In today’s briefing:
- JIP Tender Offer for Toshiba (6502) Finally Here
- JPX Nikkei 400 Index Rebalance: Some Big Impact Names
- Bank of Kyoto (8369) – Too Far Too Fast
- Toshiba – The Tender Arrives
- Samsung Electronics: Prefs Need to Catch Up
- Estia & Bain Enter Into Scheme Agreement
- Toshiba (6502 JP): Tender Offer Launches, 1Q Results Increase Deal Risks
- TOPIX Inclusions: Who Is Ready (Aug 2023)
- Estia Health (EHE AU): Bain Capital’s Binding Proposal
- OreCorp Inks Deal With Silvercorp. Perseus In The Wings?
JIP Tender Offer for Toshiba (6502) Finally Here
- The JIP TOB for Toshiba is here. Finally. It is still too low. Since the announcement, when it was too low, peers are up a lot, and memory looks healthier.
- But it is not clear that activists who pushed this for years want to push any more. There appears to be Toshiba Fatigue, as I warned in March.
- That makes this deal look “safe” but there are technical aspects which make it less “comfortable” than normal large and long-awaited deals.
JPX Nikkei 400 Index Rebalance: Some Big Impact Names
- There are 38 adds/36 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. There are stocks with multiple days ADV to trade.
- Based on the adds, deletes and capping changes, we estimate one way turnover of 4.35% and a two-way trade of JPY 461bn (US$3.24bn).
- There are a few stocks that will have same way flow from other index trackers within a few weeks of the JPX Nikkei 400 Index rebalance.
Bank of Kyoto (8369) – Too Far Too Fast
- Bank of Kyoto (8369 JP) has been on a relative tear recently. This is a bit surprising. On a static equity-portfolio discount measure, it has outperformed regional banks.
- On a static regional bank PBR basis, it has outperformed its equity portfolio and the discount to the After Tax Equity Portfolio Value (ATEPV) is the smallest in eight years.
- Is there a sea change? There is a possibility, however remote, that domestic investor disappointment rears its voting head. That’s the dream scenario. But I don’t see it coming soon.
Toshiba – The Tender Arrives
- At long last the end to the Toshiba saga appears at hand with JIP’s belated tender offer being formally announced today at the previously quoted price of ¥4,620.
- With a minimum target of 66.7% this does not seem guaranteed to pass but we nevertheless believe that odds are good.
- The question is whether there is any room for a small hike in the price as alluded to by the Chairman.
Samsung Electronics: Prefs Need to Catch Up
- Over the last year, the discount of Samsung Electronics Pref Shares (005935 KS) to Samsung Electronics (005930 KS) has increased from 5% to 17%.
- The preferred shares have adequate liquidity, a large issue market cap, and now trade at a much higher dividend yield. A special dividend will further increase the dividend yield differential.
- Breaking from history, the preferred shares discount has continued to increase as the stock has moved higher. With the preferred shares trading near its widest discount, that could change.
Estia & Bain Enter Into Scheme Agreement
- After its initial bid of $3.00/share was rejected by Estia Health (EHE AU), Bain returned on the 7 June with a $3.20/share non-binding proposal and was granted exclusive due diligence.
- Estia and Bain Capital have now entered into a Scheme Implementation Agreement at A$3.20/share, a 50% premium to undisturbed.
- A shareholder meeting is expected to be held in November with implementation expected prior to the end of 2023.
Toshiba (6502 JP): Tender Offer Launches, 1Q Results Increase Deal Risks
- Japan Industrial Partners (JIP) will launch the Toshiba Corp (6502 JP) tender offer of JPY4,620 per share from 8 August to 20 September.
- The Board has reaffirmed its recommendation to accept the offer. JIP’s inability to raise its bid is used as an excuse to ignore the material peer rerating and unattractive terms.
- The 1Q results undermine the Board’s view of an overstated DCF and show its unwillingness to entertain a potential Kioxia merger as a superior alternative, increasing deal risks.
TOPIX Inclusions: Who Is Ready (Aug 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.
- Plus Alpha Consulting (4071 JP) will be included in TOPIX at the end of August 2023 and so far the stock has performed negatively as expected (see link).
- Our long-term TOPIX pre-event name CELSYS (3663 JP) has seen its share price decline sharply in the last few weeks which raises some important questions.
Estia Health (EHE AU): Bain Capital’s Binding Proposal
- Estia Health (EHE AU) has entered a SID with Bain Capital at A$3.20 per share, a 49.5% premium to the undisturbed price (21 March).
- The offer is attractive in comparison to historical share prices and multiples. The offer is also attractive in comparison to the Japara Healthcare (JHC AU) precedent transaction.
- The MAC clause, particularly around material regulatory events, could be risky. At the last close and for an end-of-December payment, the gross and annualised spread is 3.7% and 9.5%, respectively.
OreCorp Inks Deal With Silvercorp. Perseus In The Wings?
- Western Australian-based miner OreCorp Ltd (ORR AU) has signed a Scheme Implementation Deed with Canada’s Silvercorp Metals (SVM CN).
- Assuming the Scheme is successful, OreCorp shareholders will receive A$0.15 in cash and 0.0967 new Silvercorp shares – or an implied value of A$0.60 – for each OreCorp share held.
- A shareholder meeting is expected to be held in mid-November with implementation expected end-Nov, early-Dec. Separately, Perseus (PRU AU) is understood to be kicking OreCorp’s tyres.
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