In today’s briefing:
- Renesas Electronics (6723 JP): INCJ Clean Up; Index Buying Smaller than Expected
- Trend Micro BIG Bonanza But Shareholder AND Balance Sheet Structure Matter. N225 Divs Get a Fillip
- P.S. Mitsubishi Construction (1871 JP): Taisei’s Partial Tender Offer
- Spotlight on Trading Prospects Arising from ETFs as Short Selling Workarounds in Korea
- Cybernet Systems (4312 JP): Fuji Soft’s Tender Offer at JPY1,095
- IRC Limited (1029 HK): Mandatory Conditional Offer from the Chairman
- IRC (1029 HK): MBO’s MGO. Look Away …
- KKR/Telecom Italia: Uncertainty Endures
Renesas Electronics (6723 JP): INCJ Clean Up; Index Buying Smaller than Expected
- INCJ is selling the last of its stake in Renesas Electronics (6723 JP). This will remove the overhang but could lead to selling in the short-term.
- Renesas Electronics (6723 JP) has outperformed its peers over the last couple of years but valuations are in-line with the peer group (or slightly cheaper).
- The float increase in global indices will coincide with the offering, but the TSE Tokyo Price Index TOPIX (TPX INDEX) float increase will take quite a while.-
Trend Micro BIG Bonanza But Shareholder AND Balance Sheet Structure Matter. N225 Divs Get a Fillip
- Trend Micro Inc (4704 JP) has been under pressure to improve capital allocation after Value Act bought in 2022. In February 2023, Trend announced a weak sauce capital return policy.
- They promised a 100% payout ratio with 70% div payout ratio. But with huge piles of cash and securities, it wasn’t going to be enough, and shareholder structure ALWAYS matters.
- Here it meant Trend Micro was vulnerable to further attack. Today, Trend announced a HUGE capital return with buyback, and a special div and this will excite Nikkei 225 arbs.
P.S. Mitsubishi Construction (1871 JP): Taisei’s Partial Tender Offer
- Ps Mitsubishi Construction (1871 JP)/PSMIC announced a partial tender offer for Taisei Corp (1801 JP) at JPY1,010 per share, a 22.4% premium to the undisturbed price.
- The partial offer is for a minimum of 20.4 million shares (42.94% ownership ratio) and a maximum of 23.8 million shares (50.20% ownership ratio).
- Irrevocables represent a 42.94% ownership ratio, satisfying the minimum acceptance condition. The offer is attractive and represents a ten-year high. The tender offer runs from 10 November to 11 December.
Spotlight on Trading Prospects Arising from ETFs as Short Selling Workarounds in Korea
- During the previous period of short-selling restrictions, a pattern was observed in which ETFs were utilized as a workaround for short-selling.
- We should anticipate more substantial price impacts this time. Of particular significance is the possibility of utilizing not only the MSCI Korea ETF but also sector ETFs for similar purposes.
- This calls for our attention to the possibility that this short-selling workaround could generate a significantly wider range of trading opportunities in the spot market compared to three years ago.
Cybernet Systems (4312 JP): Fuji Soft’s Tender Offer at JPY1,095
- Cybernet Systems Co (4312 JP) has recommended Fuji Soft Inc (9749 JP)’s tender offer of JPY1,095 per share, a 31.8% premium to the undisturbed price (8 November).
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 12.28% ownership ratio.
- The offer price is attractive and marginally below the ten-year share price high. The minimum acceptance condition (lower limit) requires a 26.9% minority acceptance rate, which is doable.
IRC Limited (1029 HK): Mandatory Conditional Offer from the Chairman
- Irc Ltd (1029 HK) has announced a mandatory conditional offer from Nikolai Levitskii (Chairman) at HK$0.118 per share, a 32.6% premium to the undisturbed price (1 November).
- The offer is conditional on the offeror and concert parties representing more than 50% of voting rights. The offeror currently represents 30.61% of outstanding shares.
- The offer looks light vs long-term trading ranges. The minimum acceptance threshold implies a minority acceptance rate of 27.9% (36.8% if MIC Invest does not tender), which is not onerous.
IRC (1029 HK): MBO’s MGO. Look Away …
- Nikolai Levitskii, Russian iron-ore play IRC Ltd (1029 HK)‘s chairman and largest shareholder, has acquired 4.72% of shares out, lifting his stake above 30%, triggering an MGO.
- The Offer price of HK$0.118/share, a 32.58% to last close, is the same price paid for the stake increase.
- The Offer is conditional on Levitskii holding more than 50% of shares out. His intention is to maintain IRC’s listing.
KKR/Telecom Italia: Uncertainty Endures
- As a result of the deal with KKR, Telecom Italia SPA (TIT IM) projects a decrease in net debt of about €14 billion, bringing Net Debt/EBITDAaL from >4.5x to around 2.0x.
- This should guarantee the survival of Telecom Italia, but Vivendi is ready to challenge the decision. Equity is volatile as net debt represents 3.7x the market cap. Debt looks more interesting.
- TLIT 6.875 FEB-2028 with YTM 6.624, or TLIT 7.875 JUL-2028, with YTM 6.838, likely to profit from a rating upgrade. Savings shares are unlikely to receive a dividend until 2027.
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