Daily Brief Industrials: Benefit One Inc, Pasona Group, O S Co Ltd, Bharat Heavy Electricals, Ircon International, Korean Air Lines, COPRO-HOLDINGS Co Ltd, Braemar Shipping Services PLC and more

• Today post-close, life insurer Dai Ichi Life Insurance (8750 JP) announced plans to launch a Tender Offer to buy out all minorities in Benefit One Inc (2412 JP) at ¥1,800/share. 
• M3’s Partial (55%) Tender at ¥1,600/share ending next week is obviously a question. 
• This is GREAT news for M&A in Japan. It’s good for holders of Benefit One and Pasona Group (2168 JP) too.

• Today, Dai Ichi Life Insurance (8750 JP)  announced a proposed counter/over-bid for Benefit One Inc (2412 JP). ¥1800/share for minorities and a better (undefined) outcome for Pasona Group (2168 JP). 
• This throws the cat amongst the pigeons as it is unsolicited, for 100% not just to get Pasona’s stake, and it will require Benefit One recommend or not.
• For Pasona, this deal structure would likely increase the net result from the stake sale, possibly substantially so. It’s in the details. 

• Dai Ichi Life Insurance (8750 JP)‘s pre-conditional tender offer for Benefit One Inc (2412 JP) is JPY1,800 (floor price) + share of Pasona Group (2168 JP)’s TOB tax benefits.
• The pre-conditions relate to the Board recommendation, Pasona support, and M3 Inc (2413 JP) offer not completing its partial offer. The tender offer starts in mid-January 2024 (20 business days).
• While the Dai-ichi Life offer is light, M3’s engagement in a bidding war is low. The proposed minimum acceptance condition (15.51% ownership ratio) requires a 32% minority acceptance rate.

• The flip-side of the Toho Takeout of Rakutenchi – Buying a Real Estate Portfolio at a 50% Premium but 0.7x NAV. is the Hankyu-Hanshin deal to buy OS Corp (9637).
• Tokyo-Based Toho buys out Kansai-based Hankyu-Hanshin’s stake in Tokyo-based Rakutenchi. HH buys out Toho’s stake in Kobe-based OS Corp. This is a “TOB Swap”. HH owns 21.7% of Toho too.
• Like Rakutenchi, it is being done at a PBR higher than 1, but a decent discount to NAV. But this one is horribly, horribly illiquid (1,000 shs/day) 

• There are 18 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 28 December. We had forecast all the index changes.
• Estimated one-way turnover is 57.7% resulting in a one-way trade of INR 21.75bn (US$261m). 8 stocks have over 1x ADV to trade; 21 stocks have atleast 0.5x ADV to trade.
• The adds have continued to outperform the deletes and the index and there could be further outperformance heading into year-end and buying from passive trackers.

• The Government of India (GoI) is looking to raise US$155m from trimming a portion of its stake in Ircon International (IRCON IN), assuming the deal upsizes.
• Assuming the deal upsizes, while it would represent 8% of the firm’s current shares outstanding, it would only represent 3.8 days of its three month ADV, given its strong liquidity.
• Given that it isn’t the first time the GoI has sold its stake in IRCON, the selldown here should be expected, in our view.

• The European Commission has confirmed it aims to make a preliminary decision on the proposed Korean Air/Asiana merger by 14 February.
• Plans to sell Asiana Cargo may struggle to find a buyer, while the US has also highlighted concerns regarding the merger, and Japan has yet to provide approval.
• We continue to highlight there is a strong argument for Korean Air continuing alone, as Asiana continues to struggle to achieve profitability, with a stretched balance sheet.

• The deal from Dai-Ichi Life for Benefit One Inc (2412 JP) appears language I did not get the first time around. The JPY 1800/share price is a proposed combined value.
• The deal would then lower the TOB price to Pasona, and share the benefits from that lower price to Benefit One minorities. 
• That suggests more upside to Benefit One than I originally thought, and less upside (but still a chunk) to Pasona.

• COPRO-HOLDINGS. Co., Ltd., (COPRO) announced its 2Q FY24/3 results after market close on Tuesday, November 14, 2023.
• Key consolidated figures included net sales of ¥11,137 mn (+28.5% YoY), operating profit of ¥737 mn (+56.9% YoY), ordinary profit of ¥810 mn (+71.8% YoY), and net income attributable to the parent company of ¥510 mn (+81.9% YoY).
• Sales were largely in line with initial forecasts, while profits were 61.4% higher than initial forecasts, mainly due to lower back-office-related labor costs. 

Braemar’s H124 results were in line with expectations with revenues up by 8%, but operating profits were down, having been hit by one-off costs. The underlying operations continue to expand and diversify, and the company remains well-positioned to drive its future growth strategy. The trading outlook is promising and Braemar should be able to leverage its strong balance sheet in pursuit of strategic growth. We have maintained our underlying revenue and operating profit estimates for FY24 and FY25 and retain our 520p per share valuation, offering c 85% upside.