fuji Media more closely; fresh interest in Goodspeed, the car dealer

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Sigma Health, Vinda, Outsourcing, Allkem, Costa, Hollysys

I tally 46 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Four new deals discussed this week: Sigma Healthcare (SIG AU)‘s reverse takeover; Tanotos’ tilt for Vinda (3331 HK); and Tender offers for Shinko Electric (6967 JP) and Outsourcing (2427 JP).
Key updates took place on: Pact Group Holdings (PGH AU), Allkem (AKE AU), Costa Group Holdings (CGC AU), T&K Toka Co Ltd (4636 JP) and Hollysys Automation Technologies (HOLI US).

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Dec 16

Most Read: JD.com Inc (ADR), Hankook & Company, Bharat Heavy Electricals, Shinko Electric Industries, Vinda International, Posco DX, Sands China, Doosan Robotics , Samsung C&T and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade
Elder Brother Cho Hyun-Sik Joins Hands With MBK Partners to Tender Offer Hankook & Co. Shares
NIFTY200 Momentum30 Index Rebalance: 18 Changes a Side, 58% Turnover, Momentum Intact
Shinko Electric (6967) Takeover: Initial Break/Gap Risk Analysis
Vinda (3331 HK): Tanoto’s Firm Offer
KOSDAQ150 Index Rebalance Preview: Posco DX Listing Transfer
StubWorld: LVS To Up Stake In Sands. Melco Back To Square One
Investigating Float Rate Issues of Ecopro Materials & Doosan Robotics for Global Index Feb Review
Whitebox Goes Activist on Samsung C&T
Vinda International (3331 HK): Pre-Conditional Voluntary Offer at HK$23.50

NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade

There were 6 inclusions and 6 exclusions for the Nasdaq-100 Stock Index (NDX INDEX) at the annual December reconstitution. Then another ad hoc change was added on top of that.
Impact on the inclusions ranges from 1-8 days of ADV to buy, while the impact on the deletions varies from 0.7-2.6 days of ADV to sell.
Apart from the constituent changes, there are expected to be inflows in Tesla Motors and Broadcom and outflows from Apple, Microsoft, Amazon.com and NVIDIA.

Elder Brother Cho Hyun-Sik Joins Hands With MBK Partners to Tender Offer Hankook & Co. Shares

Cho Hyun-Sik has joined hands with MBK Partners to make a tender offer for shares of Hankook & Co for a minimum of 20.35% and maximum of 27.32% stake.
The tender offer price is 20,000 won which is 18.9% higher than the closing price of 16,820 won on Monday.
Chairman Cho Hyun-Bum may try to find a strategic ally to launch his own tender offer of Hankook & Co shares at even higher tender offer price than 20,000 won.

NIFTY200 Momentum30 Index Rebalance: 18 Changes a Side, 58% Turnover, Momentum Intact

There are 18 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 28 December. We had forecast all the index changes.
Estimated one-way turnover is 57.7% resulting in a one-way trade of INR 21.75bn (US$261m). 8 stocks have over 1x ADV to trade; 21 stocks have atleast 0.5x ADV to trade.
The adds have continued to outperform the deletes and the index and there could be further outperformance heading into year-end and buying from passive trackers.

Shinko Electric (6967) Takeover: Initial Break/Gap Risk Analysis

The JIC Deal for Shinko Electric Industries (6967 JP) has been announced and is, as expected, trading wide.
There is FUD. There are Flows. Just like JSR (4185). Some of that FUD can be explained by “gap risk” on deal break…. or can it? We look at risks.
There’s more positioning risk than fundamental risk at this point. And the FUD and Flows have specific timing in this case which makes thing different than JSR. Worth thinking about.

Vinda (3331 HK): Tanoto’s Firm Offer

Back on the 27 April, personal hygiene play Vinda International (3331 HK) announced its controlling shareholder Essity (ESSITYB SS) would commence a strategic review of its 51.59% ownership.
That spurred, allegedly, a variety of suitors including Brazil’s Suzano, the world’s largest hardwood pulp producer, Bain Capital, CVC Capital, DCP Capital, and Indonesia’s Tanoto family.
And the Tanoto’s have now emerged with a HK$23.50 pre-conditional Offer. The key risk is PRC regulatory approval . Elsewhere, this is a done deal.

KOSDAQ150 Index Rebalance Preview: Posco DX Listing Transfer

The KRX has preliminarily approved Posco DX (022100 KS)‘s listing transfer from the KOSDAQ Market to the KOSPI Market.
Posco DX (022100 KS) has announced that its stock will start trading on the KOSPI Market from the open on 2 January.
We expect Temc (425040 KS) to replace Posco DX (022100 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 28 December.

StubWorld: LVS To Up Stake In Sands. Melco Back To Square One

Las Vegas Sands (LVS US) announced it will buy ~1% of Sands China (1928 HK). Melco International Development (200 HK) mean reverts after a roller coaster out/under-performance.
Preceding my comments on Las Vegas Sands and Melco are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Investigating Float Rate Issues of Ecopro Materials & Doosan Robotics for Global Index Feb Review

With recent surges in EcoPro Materials and Doosan Robotics, it’s crucial for their potential inclusion in the February Global Index review. No other names approach the threshold.
Depending on classification, Ecopro Materials may get a free-float rate from 15% to 20%, while Doosan Robotics may receive a rate from 20% to 30%.
With max free-float rates (20% and 30%), both meet Cutoffs. At minimum rates, Doosan Robotics needs over a 20% increase, while Ecopro Materials slightly exceeds Cutoffs.

Whitebox Goes Activist on Samsung C&T

On 14 December, it was reported that US based Whitebox Advisors has started an activist campaign on Samsung C&T (028260 KS).
Whitebox estimates that Samsung C&T’s stock price is about 68% undervalued compared to its NAV.
In addition to Whitebox, there are two other foreign investors including Palliser Capital and City of London Investment Management that have requested Samsung C&T to improve corporate governance.

Vinda International (3331 HK): Pre-Conditional Voluntary Offer at HK$23.50

Vinda International (3331 HK) has announced a pre-conditional voluntary offer from Sukanto Tanoto at HK$23.50 per scheme share, a 7.8% premium to the undisturbed price (26 April).
The pre-condition relates to China SAMR and Japan Fair Trade Commission approval. The offer is conditional on the offeror and concert parties representing more than 50% of voting rights.
Irrevocables ensure the satisfaction of the minimum acceptance condition but also rule out a competing proposal. The timing of China SAMR approval is the key risk.

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Dec 15

Most Read: Allkem Ltd, JD.com Inc (ADR), Toyota Motor, Shinko Electric Industries, Posco DX, Samsung C&T, Vinda International, yutori , Hunan Changyuan Lico and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Allkem/Livent (AKE AU | LTHM US) Merger Update: MUCH More Than Meets The Eye
JIC Deal For Shinko Electric Is LIGHT, and There’s Room To Complain, But Will Trade Wide
NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade
Toyota Cross-Shareholding – To Say a Whole Lot Is Left Would Be a US$26bn Understatement
Shinko Electric (6967) Takeover: Initial Break/Gap Risk Analysis
KOSDAQ150 Index Rebalance Preview: Posco DX Listing Transfer
Whitebox Goes Activist on Samsung C&T
Vinda (3331 HK): Tanoto’s Firm Offer
Zozo-Owned Yutori IPO This Month
Quiddity Leaderboard STAR 50 Mar 24: Four High-Impact Changes Likely; Some Interesting Trade Ideas

Allkem/Livent (AKE AU | LTHM US) Merger Update: MUCH More Than Meets The Eye

The Allkem/Livent “merger of equals” discussed in Allkem/Livent (AKE AU | LTHM US) Merger Of Lithium Equals Has Index Surprises and Allkem/Livent: Enlarged Charging Unit is on track.
As of the end of last month, all approvals are received or are expected to be received. The Scheme Booklet is expected next month. Deal is expected to close end-CY2023.
The deal STILL has interesting side issues with index. Even more interesting than Newcrest/Newmont. This is an update with more detail as we probably have 8-10 weeks left.

JIC Deal For Shinko Electric Is LIGHT, and There’s Room To Complain, But Will Trade Wide

29 minutes after I published a long, musing piece on the possibilities of structure and announcement later this week, JIC and Shinko Electric announced 5 minutes before midnight.
A warning for the future: The Nikkei and every other media outlet got the number wrong. It is NOT a total acquisition cost of “around ¥800bn”. It is under ¥700bn.
It IS a split deal. And if JIC won with that price, it tells you something about the state of the market and future deals in the space.

NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade

There were 6 inclusions and 6 exclusions for the Nasdaq-100 Stock Index (NDX INDEX) at the annual December reconstitution. Then another ad hoc change was added on top of that.
Impact on the inclusions ranges from 1-8 days of ADV to buy, while the impact on the deletions varies from 0.7-2.6 days of ADV to sell.
Apart from the constituent changes, there are expected to be inflows in Tesla Motors and Broadcom and outflows from Apple, Microsoft, Amazon.com and NVIDIA.

Toyota Cross-Shareholding – To Say a Whole Lot Is Left Would Be a US$26bn Understatement

With Toyota (7203 JP) having sold some of its stake in Denso, KDDI and Harmonic Drive this year, it has firmly set the ball rolling for unwinding some of its cross-shareholding.
Toyota has a shareholding in around 60 listed companies, with its combined disposable stake worth over US$26bn.
In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

Shinko Electric (6967) Takeover: Initial Break/Gap Risk Analysis

The JIC Deal for Shinko Electric Industries (6967 JP) has been announced and is, as expected, trading wide.
There is FUD. There are Flows. Just like JSR (4185). Some of that FUD can be explained by “gap risk” on deal break…. or can it? We look at risks.
There’s more positioning risk than fundamental risk at this point. And the FUD and Flows have specific timing in this case which makes thing different than JSR. Worth thinking about.

KOSDAQ150 Index Rebalance Preview: Posco DX Listing Transfer

The KRX has preliminarily approved Posco DX (022100 KS)‘s listing transfer from the KOSDAQ Market to the KOSPI Market.
Posco DX (022100 KS) has announced that its stock will start trading on the KOSPI Market from the open on 2 January.
We expect Temc (425040 KS) to replace Posco DX (022100 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 28 December.

Whitebox Goes Activist on Samsung C&T

On 14 December, it was reported that US based Whitebox Advisors has started an activist campaign on Samsung C&T (028260 KS).
Whitebox estimates that Samsung C&T’s stock price is about 68% undervalued compared to its NAV.
In addition to Whitebox, there are two other foreign investors including Palliser Capital and City of London Investment Management that have requested Samsung C&T to improve corporate governance.

Vinda (3331 HK): Tanoto’s Firm Offer

Back on the 27 April, personal hygiene play Vinda International (3331 HK) announced its controlling shareholder Essity (ESSITYB SS) would commence a strategic review of its 51.59% ownership.
That spurred, allegedly, a variety of suitors including Brazil’s Suzano, the world’s largest hardwood pulp producer, Bain Capital, CVC Capital, DCP Capital, and Indonesia’s Tanoto family.
And the Tanoto’s have now emerged with a HK$23.50 pre-conditional Offer. The key risk is PRC regulatory approval . Elsewhere, this is a done deal.

Zozo-Owned Yutori IPO This Month

By Michael Causton

Zozo may lead in online fashion malls but its customer base, while young, is getting older.
In 2020, it acquired a majority stake in Yutori, a fledgling fashion mall targeting the young, which will now list this month.
Yutori has grown sales to ¥2.47 billion since launching five years ago. As well as Japan, it sees a major opportunity across Asia given Japanese street fashion popularity there.

Quiddity Leaderboard STAR 50 Mar 24: Four High-Impact Changes Likely; Some Interesting Trade Ideas

STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the March 2024 index rebal event.
There could be up to four index changes. Some of these are high-conviction changes and some are low-conviction changes.

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Dec 14

Most Read: Denso Corp, Benefit One Inc, Shinko Electric Industries, JD.com Inc (ADR), Tongcheng Travel Holdings , Recruit Holdings, Hollysys Automation Technologies and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying
JIC Consortium Possibly In Line to Win Shinko At “¥800bn”, Which Makes You Go 🤔…
Benefit One (2412): M3 Extends For a Full Month
Shinko Electric (6967 JP): JIC’s Pre-Conditional Tender Offer at JPY5,920
JIC Deal For Shinko Electric Is LIGHT, and There’s Room To Complain, But Will Trade Wide
NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade
Hollysys Gives Ascendent Capital The Nod. “Agnostic” Shareholders Will Approve
HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)
Recruit (6098 JP) Buyback – It’s Big But Not THAT Big; Value Act Effect Vs Corp Selldown Vs Multiple
Hollysys (HOLI US): Merger Agreement Leaves the Door Ajar for a Higher Recco Offer

Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying

There could be a US$4.6bn secondary placement in Denso Corp (6902 JP) before year-end as Toyota Motor (7203 JP), Toyota Industries (6201 JP) and Aisin Corp (7259 JP) unwind cross-holdings.
Denso Corp (6902 JP) was down 4.85% yesterday (and even more intra-day) and the stock could remain under pressure for the next few weeks.
There will be limited passive buying in conjunction with the secondary offering and active investors will need to buy a lot of stock.

JIC Consortium Possibly In Line to Win Shinko At “¥800bn”, Which Makes You Go 🤔…

A Nikkei article today suggested that Fujitsu had granted preferential negotiating rights to buy Shinko Electric Industries (6967 JP) to a JIC-led consortium (including DNP and Mitsui Chem) for ~¥800bn.
This happened late in the afternoon session. Shares spiked 5+%, then were halted. A gray market ensued.
A Bloomberg article provided more info, and the same info nuanced slightly differently. The wording in yet other articles was interesting enough that it is worth discussing.

Benefit One (2412): M3 Extends For a Full Month

Today after the close, Benefit One Inc (2412 JP) amended its Tender Offer Target Opinion Statement to note that Dai Ichi Life had made a proposal to acquire 100%.
To allow the Board time to evaluate this proposal, the Company requested a Tender extension. Bidder M3 Inc (2413 JP) was obliged to extend 10 days. They extended 20 days.
This tells us a bunch of things. It is worth thinking about what happened to get here.

Shinko Electric (6967 JP): JIC’s Pre-Conditional Tender Offer at JPY5,920

After months of speculation, Shinko Electric Industries (6967 JP) has recommended the JIC alliance’s preconditional tender offer of JPY5,920 per share, an 18.9% premium to the undisturbed price (31 May).
The pre-condition relates to regulatory approvals in Japan, China, Korea, and possibly Vietnam. The offeror may waive the pre-condition. The offer is long-dated and expected to start in August 2024.
The minimum acceptance condition requires a 33.3% minority acceptance rate. Despite the low 7.1% premium to the last close, the offer resulted from a competing bidding process.

JIC Deal For Shinko Electric Is LIGHT, and There’s Room To Complain, But Will Trade Wide

29 minutes after I published a long, musing piece on the possibilities of structure and announcement later this week, JIC and Shinko Electric announced 5 minutes before midnight.
A warning for the future: The Nikkei and every other media outlet got the number wrong. It is NOT a total acquisition cost of “around ¥800bn”. It is under ¥700bn.
It IS a split deal. And if JIC won with that price, it tells you something about the state of the market and future deals in the space.

NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade

There were 6 inclusions and 6 exclusions for the Nasdaq-100 Stock Index (NDX INDEX) at the annual December reconstitution. Then another ad hoc change was added on top of that.
Impact on the inclusions ranges from 1-8 days of ADV to buy, while the impact on the deletions varies from 0.7-2.6 days of ADV to sell.
Apart from the constituent changes, there are expected to be inflows in Tesla Motors and Broadcom and outflows from Apple, Microsoft, Amazon.com and NVIDIA.

Hollysys Gives Ascendent Capital The Nod. “Agnostic” Shareholders Will Approve

Hollysys Automation Technologies (HOLI US)‘s board persistent stonewalling was effectively terminated after the its court injunction was dismissed last month. An SGM will now take place sometime next month.
A firm merger agreement was expected this month, and Hollysys announced yesterday Ascendent Capital has emerged as the preferred suitor with a (revised) US$26.50/share Offer.
This looks to be (finally) all stitched up. Trading wide-ish to terms. Get involved.

HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)

Tongcheng Travel Holdings (780 HK) is expected to replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the March review.
Constituent changes and capping changes will result in a one-way turnover of 2.32% and that will result in a round-trip trade of US$628m.
Short interest on Tongcheng Travel Holdings (780 HK) is near its lows while there has been some recent short covering in GDS Holdings (9698 HK).

Recruit (6098 JP) Buyback – It’s Big But Not THAT Big; Value Act Effect Vs Corp Selldown Vs Multiple

Last month, Reuters reported that activist-ish investor Value Act Capital Management had bought a stake in Recruit Holdings (6098 JP) and separately in Expedia Group, Inc. (EXPE US)).
It was “revealed” in a letter to its clients. And there were reasons stated why Value Act thought Recruit was worth a lot more than it was trading for.
Today, Recruit announced an on-market buyback for ¥200bn. That’s nice. But it is not enormous, and it may signal other info, and it is worth understanding details and context.

Hollysys (HOLI US): Merger Agreement Leaves the Door Ajar for a Higher Recco Offer

Bloomberg reports that the Recco consortium is considering “a significantly higher” Hollysys Automation Technologies (HOLI US) offer than Ascendent’s US$26.50 binding offer.
The Hollysys 6-K filling outlines the closing conditions – a simple majority YES vote, regulatory approvals, minimum net cash (waivable) and a 10% maximum dissent condition (waivable).
Recco is a committed suitor and will not easily give up. The merger agreement clauses point to a Recco offer floor of US$27.03 and a ceiling of US$30.48.

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Dec 13

Most Read: Benefit One Inc, Yamazen Corp, S.M.Entertainment Co, Shinko Electric Industries, Denso Corp, CPMC Holdings, Tongcheng Travel Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Denso Corp Placement – Quick Update – In Better Shape Now, Size Concern Remains
Benefit One (2412): M3 Extends For a Full Month
Yamazen Secondary Offer (8150 JP) – 5 Banks Sell To Make This a Future Activism Target
A Review of Tender Offers of Korean Companies in 2023
JIC Consortium Possibly In Line to Win Shinko At “¥800bn”, Which Makes You Go 🤔…
Shinko Electric (6967 JP): JIC’s Pre-Conditional Tender Offer at JPY5,920
Denso (6902 JP): The Current Playbook
CPMC (906 HK): SASAC Usurper?
CPMC Holdings (906 HK): Possible Scenarios as ORG Mulls a Competing Offer
HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)

Denso Corp Placement – Quick Update – In Better Shape Now, Size Concern Remains

On 28th Nov 2023, Toyota Motor (7203 JP) announced that it would sell around 9.4% of Denso Corp (6902 JP) in order to reduce its cross-shareholding.
The shares hadn’t corrected much till our last note on 7th Dec 2023, they have since corrected by 6% .
We have covered the deal background and deal dynamics in our earlier notes. In this note, we talk about the recent share price movement, as compared to prior deals.

Benefit One (2412): M3 Extends For a Full Month

Today after the close, Benefit One Inc (2412 JP) amended its Tender Offer Target Opinion Statement to note that Dai Ichi Life had made a proposal to acquire 100%.
To allow the Board time to evaluate this proposal, the Company requested a Tender extension. Bidder M3 Inc (2413 JP) was obliged to extend 10 days. They extended 20 days.
This tells us a bunch of things. It is worth thinking about what happened to get here.

Yamazen Secondary Offer (8150 JP) – 5 Banks Sell To Make This a Future Activism Target

On Monday after the close, trading house Yamazen Corp (8051 JP) announced a secondary offering where five bank shareholders would sell ~6.7mm shares (including greenshoe).
It appears as if most of the banks are selling everything, making it about US$50mm, 50 days of ADV, and about 7% of shares out.
But this should get swallowed pretty easily. The stock is DIRT CHEAP. The caveat? Crossholders and insiders will still own 45-48% post-offer.

A Review of Tender Offers of Korean Companies in 2023

We review the major tender offers of Korean companies in 2023. Some of the major M&A tender offers that have closed this year include Osstem Implant and SM Entertainment.
Among the 15 companies targeted for tender offers, there are 5 companies including Osstem Implant, SM Entertainment, Lutronic Corp where the purpose of the tender offers is for M&A.
There were a total of 18 companies that submitted tender offer results announcements in 2023 (as of 11 December), up 157% YoY.

JIC Consortium Possibly In Line to Win Shinko At “¥800bn”, Which Makes You Go 🤔…

A Nikkei article today suggested that Fujitsu had granted preferential negotiating rights to buy Shinko Electric Industries (6967 JP) to a JIC-led consortium (including DNP and Mitsui Chem) for ~¥800bn.
This happened late in the afternoon session. Shares spiked 5+%, then were halted. A gray market ensued.
A Bloomberg article provided more info, and the same info nuanced slightly differently. The wording in yet other articles was interesting enough that it is worth discussing.

Shinko Electric (6967 JP): JIC’s Pre-Conditional Tender Offer at JPY5,920

After months of speculation, Shinko Electric Industries (6967 JP) has recommended the JIC alliance’s preconditional tender offer of JPY5,920 per share, an 18.9% premium to the undisturbed price (31 May).
The pre-condition relates to regulatory approvals in Japan, China, Korea, and possibly Vietnam. The offeror may waive the pre-condition. The offer is long-dated and expected to start in August 2024.
The minimum acceptance condition requires a 33.3% minority acceptance rate. Despite the low 7.1% premium to the last close, the offer resulted from a competing bidding process.

Denso (6902 JP): The Current Playbook

Since the US$4.0 billion secondary placement announcement, Denso Corp (6902 JP)’s shares are down 4.3% from the undisturbed price of JPY2,298 per share (28 November).
Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Denso’s shares have followed the pattern of previous large placements.
The offering will likely be priced on 13 December. Investors participating in previous large Japanese placements tend to secure positive returns.

CPMC (906 HK): SASAC Usurper?

In what I viewed as one of the cleaner deals, CPMC Holdings (906 HK) announced a pre-conditional Offer from SASAC and the National Council for Social Security Fund of China.
A decent premium to undisturbed, a low tendering threshold, and a large shareholder giving an irrevocable – this looked done.
Now ORG Development Limited/ORG Technology Co., Ltd. A (002701 CH), holding 24.4% of shares out, is mulling a competing conditional general cash Offer. One of these Offers will get up.

CPMC Holdings (906 HK): Possible Scenarios as ORG Mulls a Competing Offer

CPMC Holdings (906 HK) disclosed that ORG Technology Co., Ltd. A (002701 CH), the second-largest shareholder, is considering a competing voluntary conditional general cash offer.
It is rare to bid against an SOE bidder. ORG likely has implicit SOE support to launch a competing offer due to the need for Chinese regulatory approvals.
The possible scenarios suggest Mr Zhang Wei is the winning bid’s kingmaker. Mr Wei sold down 260K shares at HK$6.35 on 8 December, indicating a willingness to exit.

HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)

Tongcheng Travel Holdings (780 HK) is expected to replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the March review.
Constituent changes and capping changes will result in a one-way turnover of 2.32% and that will result in a round-trip trade of US$628m.
Short interest on Tongcheng Travel Holdings (780 HK) is near its lows while there has been some recent short covering in GDS Holdings (9698 HK).

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Dec 12

Most Read: Benefit One Inc, Outsourcing Inc, Taiwan Semiconductor (TSMC) – ADR, DISCO Corp, Denso Corp, S.M.Entertainment Co, LG Energy Solution, Yamazen Corp, Softbank Group, Sigma Healthcare and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

New Benefit One Deal Recalculated, More Benefit for All, Less for One
Bain Deal for Outsourcing (2427): Cheeky, Opportunistic, Too Low
MVIS US Listed Semiconductor 25 Index Rebalance: TSMC Is the Big Sell
Index Rebalance & ETF Flow Recap: NKY, TW Div+, ASX200, NZX50, Mom30, Top10EW, MVW, Rakuten Bank
Denso Corp Placement – Quick Update – In Better Shape Now, Size Concern Remains
A Review of Tender Offers of Korean Companies in 2023
Exploring the Possibility of an LG Energy Solution Block Deal
Yamazen Secondary Offer (8150 JP) – 5 Banks Sell To Make This a Future Activism Target
Softbank (9984 JP): Adding a Strengthening JPY to the Mix
Sigma Healthcare (SIG AU): Chemist Warehouse’s Reverse Takeover

New Benefit One Deal Recalculated, More Benefit for All, Less for One

The deal from Dai-Ichi Life for Benefit One Inc (2412 JP) appears language I did not get the first time around. The JPY 1800/share price is a proposed combined value.
The deal would then lower the TOB price to Pasona, and share the benefits from that lower price to Benefit One minorities.
That suggests more upside to Benefit One than I originally thought, and less upside (but still a chunk) to Pasona.

Bain Deal for Outsourcing (2427): Cheeky, Opportunistic, Too Low

On Friday 8 December, Bain announced an MBO with Outsourcing Inc (2427 JP) Chair Haruhiko Doi to take the company private at a 51% premium. Looks good at first glance.
It is, however, an offer at ~6.6x Management Forecast derived Dec 2024 EBITDA. This for a top player in a fast-growing market where Street/mgmt both see up-and-to-the-right results from here.
This is a delayed start (late-Jan) for regulatory approvals. It is too cheap. It is blockable. But Doi-san is young at 64yrs old and he could come back years later.

MVIS US Listed Semiconductor 25 Index Rebalance: TSMC Is the Big Sell

There are no constituent changes for the VanEck Vectors Semiconductor (SMH US) in December but there are a lot of float and capping changes.
Taiwan Semiconductor (TSMC) – ADR (TSM US) is the biggest sell while NVIDIA Corp (NVDA US) is the biggest buy.
Estimated one-way turnover is 6.6% resulting in a one-way trade of US$682m. Couple of stocks have greater than 0.2x ADV to trade.

Index Rebalance & ETF Flow Recap: NKY, TW Div+, ASX200, NZX50, Mom30, Top10EW, MVW, Rakuten Bank

There were a lot of rebalance implementations in China on Friday, plus a few upcoming index changes that were announced during the week.
There are a lot of implementations this week, with KOSPI 200 and KOSDAQ 150 on Thursday and then others across a bunch of countries on Friday.
There were big inflows to Tracker Fund of Hong Kong (2800 HK) during the week taking units outstanding to a new high. ETF inflows continue even as the market drops.

Denso Corp Placement – Quick Update – In Better Shape Now, Size Concern Remains

On 28th Nov 2023, Toyota Motor (7203 JP) announced that it would sell around 9.4% of Denso Corp (6902 JP) in order to reduce its cross-shareholding.
The shares hadn’t corrected much till our last note on 7th Dec 2023, they have since corrected by 6% .
We have covered the deal background and deal dynamics in our earlier notes. In this note, we talk about the recent share price movement, as compared to prior deals.

A Review of Tender Offers of Korean Companies in 2023

We review the major tender offers of Korean companies in 2023. Some of the major M&A tender offers that have closed this year include Osstem Implant and SM Entertainment.
Among the 15 companies targeted for tender offers, there are 5 companies including Osstem Implant, SM Entertainment, Lutronic Corp where the purpose of the tender offers is for M&A.
There were a total of 18 companies that submitted tender offer results announcements in 2023 (as of 11 December), up 157% YoY.

Exploring the Possibility of an LG Energy Solution Block Deal

The prevailing sentiment in Yeouido signals a shift of companies, originally preparing for EB issuances, toward block deals. Local brokerages are competing to identify potential block deals involving major issuers.
The local market anticipates LG Chem opting for a short-term block deal, considering the potential reduction of the LG Energy stake below 80% to alleviate global minimum corporate tax burdens.
Timing is a challenge, but based on corrections before July’s EB issuance, we could proactively plan for January. Abundant liquidity in LG Energy’s futures eases trading instrument concerns.

Yamazen Secondary Offer (8150 JP) – 5 Banks Sell To Make This a Future Activism Target

On Monday after the close, trading house Yamazen Corp (8051 JP) announced a secondary offering where five bank shareholders would sell ~6.7mm shares (including greenshoe).
It appears as if most of the banks are selling everything, making it about US$50mm, 50 days of ADV, and about 7% of shares out.
But this should get swallowed pretty easily. The stock is DIRT CHEAP. The caveat? Crossholders and insiders will still own 45-48% post-offer.

Softbank (9984 JP): Adding a Strengthening JPY to the Mix

By Victor Galliano

In 1HFY23, a weak JPY – with it having depreciated from JPY132 to JPY149 to the USD – has actively supported the group’s valuation, contributing 12% to SoftBank group’s NAV
The BoJ is looking to tighten monetary policy, whilst all other major central banks are set to cut rates; under this scenario, it is likely for the JPY to strengthen
Softbank shares trade at a 51%+ stated NAV discount yet we believe that there is downside risk to at least Arm’s high valuations, which could tighten the discount significantly

Sigma Healthcare (SIG AU): Chemist Warehouse’s Reverse Takeover

Privately-Held Chemist Warehouse’s (CWG) “transformational merger” with pharmaceutical wholesaler and franchisor Sigma Healthcare (SIG AU) will result in CWG’s shareholders holding 85.75% of the merged company.
CWG shareholders will receive A$700mn in cash plus new Sigma shares. Sigma will also undertake a $400mn equity raising to fund working capital needs.
Sigma has the backing of its largest shareholder HMC. The risk to completion pivots off ACCC approval.

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Dec 11

Most Read: Benefit One Inc, Outsourcing Inc, Visional , Kinross Gold Corp, DISCO Corp, Albemarle Corp, Taiwan Semiconductor (TSMC) – ADR and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

New Benefit One Deal Recalculated, More Benefit for All, Less for One
Benefit One (2412 JP): Thoughts on the Potential Minority Offer Price
Outsourcing (2427 JP): Bain-Backed Preconditional MBO Tender Offer at JPY1,755
TOPIX Inclusions: Who Is Ready (Dec 2023)
MVIS Global Junior Gold Miners Index Rebalance: Few Large Weight Changes
Index Rebalance & ETF Flow Recap: NKY, TW Div+, ASX200, NZX50, Mom30, Top10EW, MVW, Rakuten Bank
MVIS Global Rare Earth/Strategic Metals Index Rebalance: Albermarle (ALB US) Finally Added
MVIS US Listed Semiconductor 25 Index Rebalance: TSMC Is the Big Sell
Last Week in Event SPACE: Pasona/Benefit One, EOFlow, Swire Pacific, Hankook & Co, Toyo Construction
Bain Deal for Outsourcing (2427): Cheeky, Opportunistic, Too Low

New Benefit One Deal Recalculated, More Benefit for All, Less for One

The deal from Dai-Ichi Life for Benefit One Inc (2412 JP) appears language I did not get the first time around. The JPY 1800/share price is a proposed combined value.
The deal would then lower the TOB price to Pasona, and share the benefits from that lower price to Benefit One minorities.
That suggests more upside to Benefit One than I originally thought, and less upside (but still a chunk) to Pasona.

Benefit One (2412 JP): Thoughts on the Potential Minority Offer Price

Dai Ichi Life Insurance (8750 JP)‘s pre-conditional tender offer for Benefit One Inc (2412 JP) has a total value of JPY285,733 million (JPY1,800 per share).
The offer structure is that Pasona Group (2168 JP) will receive JPY1,800 less TOB tax benefits. Minorities will receive JPY1,800 plus the proportionate share of Pasona’s TOB tax benefits.
Our estimated minority offer price is JPY2,086 per share, which is 15.9% higher than the JPY1,800 floor price and 9.1% higher than the last close price.

Outsourcing (2427 JP): Bain-Backed Preconditional MBO Tender Offer at JPY1,755

Outsourcing Inc (2427 JP) has recommended a Bain-backed preconditional MBO tender offer of JPY1,755 per share, a 52.1% premium to the undisturbed (8 December).
The offer is light vs. peer and historical multiples and opportunistically takes advantage of the 20% price fall due to the disclosure of employment adjustment subsidies issues on 1 August.
Based on the irrevocables, the minimum acceptance condition requires a 61.9% minority acceptance rate. The acceptance rate could prove challenging. The tender offer is to start by late January 2024.

TOPIX Inclusions: Who Is Ready (Dec 2023)

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
One of our TOPIX Inclusion Pre-event names Visional (4194 JP) confirmed it has received approval to move to the Prime Market in December 2023.
Currently, we are expecting one TOPIX Inclusion at the end of December 2023 and two more at the end of January 2024 (including Visional).

MVIS Global Junior Gold Miners Index Rebalance: Few Large Weight Changes

There are no constituent changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in December, but there are float and capping changes for some stocks.
Estimated one-way turnover is 2.8% and that leads to a one-way trade of US$122m.
There are 13 stocks with over US$5m to trade from passive trackers, though the impact is not very big on the stocks.

Index Rebalance & ETF Flow Recap: NKY, TW Div+, ASX200, NZX50, Mom30, Top10EW, MVW, Rakuten Bank

There were a lot of rebalance implementations in China on Friday, plus a few upcoming index changes that were announced during the week.
There are a lot of implementations this week, with KOSPI 200 and KOSDAQ 150 on Thursday and then others across a bunch of countries on Friday.
There were big inflows to Tracker Fund of Hong Kong (2800 HK) during the week taking units outstanding to a new high. ETF inflows continue even as the market drops.

MVIS Global Rare Earth/Strategic Metals Index Rebalance: Albermarle (ALB US) Finally Added

Albemarle Corp (ALB US) will replace ioneer (INR AU) in the VanEck Rare Earth/Strategic Me (REMX US) at the close on 15 December.
Constituent changes, float changes and capping changes result in an estimated one-way turnover is 13.4% and in a one-way trade of US$50m.
The mainland China stocks in the index have been the biggest laggards and this rebalance will reduce their weight in the index significantly.

MVIS US Listed Semiconductor 25 Index Rebalance: TSMC Is the Big Sell

There are no constituent changes for the VanEck Vectors Semiconductor (SMH US) in December but there are a lot of float and capping changes.
Taiwan Semiconductor (TSMC) – ADR (TSM US) is the biggest sell while NVIDIA Corp (NVDA US) is the biggest buy.
Estimated one-way turnover is 6.6% resulting in a one-way trade of US$682m. Couple of stocks have greater than 0.2x ADV to trade.

Last Week in Event SPACE: Pasona/Benefit One, EOFlow, Swire Pacific, Hankook & Co, Toyo Construction

Dai Ichi Life (8750 JP)‘s proposal suggests more upside to Benefit One (2412 JP)‘s minorities than originally thought, and less upside (but still a chunk) to Pasona Group (2168 JP).
It’s all over for EOFlow (294090 KS), as Medtronic Plc (MDT US) folds it tent.
Cho Hyun-Sik (eldest son of Cho Yang-Rae, Chairman of Hankook & Company (000240 KS) has joined MBK Partners in making a partial Tender Offer for Hankook & Co.

Bain Deal for Outsourcing (2427): Cheeky, Opportunistic, Too Low

On Friday 8 December, Bain announced an MBO with Outsourcing Inc (2427 JP) Chair Haruhiko Doi to take the company private at a 51% premium. Looks good at first glance.
It is, however, an offer at ~6.6x Management Forecast derived Dec 2024 EBITDA. This for a top player in a fast-growing market where Street/mgmt both see up-and-to-the-right results from here.
This is a delayed start (late-Jan) for regulatory approvals. It is too cheap. It is blockable. But Doi-san is young at 64yrs old and he could come back years later.

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Dec 10

Most Read: Uber Technologies , AMP Ltd, NTPC Ltd, Kia Corp, Bharat Heavy Electricals, Benefit One Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Dai-Ichi Life (8750) Proposes a Full Takeover of Benefit One (2412), Overbidding M3
New Benefit One Deal Recalculated, More Benefit for All, Less for One
S&P500 Index Rebalance: Calling an UBER
Index Rebalance & ETF Flow Recap: KWEB, CSI300/500, STAR50, SSE50, ChiNext, SET50, Chips, Denso, SPX
MVIS Australia Equal Weight Index Rebalance Preview: Stocks Close to Deletion Zone
NIFTY200 Momentum30 Index Rebalance Preview: 58% Turnover & Strong Momentum
FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M
NIFTY200 Momentum30 Index Rebalance: 18 Changes a Side, 58% Turnover, Momentum Intact
Benefit One (2412 JP): Thoughts on the Potential Minority Offer Price
Last Week in Event SPACE: Pasona/Benefit One, EOFlow, Swire Pacific, Hankook & Co, Toyo Construction

Dai-Ichi Life (8750) Proposes a Full Takeover of Benefit One (2412), Overbidding M3

Today post-close, life insurer Dai Ichi Life Insurance (8750 JP) announced plans to launch a Tender Offer to buy out all minorities in Benefit One Inc (2412 JP) at ¥1,800/share.
M3’s Partial (55%) Tender at ¥1,600/share ending next week is obviously a question.
This is GREAT news for M&A in Japan. It’s good for holders of Benefit One and Pasona Group (2168 JP) too.

New Benefit One Deal Recalculated, More Benefit for All, Less for One

The deal from Dai-Ichi Life for Benefit One Inc (2412 JP) appears language I did not get the first time around. The JPY 1800/share price is a proposed combined value.
The deal would then lower the TOB price to Pasona, and share the benefits from that lower price to Benefit One minorities.
That suggests more upside to Benefit One than I originally thought, and less upside (but still a chunk) to Pasona.

S&P500 Index Rebalance: Calling an UBER

Uber Technologies (UBER US), Jabil Circuit (JBL US) and Builders Firstsource (BLDR US) will be added to the S&P 500 INDEX (SPX INDEX) at the close on 15 December.
There are a bunch of inclusions. deletions and migrations across the S&P 500 INDEX (SPX INDEX), the S&P Midcap 400 Index, and the S&P SmallCap 600 Index.
We estimate passive trackers will need to buy around US$18bn of Uber Technologies (UBER US). There has been positioning in the stock for just over a month now.

Index Rebalance & ETF Flow Recap: KWEB, CSI300/500, STAR50, SSE50, ChiNext, SET50, Chips, Denso, SPX

The announcement of the inclusion of Uber Technologies (UBER US) in the S&P 500 INDEX was a big one last week. There were announcements for some other indices too.
There are many indices in China that will be rebalanced at the close on Friday, the biggest being the CSI 300, CSI 500, STAR50, SSE50 and KWEB US.
Relatively quiet in ETF world with net inflows to China focused ETFs and net outflows for Japan.

MVIS Australia Equal Weight Index Rebalance Preview: Stocks Close to Deletion Zone

AMP Ltd (AMP AU) and A2 Milk Co Ltd (A2M AU) could be deleted as the lowest ranked current index constituents.
There are three other stocks that are close to the deletion threshold and a change in the free float could result in the stocks being deleted.
With the exception of A2 Milk Co Ltd (A2M AU), shorts have been increasing on nearly all the potential and close deletions.

NIFTY200 Momentum30 Index Rebalance Preview: 58% Turnover & Strong Momentum

There could be 18 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 28 December.
If all changes are on expected lines, one-way turnover is estimated at 58.2% and that will result in a one-way trade of INR 20bn (US$240m).
Since July, the potential adds to the index have outperformed the index and the potential deletes by a big margin. Momentum could keep the outperformance going till implementation date.

FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M

The Samsung KODEX Fn Top10 Equal Weight ETF (395170 KS) tracks the FnGuide Top 10 Index and has an AUM of US$264m.
We expect Kia Corp (000270 KS) to replace Posco Future M (003670 KS) in the index at the December rebalance.
There will be 0.4x ADV to buy in Kia Corp (000270 KS) while passives will need to sell 0.1x ADV of Posco Future M (003670 KS).

NIFTY200 Momentum30 Index Rebalance: 18 Changes a Side, 58% Turnover, Momentum Intact

There are 18 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 28 December. We had forecast all the index changes.
Estimated one-way turnover is 57.7% resulting in a one-way trade of INR 21.75bn (US$261m). 8 stocks have over 1x ADV to trade; 21 stocks have atleast 0.5x ADV to trade.
The adds have continued to outperform the deletes and the index and there could be further outperformance heading into year-end and buying from passive trackers.

Benefit One (2412 JP): Thoughts on the Potential Minority Offer Price

Dai Ichi Life Insurance (8750 JP)‘s pre-conditional tender offer for Benefit One Inc (2412 JP) has a total value of JPY285,733 million (JPY1,800 per share).
The offer structure is that Pasona Group (2168 JP) will receive JPY1,800 less TOB tax benefits. Minorities will receive JPY1,800 plus the proportionate share of Pasona’s TOB tax benefits.
Our estimated minority offer price is JPY2,086 per share, which is 15.9% higher than the JPY1,800 floor price and 9.1% higher than the last close price.

Last Week in Event SPACE: Pasona/Benefit One, EOFlow, Swire Pacific, Hankook & Co, Toyo Construction

Dai Ichi Life (8750 JP)‘s proposal suggests more upside to Benefit One (2412 JP)‘s minorities than originally thought, and less upside (but still a chunk) to Pasona Group (2168 JP).
It’s all over for EOFlow (294090 KS), as Medtronic Plc (MDT US) folds it tent.
Cho Hyun-Sik (eldest son of Cho Yang-Rae, Chairman of Hankook & Company (000240 KS) has joined MBK Partners in making a partial Tender Offer for Hankook & Co.

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Dec 09

Most Read: Benefit One Inc, Kokusai Electric , K Car , EcoPro Materials, Pasona Group, LG CNS, Bharat Heavy Electricals, Kasumigaseki Capital, REPT BATTERO Energy and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Dai-Ichi Life (8750) Proposes a Full Takeover of Benefit One (2412), Overbidding M3
New Benefit One Deal Recalculated, More Benefit for All, Less for One
TOPIX Inclusions: Who Is Ready (Nov 2023)
Ecopro Materials KOSPI 200 Fast Entry Assessment: With K Car as the Outgoing Constituent
Ecopro Materials: Overshooting Share Price and Upcoming End of Lockup in December
Pasona Is Up Bigly. More To Come
2024 Major IPOs Pipeline in Korea
NIFTY200 Momentum30 Index Rebalance: 18 Changes a Side, 58% Turnover, Momentum Intact
Kasumigaseki Capital (3498 JP) – An Offering Worth Examining
REPT BATTERO Energy IPO – Fastest Growth, Lowest Margins, No Valuation Discount

Dai-Ichi Life (8750) Proposes a Full Takeover of Benefit One (2412), Overbidding M3

Today post-close, life insurer Dai Ichi Life Insurance (8750 JP) announced plans to launch a Tender Offer to buy out all minorities in Benefit One Inc (2412 JP) at ¥1,800/share.
M3’s Partial (55%) Tender at ¥1,600/share ending next week is obviously a question.
This is GREAT news for M&A in Japan. It’s good for holders of Benefit One and Pasona Group (2168 JP) too.

New Benefit One Deal Recalculated, More Benefit for All, Less for One

The deal from Dai-Ichi Life for Benefit One Inc (2412 JP) appears language I did not get the first time around. The JPY 1800/share price is a proposed combined value.
The deal would then lower the TOB price to Pasona, and share the benefits from that lower price to Benefit One minorities.
That suggests more upside to Benefit One than I originally thought, and less upside (but still a chunk) to Pasona.

TOPIX Inclusions: Who Is Ready (Nov 2023)

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
Our main pre-event candidate CELSYS (3663 JP) has outperformed TOPIX by ~12.6% since 1 Sep (when it was highlighted) and 6 Nov 2023.
There are three TOPIX Inclusion events confirmed for the end of November and two other interesting pre-event names we are closely monitoring.

Ecopro Materials KOSPI 200 Fast Entry Assessment: With K Car as the Outgoing Constituent

The fast entry screening spans from November 17th to December 7th. Given its current market cap, we should anticipate the potential success of fast entry.
The implementation date will coincide with the effective day of the December rebalancing, which is December 15th. There are precedents of successfully achieving fast entry with such a tight schedule.
The setup will be challenging due to the short selling ban. Nevertheless, with an existing position, there may be value in a market timing approach.

Ecopro Materials: Overshooting Share Price and Upcoming End of Lockup in December

In this insight, we discuss the upcoming end of lockup in December for Ecopro Materials and why we believe Ecopro Materials’ share price will be much lower in 6-12 months.
A combination of the potential inclusion in KOSPI Fast Entry plus the temporary ban on short selling of stocks in Korea has helped to push up Ecopro Materials’ share price.
However, despite this sharp share price run-up, we think the risk-reward is horrible on this stock in terms of bigger downside risk in the next 6-12 months.

Pasona Is Up Bigly. More To Come

After M3 Inc (2413 JP) announced an intention to buy 51.16%-55.00% of Benefit One Inc (2412 JP) via a partial Tender Offer at ¥1,600, Pasona Group (2168 JP) took off.
Now Dai Ichi Life Insurance (8750 JP) has countered with an unsolicited ¥1,800/share Offer of Equity Value; TOB followed by a Benefit One buyback to mop up Pasona’s stake.
The big news is how tax would be applied under Dai Ichi’s deal structure, which should see Pasona’s net proceeds significantly exceed those under M3’s Offer.

2024 Major IPOs Pipeline in Korea

This is our 9th “Annual Edition of the Major Korean IPOs Pipeline Preview” at Smartkarma.
This insight will feature 50 of the biggest potential IPOs in Korea in 2024.
These 50 IPOs in Korea are likely to represent more than 80% of all capital raised through IPOs in Korea next year.

NIFTY200 Momentum30 Index Rebalance: 18 Changes a Side, 58% Turnover, Momentum Intact

There are 18 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 28 December. We had forecast all the index changes.
Estimated one-way turnover is 57.7% resulting in a one-way trade of INR 21.75bn (US$261m). 8 stocks have over 1x ADV to trade; 21 stocks have atleast 0.5x ADV to trade.
The adds have continued to outperform the deletes and the index and there could be further outperformance heading into year-end and buying from passive trackers.

Kasumigaseki Capital (3498 JP) – An Offering Worth Examining

Kasumigaseki Capital is a small cap consulting real estate speculator/developer. They have an interesting, aggressive model. People will recognise the model from pre-GFC but this one is structured better.
The company had planned explosive growth and in October, brought growth plans forward and guidance way up. Now there is an offering to fund that growth.
It appears to also be an offering to get a very large short position out of a risk of potential squeeze. For that, I expect this goes smoothly.

REPT BATTERO Energy IPO – Fastest Growth, Lowest Margins, No Valuation Discount

REPT BATTERO Energy is looking to raise around US$300m in its Hong Kong IPO.
REPT BATTERO Energy (REPT) is a lithium-ion battery manufacturer in China, focusing on R&D, production, and sales of EV/ESS lithium-ion battery products such as battery cells, modules and packs.
We have looked at the company’s past performance in our previous notes. In this note, we talk about valuations.

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Dec 08

Most Read: Benefit One Inc, Rakuten Bank , Pasona Group, Hygon Information Technology C, Mini Kospi 200 Futures, Denso Corp, O S Co Ltd, Perpetual Ltd, Zhongsheng Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Dai-Ichi Life (8750) Proposes a Full Takeover of Benefit One (2412), Overbidding M3
Rakuten Bank (5838 JP) Placement: Index Inclusion Will Absorb Some Stock
New Deal for Benefit One (2168) Could Mean Lots More Money for Pasona (2168)
China: Consolidated Flows at the Close Tomorrow
Benefit One (2412 JP): Dai-Ichi Life Counters M3 with a Privatisation Offer
KOSPI 200 Futures Calendar Spread Trading: Latest on Year-End Dividend Record Date Changes
Denso Corp Placement – Not Quite Shaping up for a Win Yet
Hankyu Hanshin Takeout of OS Corp
Oh, The Irony! Perpetual Rejects Soul Patts’ “Fair” Offer
Quiddity HSCEI Mar 24 Rebalance: Same Rankings; Same Questions

Dai-Ichi Life (8750) Proposes a Full Takeover of Benefit One (2412), Overbidding M3

Today post-close, life insurer Dai Ichi Life Insurance (8750 JP) announced plans to launch a Tender Offer to buy out all minorities in Benefit One Inc (2412 JP) at ¥1,800/share.
M3’s Partial (55%) Tender at ¥1,600/share ending next week is obviously a question.
This is GREAT news for M&A in Japan. It’s good for holders of Benefit One and Pasona Group (2168 JP) too.

Rakuten Bank (5838 JP) Placement: Index Inclusion Will Absorb Some Stock

Rakuten Group (4755 JP) is looking to sell 25.5m shares of Rakuten Bank (5838 JP) via a secondary offering at a discount of between 8.7%-12.3%.
The offering will raise a maximum of US$433m and Rakuten Group (4755 JP) will use the funds to reduce its interest-bearing debt by the early repayment of its bonds.
There will be limited passive buying at the time of settlement of the stock but there is an index inclusion coming up that will result in passives buying.

New Deal for Benefit One (2168) Could Mean Lots More Money for Pasona (2168)

Today, Dai Ichi Life Insurance (8750 JP) announced a proposed counter/over-bid for Benefit One Inc (2412 JP). ¥1800/share for minorities and a better (undefined) outcome for Pasona Group (2168 JP).
This throws the cat amongst the pigeons as it is unsolicited, for 100% not just to get Pasona’s stake, and it will require Benefit One recommend or not.
For Pasona, this deal structure would likely increase the net result from the stake sale, possibly substantially so. It’s in the details.

China: Consolidated Flows at the Close Tomorrow

Local indices in China including the CSI 300 Index, CSI 500 Index, STAR50 Index and SSE50 Index will rebalance at the close tomorrow.
There are many changes for the indices and there are stocks that are adds and/or deletes from multiple indices which results in cumulative or offsetting flows.
We estimate turnover at the close tomorrow in China will be around US$7.5bn with big impact on a lot of stocks.

Benefit One (2412 JP): Dai-Ichi Life Counters M3 with a Privatisation Offer

Dai Ichi Life Insurance (8750 JP)‘s pre-conditional tender offer for Benefit One Inc (2412 JP) is JPY1,800 (floor price) + share of Pasona Group (2168 JP)’s TOB tax benefits.
The pre-conditions relate to the Board recommendation, Pasona support, and M3 Inc (2413 JP) offer not completing its partial offer. The tender offer starts in mid-January 2024 (20 business days).
While the Dai-ichi Life offer is light, M3’s engagement in a bidding war is low. The proposed minimum acceptance condition (15.51% ownership ratio) requires a 32% minority acceptance rate.

KOSPI 200 Futures Calendar Spread Trading: Latest on Year-End Dividend Record Date Changes

It would be prudent to anticipate that a considerable portion of these 636 companies will indeed adjust their dividend record dates, effective from this year’s year-end dividends.
One notable setup gaining attention is calendar spread trading for the KOSPI 200 futures in anticipation of an upward trend in the KOSPI 200 futures market towards the year’s end.
This entails buying the near-month and selling the far-month, liquidating when the price difference reverts. Traders pay attention to potential far-month divergence due to the shift in dividend record dates.

Denso Corp Placement – Not Quite Shaping up for a Win Yet

On 28th Nov 2023, Toyota (7203 JP) announced that it would sell around 9.4% of Denso (6902 JP) in order to reduce its cross-shareholding.
Since then the shares haven’t corrected by much, as compared to prior large secondary deals.
We have covered the deal background in our earlier notes. In this note, we talk about deal dynamics, as compared to prior deals.

Hankyu Hanshin Takeout of OS Corp

The flip-side of the Toho Takeout of Rakutenchi – Buying a Real Estate Portfolio at a 50% Premium but 0.7x NAV. is the Hankyu-Hanshin deal to buy OS Corp (9637).
Tokyo-Based Toho buys out Kansai-based Hankyu-Hanshin’s stake in Tokyo-based Rakutenchi. HH buys out Toho’s stake in Kobe-based OS Corp. This is a “TOB Swap”. HH owns 21.7% of Toho too.
Like Rakutenchi, it is being done at a PBR higher than 1, but a decent discount to NAV. But this one is horribly, horribly illiquid (1,000 shs/day)

Oh, The Irony! Perpetual Rejects Soul Patts’ “Fair” Offer

Yesterday, Washington H. Soul Pattinson and Co. Ltd (SOL AU) made a $3bn scrip offer Aussie-listed equities manager Perpetual Ltd (PPT AU).
Under the indicative terms, PPT shareholders receive one-third of the Offer in SOL shares, and two-thirds in PPT’s asset management arm via an in-specie spin-off.
PPT rejected the proposal as it undervalues PPT, its corporate trust and wealth management businesses; and it offers SOL shares as consideration. But the Offer is not without merit.

Quiddity HSCEI Mar 24 Rebalance: Same Rankings; Same Questions