In today’s briefing:
- Tsuruha (3391) And Welcia (3141) – Aeon Tsuruha Stake Buy Followed by Merger?
- Rakuten Bank (5838 JP) – Introduces a Yutai Program to Goose the Mar24 Price, Mar25 EPS
- Alcoa (AA US) Makes an Offer for Alumina (AWC AU)
- Aeon, Welcia and Tsuruha: Creating an FMCG Behemoth
- StubWorld: Keisei Electric Appears Stretched Amid Latest Buyback
- CSR (CSR AU): Saint-Gobain’s Binding Proposal at A$9.00
- Alumina (AWC AU): Alcoa’s All-Scrip Non-Binding Proposal Seems Opportunistic
- KOSPI Size Indices – Potential Migrations as Focus Is on Price to Book
- ABB Targets Superloop After Taking Out Symbio
- CSR (CSR AU): Saint Gobain Firms $9/Share Bid
Tsuruha (3391) And Welcia (3141) – Aeon Tsuruha Stake Buy Followed by Merger?
- Over the weekend there was an article in the Nikkei saying that Tsuruha Holdings (3391 JP) and Welcia Holdings (3141 JP) were considering a merger. Other media outlets followed.
- This has been a possible outcome. Aeon Co Ltd (8267 JP) owns 51% of Welcia, 13.6% in Tsuruha, and is negotiating to buy another 13% in Tsuruha from Oasis.
- This would create a behemoth. ¥2.2trln in revenues vs ¥1trln for MatsukiyoCocokara (3088 JP). It would be 25% of the market. Questions will be asked about concentration.
Rakuten Bank (5838 JP) – Introduces a Yutai Program to Goose the Mar24 Price, Mar25 EPS
- The Rakuten Bank offering in early December was a great time to buy the dip of you sold end-September. It should have been a good time to buy outright.
- Unfortunately, the stock priced at ¥2,470, then closed that day at ¥2,500. That was the high for the next ten weeks. Two weeks later it was 20% lower. Ouch.
- But it climbed out of the abyss, gained 35% in 8wks, then Thursday the Bank announced a new Shareholder Benefit program. Today the stock was +7%. Worth looking at details.
Alcoa (AA US) Makes an Offer for Alumina (AWC AU)
- Alcoa (AA US) has made a non-binding, indicative and conditional proposal to acquire all shares in Alumina (AWC AU). Shareholders will receive 0.02854 shares of Alcoa for each Alumina share.
- Alcoa (AA US) has entered into an agreement with Allan Gray Australia that gives them the right to acquire 19.9% of Alumina Ltd (AWC AU) at the same swap ratio.
- Alumina Ltd (AWC AU) is a potential delete from the ASX100 Index at the March rebalance and that could provide an entry into the stock.
Aeon, Welcia and Tsuruha: Creating an FMCG Behemoth
- The possible merger between Welcia and Tsuruha under Aeon has been talked about for years despite concerns from both drugstores, but may now happen.
- But calling these retailers drugstores is increasingly a misnomer: FMCG-drugstores is better because they and many others in the sector, increasingly compete with FMCG retailers like supermarkets and even CVS.
- This evolution is rapid so the merits of a deal make more sense when we view it from a sector five years in the future than how it is today.
StubWorld: Keisei Electric Appears Stretched Amid Latest Buyback
- Keisei Electric (9009 JP) has been an outperformer since activist fund Palliser Capital called on the company sell some Oriental Land (4661 JP) shares. It has now announced another buyback.
- Preceding my comments on Keisei Electric are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
CSR (CSR AU): Saint-Gobain’s Binding Proposal at A$9.00
- CSR Ltd (CSR AU) has entered a scheme implementation deed with Cie De Saint-Gobain (SGO FP) at A$9.00 per share, a 32.9% premium to the undisturbed price (20 February).
- The offer has a ticking fee of A$0.02 per month (accrued daily) if the scheme’s effective date is delayed beyond 26 June. The offer requires FIRB approval.
- The offer is attractive and represents a 15-year high. At the last close and for a mid-June payment, the gross/annualised spread is 7.4%/28.8%.
Alumina (AWC AU): Alcoa’s All-Scrip Non-Binding Proposal Seems Opportunistic
- Alumina Ltd (AWC AU)‘s non-binding proposal from Alcoa (AA US) is 0.02854 Alcoa shares per Alumina share, implying a value of A$1.15, a 13.1% premium to the undisturbed price.
- Alcoa has been granted a 20-business day exclusivity period. The Board intends to recommend a binding proposal. Allan Gray, the largest shareholder, is supportive.
- While strategically sensible, the offer is not a knockout bid. The headcount test is a risk as retail forums suggest a majority view forming against the offer.
KOSPI Size Indices – Potential Migrations as Focus Is on Price to Book
- The review period for the March rebalance of the KOSPI Size Indices started 1 December and will end 29 February. The changes will be implemented at the close 14 March.
- We see 3 migrations from MidCap to LargeCap, 4 new adds to LargeCap, 7 migrations from LargeCap to MidCap, and 11 migrations from SmallCap to MidCap.
- On average, stocks migrating from SmallCap to MidCap have the lowest price to book value and have historically outperformed stocks migrating between other categories.
ABB Targets Superloop After Taking Out Symbio
- The hunter becomes the hunted. After Superloop (SLC AU) failed to clinch Symbio Holdings (SYM AU) last year, Aussie Broadband (ABB AU) has now made an Offer for Superloop.
- ABB’s indicative Offer provides Superloop shareholders with 0.21 new ABB shares for each Superloop share held, or an indicative Offer price of A$0.95/share, a 33.2% premium to the three-month VWAP.
- ABB has picked up 19.9% in Superloop, also at A$0.95/share. Superloop has yet to respond.
CSR (CSR AU): Saint Gobain Firms $9/Share Bid
- On the 21st Feb, Saint-Gobain (SGO FP) made an indicative Offer to CSR Ltd (CSR AU) shareholders of A$9/share by way of a Scheme, a 34% premium to last close.
- Saint-Gobain and CSR have now entered into a definitive agreement, also at $9/share. The business combination has been unanimously approved by the boards of both companies.
- Conditions include CSR’s shareholder approval and FIRB signing off. No specific mention of ACCC. The transaction is expected to close in the second half of this year.
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