In today’s briefing:
- JAFCO (8595) Succumbs to Even Worse Greenmail – SPECTACULARLY BAD Governance
- Appier (4180) – Down But Not Out; Shareholder Structure Still The Biggest Risk
- Nippon Steel & Mitsui & Co to Buy Out Nippon Steel Trading (9810) At 87% Premium
- ENEOS to Buy Out Tatsuta Electric (5809) At 74% Premium
- Nippon Steel Trading’s (9810 JP) JPY9,300 Tender Offer from Nippon Steel
- Warrego Energy: Reinhart Disses Strike’s “Superior” Offer
- Mandatory Offer Arrives in Korea: Detailed Rules & Trading Ramifications
- Thailand SET 50 Dec 22 Rebal: Good Hit Rate, Successful Pre-Event Trade, Unwind Now
- AMFI Stock Reclassification Preview (Dec 2022): A Bunch of Migrations
- TIGER (WISE) Secondary Battery ETF Rebalancing in January: Names to Watch
JAFCO (8595) Succumbs to Even Worse Greenmail – SPECTACULARLY BAD Governance
- Jafco Co Ltd (8595 JP) was the target of activist Murakami-san in August 2022. They threatened a poison pill. Murakami-san sold, then bought to 19.5%. They negotiated. He won.
- His result excluded others. The market did not take it well. Murakami-san rejected taking a 1% hit to original terms (vs reference NAV). JAFCO went back to the drawing board.
- Then submitted to greenmail at a higher price. The first buyback was agreed at ¥2,500 vs ¥2,651 NAV. The new one? ¥2,730-2,840 vs ¥2,513 NAV. Inexplicable – Spectacularly Bad Governance.
Appier (4180) – Down But Not Out; Shareholder Structure Still The Biggest Risk
- Appier Group (4180 JP) had been among our picks for TSE Prime promotion and we had recommended positioning for it. That worked. On 8 Dec they announced the promotion.
- The company is now part of TSE Prime which means a TOPIX Inclusion at end-January and an upweight in April. More than 20% of TSE float to buy by end-April.
- Share price performance has not kept pace with potential, and yesterday’s BOJ decision saw a flurry of volume selling (bailing). Pre-IPO holder overhang may be the biggest “risk” here.
Nippon Steel & Mitsui & Co to Buy Out Nippon Steel Trading (9810) At 87% Premium
- Nippon Steel Corporation (5401 JP) and Mitsui & Co Ltd (8031 JP) today announced they would buy out Nippon Steel & Sumikin Bussan (9810 JP), their steel-trading subsidiary.
- The shares trade near an all-time high, but Nippon Steel is paying an 87% premium. (Interestingly, the high end of the DCF ranges suggest a 280% premium)
- On fundamentals, this could have been higher, but given the shareholder structure, I expect it is a done deal as-is. The Tender Offer should start in February 2023.
ENEOS to Buy Out Tatsuta Electric (5809) At 74% Premium
- ENEOS Holdings (5020 JP) and subsidiary JX Nippon Mining & Metals Corporation announced today it would buy out minorities in miner and refiner Tatsuta Elec Wire & Cable (5809 JP).
- The Tender Offer comes at a 74% premium for their 37% sub. 5% off a 2yr high, 10% off a 20-year high. This is likely to be a “done deal”.
- JX probably starts with ~55% in the bag out of the 66.7% minimum. But the tender doesn’t start for ~ 6 months. Separately, importantly, there is a precedent here.
Nippon Steel Trading’s (9810 JP) JPY9,300 Tender Offer from Nippon Steel
- Nippon Steel & Sumikin Bussa (9810 JP) has recommended Nippon Steel Corporation (5401 JP)’s tender at JPY9,300 per share, an 87.5% premium to the undisturbed price and an all-time high.
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the offer has been set to meet the 66.67% ownership ratio.
- Mitsui & Co Ltd (8031 JP) will retain its 19.93% stake and together with Nippon Steel account for 55.01% of outstanding shares. Tender starts in late-February subject to antitrust clearances.
Warrego Energy: Reinhart Disses Strike’s “Superior” Offer
- After the Gina Reinhart-backed Hancock bumped its Offer for Warrego Energy (WGO AU) to A$0.28/share, in cash, Beach Energy (BPT AU) declined to match the revised Offer.
- With Hancock seemingly in the driver’s seat, Strike Energy (STX AU), with 19.9% of shares out, proposed a one-for-one scrip Offer, with an indicative price of A$0.335/share.
- Hancock has responded that its Offer provides certainty, with cash, whereas Strike’s proposal does not. Now 15.84% of the register has come out in support of Hancock’s Offer.
Mandatory Offer Arrives in Korea: Detailed Rules & Trading Ramifications
- The target is those who purchase 25% or more of the shares of a listed company and become the largest shareholder with management rights.
- The minimum volume of a mandatory offer is [(50% of total shares + 1 share) – the management right purchase volume].
- We will be exposed to pro-rata risk, so it will be essential to figure out the nature and propensity of the shareholder composition to estimate the tendering rate in advance.
Thailand SET 50 Dec 22 Rebal: Good Hit Rate, Successful Pre-Event Trade, Unwind Now
- The index changes for the Thailand SET Index (SET INDEX) for the December 2022 Rebalance were announced yesterday (20th December 2022) after the close.
- There will be four ADDs/DELs for the SET 50 index.
- In this insight, we take a closer look at our expectations for index flows and potential trading ideas.
AMFI Stock Reclassification Preview (Dec 2022): A Bunch of Migrations
- Near the end of the review period, we see 7 stocks moving from MidCap to LargeCap, 6 from LargeCap to MidCap, 8 from SmallCap to MidCap and vice versa.
- One spin-off should be added to the MidCap segment, while a bunch of recent listings will be added to the SmallCap segment.
- Stock migrating upwards have outperformed stocks migrating downwards and we expect there could be some mean reversion from the middle of January.
TIGER (WISE) Secondary Battery ETF Rebalancing in January: Names to Watch
- The key to this rebalancing is the inclusion of WCP, which satisfies the requirements of minimum listing period and secondary battery sales amount.
- As a hedge for the LONG WCP position, we can use Soulbrain and Solus Advanced, whose passive outflow is relatively high among those of a similar size to WCP.
- Among large caps, we should pay attention to L&F, Posco Chemical, and Iljin Materials. However, we should be cautious about approaching them as an active trading target.
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