In this briefing:
1. Descente Descended and Itochu Angle Is More Hostile
Descente Ltd (8114 JP) has been in the press quite a bit in recent days with management commentary about how the company and directors disagree with the Tender Offer launched by Itochu Corp (8001 JP) to raise their stake from 30% to 40% and how it could lead to conflict of interest and worsening management, lower morale for employees, and a loss of independence.
Management, former management, and former employees have all joined the party. Wednesday saw a significant sell-down of shares to a post-Tender Offer low, but it was not clear why.
Descente had, on the 26th, noted in a puff piece in the Nikkei that it would move up the release of its next Mid-Term (Three Year) Plan (normally due in May this year), and it would focus on growing direct sales in China through more stores, growing sales in the US through adding products to the list (currently the major product in North America is skiwear), selling LeCoq Sportif in Indonesia and Munsingwear in Vietnam. WHEN is unknown, but the explicit goal is to encourage shareholders to keep their shares rather than tender them to Itochu.
Today saw a new filing from Itochu in which it amended its original announcement, claimed Descente’s activity in the media was additional and additive to the Target Company Position Statement filed on 7 February, and for that reason, their activity had not been appropriately disclosed to shareholders. Furthermore, Itochu noted that while the jibber-jabber had been going on the last two-plus weeks, Descente had asked Itochu to negotiate post-Tender management structure plans, and Itochu had agreed. Itochu and Descente talked for 9 days from 11-20 Feb but Descente was bad-mouthing Itochu in the press at the same time. That induced Itochu to stop talks. And late today, the Nikkei has released a 27 February interview with the CEO of ANTA, Itochu’s longtime textile partner in China and a 6.86% holder of Descente shares, where he says that he supports Itochu’s tender offer, will not sell their shares in Descente, and would support Itochu efforts to restructure management.
These three new developments change things in interesting ways, in my opinion pushing Descente’s own plans closer to Itochu’s, and introducing the possibility of significantly more hostility to come, with a much higher likelihood Itochu can win the proxy wars to come.
In-depth analysis below the fold.
Previous insights on the situation and its runup are listed below.
Recent Insights on the Descente/Wacoal and Itochu/Descente Situations on Smartkarma | ||
Date | Author | Insight |
12-Sep-2018 | Michael Causton | Wacoal and Descente Agree Partial Merger to Head Off Itochu |
16-Oct-2018 | Michael Causton | Itochu Ups Stake in Descente – Refuses to Give up Dreams of Takeover |
21-Jan-2019 | Michael Causton | Itochu Confirms Intent to Deepen Hold over Descente |
31-Jan-2019 | Travis Lundy | No Détente for Descente: Itochu Launches Partial Tender |
10-Feb-2019 | Michael Causton | Itochu and Descente: Gloves Off |
10-Feb-2019 | Travis Lundy | Descente’s Doleful Defense (Dicaeologia) |
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