In today’s briefing:
- Itochu (8001 JP) Lowball TOB for Descente (8114) Is Here – Trades Tight But No Big Holder Appeared
- T-Gaia (3738 JP) – Potential Premium Takeout Story Turns To An Ugly Takeunder
- T-Gaia (3738 JP): Reality Check as Bain Launches a Takeunder
- A/H Premium Tracker (To 27 Sep 2024): Hs Outperforming Explosive Chinese Stimulus
- Quiddity JPX-Nikkei 400 Rebal 2025: End-Sep 2024 Ranks
- NPS Cash Inflow Projections for KRX Value-Up Index & Surging Interest in KOSDAQ Stocks
- Softbank (9984 JP) – Despite the High NAV Discount, We See Greater Headwinds; Downgrading to Neutral
- Italian Savings Shares
- Descente (8114 JP): Itochu’s (8001 JP) Tender Offer Launches
- Shinsegae E&C (034300 KS)’s Delisting Offer
Itochu (8001 JP) Lowball TOB for Descente (8114) Is Here – Trades Tight But No Big Holder Appeared
- Today, Itochu Corp (8001 JP) announced that it had received SAMR approval and would launch its Tender Offer to take private its affiliate, Descente Ltd (8114 JP).
- As warned last year, Descente is cheap on a forward basis due to very strong growth and profitability of Descente China Holdings but Itochu can downplay that future.
- And indeed, it appear they did, and unless someone takes them to task, this probably gets done. So far, nobody has.
T-Gaia (3738 JP) – Potential Premium Takeout Story Turns To An Ugly Takeunder
- Today, just before the close, the Nikkei put out a scoop that Bain would buy T Gaia Corp (3738 JP) for ¥140bn. Sounds big. It was a 30% discount.
- There is a three Tender Offer process whereby minorities, who could be squeezed out regardless, are offered the opportunity to block the deal by not tendering at ¥2,670.
- This not-quite “majority of minority” of the super-minority is an interesting governance condition established by the Special Committee. It bears some study.
T-Gaia (3738 JP): Reality Check as Bain Launches a Takeunder
- T Gaia Corp (3738 JP) disclosed a Bain tender offer at JPY2,670, a 35.9% premium to the undisturbed price but a 27.2% discount to the last close.
- Bain has set the minimum number of shares to be purchased at a 12.67% ownership ratio to appease the Board, which has a neutral recommendation.
- Bain hopes the offer’s harsh reality check will burst the share price bubble, nudging minorities to accept. An auction process suggests that the chance of a competing offer is low.
A/H Premium Tracker (To 27 Sep 2024): Hs Outperforming Explosive Chinese Stimulus
- Everything changed this past week. China has launched major public stimulus programs which seem open-ended. They are less about money and more about greasing the wheels of risk.
- It still requires that OTHER PEOPLE take risk. Shorts covered. New speculative longs made. Better financing but still the same recourse.
- But everything is going up. And believe it or not, Hs are outperforming As. Broker and Bank Hs seem like the right place to be.
Quiddity JPX-Nikkei 400 Rebal 2025: End-Sep 2024 Ranks
- JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
- A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
- Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2025 based on trading data as of end-September 2024.
NPS Cash Inflow Projections for KRX Value-Up Index & Surging Interest in KOSDAQ Stocks
- NPS will likely use the KRX Value-Up Index as its benchmark, with Long-Term Growth and Value categories likely to adopt it.
- When NPS shifts to the Value-Up Index, KOSDAQ stocks will likely drive significant flow impacts due to their lower overlap.
- These non-overlapping KOSDAQ stocks, attracting over 1 trillion won, could see significant price impacts as funds gradually flow in.
Softbank (9984 JP) – Despite the High NAV Discount, We See Greater Headwinds; Downgrading to Neutral
- The SoftBank NAV discount is historically high, which makes it appear optically attractive; despite this, we turn neutral on SoftBank group from our previous positive recommendation, due to its headwinds
- JPY strength is a key challenge, especially since the new Japanese prime minister supports the BoJ normalising monetary policy; this means BoJ tightening whilst many other central banks are easing
- Arm Holdings’ super premium valuation versus its peers is another potential headwind for SoftBank group shares and NAV, combined with the high correlation between Arm Holdings and SoftBank group shares
Italian Savings Shares
- Italian savings shares (azioni di risparmio) are non-voting stocks offering higher dividend yields. They prioritize income over governance influence, appealing to investors who prefer steady returns over company decision-making power.
- Ordinary shares command higher prices due to voting rights and control, while preference shares are valued lower. In Italy, control is highly valued, thus a significant premium for ordinary shares.
- Following mandatory conversions, the two remaining tradable situations are Danieli (whose mandatory October 2020 conversion seems postponed) and Telecom Italia, trading at a premium awaiting dividends in arrears.
Descente (8114 JP): Itochu’s (8001 JP) Tender Offer Launches
- Descente Ltd (8114 JP) has announced that Itochu Corp (8001 JP)’s tender offer precondition has been satisfied. The offer terms are unchanged at JPY4,350 per share.
- The offer is arguably light due to the peer re-rating and historical trading ranges. It is also below the midpoint of the special committee’s IFA DCF valuation range.
- Nevertheless, the offer will likely succeed. There is no vocal opposition, the volume traded through terms is low, and the offer implies a premium multiple compared to peers.
Shinsegae E&C (034300 KS)’s Delisting Offer
- Construction services play Shinsegae E&C (034300 KS) has announced a Tender Offer from E Mart (139480 KS) for 27.33% of shares out, at ₩18,300/share, a 14% premium to undisturbed.
- E Mart holds 70.46% – and the company holds 2.21% in treasuries – therefore, E Mart requires ~22% of the remaining ~27% held by minorities to tender and force delisting.
- Super clean deal. E Mart will acquire all shares tendered. The Offer kicks off today, and closes on the 29th October. There is no minimum tendering % condition.
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