In today’s briefing:
- The Next Step in Lawson’s Big Boots Adventure – KDDI and MitCorp to Take It Private
- Lawson (2651 JP): KDDI Corp (9433 JP) Pre-Conditional Tender Offer at JPY10,360
- Oriental Land: A Storm Brewing from Activist Coalition
- L’Occitane (973 HK): Blackstone Pondering an Offer
- Shiseido (4911 JP): This Fallen Angel Is Fixable
- Water Oasis 1161 HK: Gone Ex-Dividend, Trading at 7.5x PE FY24 and an 11% Dividend Yield
- NIFTY100 Low Volatility 30 Index Rebalance Preview: One Change in March
- L’Occitane (973 HK): Here We Go Again
- Lawson & KDDI: Not Just Because Japanese E-Commerce Is an Omnichannel Model
- Kayou Pre-IPO Tearsheet
The Next Step in Lawson’s Big Boots Adventure – KDDI and MitCorp to Take It Private
- Today, just before the close, the Nikkei sprung a headline saying KDDI Corp (9433 JP) would take over Lawson Inc (2651 JP). The stock immediately headed to limit up.
- Post-Close, details emerged. KDDI will buy the 50% that MitCorp does not own, this will become a 50/50 JV. TOB launch at ¥10,360 will be in April. Squeezeout in September.
- This appears to be the Next Step in Lawson’s Big Boots Adventure. The premium is too light. The price is too low. And that is not counting the synergies.
Lawson (2651 JP): KDDI Corp (9433 JP) Pre-Conditional Tender Offer at JPY10,360
- Lawson Inc (2651 JP) has recommended a pre-conditional tender offer from KDDI Corp (9433 JP) at JPY10,360 per share, an 18.8% premium to the undisturbed (5 February).
- The pre-conditions relate to regulatory approvals in Japan, China, South Korea, and the EU. The offer is expected to start in April, suggesting no significant issues, particularly with SAMR approval.
- Based on the irrevocables, the minimum acceptance condition requires a 30.2% minority acceptance rate, achievable as the offer represents an all-time high.
Oriental Land: A Storm Brewing from Activist Coalition
- Activist investor, Elliott Management has acquired over a 2% stake in Mitsui Fudosan (8801 JP) and is urging it to sell its 6% stake in Oriental Land (4661 JP).
- Elliott appears to have identified the path of least resistance, as Mitsui Fudosan had already indicated a willingness to sell its Oriental Land shares last year.
- If Elliott’s campaign proves successful, it will inadvertently benefit Palliser, which is currently challenging Keisei Electric Railway Co (9009 JP) with a similar proposal.
L’Occitane (973 HK): Blackstone Pondering an Offer
- Bloomberg reports that L’Occitane (973 HK) draws takeover interest from Blackstone (BX US), which is considering partnering with Chairman and largest shareholder Reinold Geiger.
- Blackstone needs an attractive takeover premium due to the presence of significant disinterested shareholders (Mr. Geiger and Acatis KVG).
- Shareholders will be wary of the latest rumour due to Mr Geiger’s aborted offer on 4 September 2023. Nevertheless, the valuation is undemanding compared to peer multiples.
Shiseido (4911 JP): This Fallen Angel Is Fixable
- Shiseido Company (4911 JP) relies heavily on Japan and China, each making up over one quarter of sales.
- The long thesis is simple – I expect improvement in both regions in the near future, and the valuation is very attractive.
- Blackstone just announced a potential bid for L’Occitane (973 HK), which I have written extensively about. We could potentially see a pickup in interest in the sector.
Water Oasis 1161 HK: Gone Ex-Dividend, Trading at 7.5x PE FY24 and an 11% Dividend Yield
- Water Oasis (1161 HK) just went ex-dividend on 6th Feb and is now trading at a 7.5x PE FY24e and a 10.7% dividend yield on trailing FY23 earnings.
- The company has refurbished its flagship stores, and we believe it can perform 8-9% better year over year for FY24 than FY23.
- The company also has 230 mn HKD net cash (after netting dividends paid out), representing 26% of market capitalization.
NIFTY100 Low Volatility 30 Index Rebalance Preview: One Change in March
- There could be one change for the Nifty100 Low Volatility 30 Index that will be implemented at the close on 28 March.
- Constituent changes, volatility changes and capping changes will result in one-way turnover of 12.6% and in a one-way trade of INR 3.7bn.
- While the deletion is fairly certain, there are a few non-constituents around the same level of volatility and price movements over the next few weeks will determine the inclusion.
L’Occitane (973 HK): Here We Go Again
- From 2018 onward, French beauty retailer L’Occitane (973 HK) has apparently drawn interest from the likes of Advent International and its controlling shareholder Chairman Reinold Geiger – amongst others.
- There is substance to these “Offers” – Geiger confirmed in August 2023 he was contemplating a conditional voluntary general Offer. He holds 72.65% of shares out according to the HKEx.
- The latest news, with no definitive source, is that Blackstone is mulling the possibility of teaming up with Geiger on a buyout.
Lawson & KDDI: Not Just Because Japanese E-Commerce Is an Omnichannel Model
- KDDI’s agreement with Lawson and Mitsubishi to make a tender offer for the convenience store chain is a game-changer for what has become a slow growth convenience store sector.
- There are myriad potential synergies across e-commerce, new store types and also the promising new revenue stream of retail media. Lawson may be worth more than KDDI’s offer suggests.
- And while Lawson may be behind Seven Eleven and Familymart, on some KPIs, like HQ revenues, it is No. 1 and also matches Seven Eleven on same-store sales.
Kayou Pre-IPO Tearsheet
- Kayou (000KAYOU CH) is looking to raise up to US$500m in its upcoming HK IPO. The deal will be run by CICC, Morgan Stanley and JP Morgan.
- Kayou is a Chinese pan-entertainment product retailer of toys, with trading cards in particular as its core product.
- As of 9M23 (30th Sep 23), it had an IP matrix of 44 IPs through licensing from IP partners and the development of proprietary IPs.
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