In today’s briefing:
- Furukawa Battery (6937) – Ugly Process in Virtual Take-Under Take-Private
- Toyota’s BIG Buyback Via Tender Offer from Banks & Insurers
- Furukawa Battery (6937 JP): Long-Dated Pre-Conditional Offer at JPY1,400
- Sun Corporation (6736 JP): The Uphill Struggle for True Wind’s Revised Partial Offer
- Nidec (6594)| Q1 Beat, but Some One-Offs
- What Is Needed for More Engagement to Be Effective Is to Reduce Policy Shareholdings
Furukawa Battery (6937) – Ugly Process in Virtual Take-Under Take-Private
- Today after the close, Advantage Partners announced the intention to launch a TOB to take over Furukawa Battery (6937 JP) at ¥1,400 – a 26% premium to last.
- This will require substantial time to obtain regulatory and foreign investment clearances so it is anticipated the Tender Offer will be launched at end-March 2025. I expect that is conservative.
- The price paid to minorities is a premium. But the price paid by the buyer is actually a takeunder. And it gets worse from there.
Toyota’s BIG Buyback Via Tender Offer from Banks & Insurers
- With FY23 earnings in May, Toyota Motor (7203 JP) announced a ¥1trn buyback (410mm shares, 3.04%). Given shares were ¥3,599 the day before, it meant fewer shares or a Tender.
- Like Honda (who hadn’t bought pre-offering), Toyota hadn’t bought back in the first couple of months. We knew there was bank and insurer overhang. That overhang lasts for years.
- Today, Toyota announced an “organised” 410mm share ¥1trln Tender Offer Buyback. Several financial institutions have announced plans to tender. This provides guidance on supply/demand for the rest of the year.
Furukawa Battery (6937 JP): Long-Dated Pre-Conditional Offer at JPY1,400
- Furukawa Battery (6937 JP) recommended a pre-conditional tender offer from Advantage Partners, Tokyo Century Corp (8439 JP) and Furukawa Electric (5801 JP) consortium at JPY1,400, 22.6% premium to the undisturbed price.
- The precondition is approval under the competition laws of Japan and Thailand. The offer is long-dated and anticipated to commence in March 2025.
- While not a knockout bid, the required minority acceptance rate is not onerous. A long-dated offer presents a free option on a bump due to earnings upside or a counteroffer.
Sun Corporation (6736 JP): The Uphill Struggle for True Wind’s Revised Partial Offer
- True Wind has increased its partial offer for Sun Corp (6736 JP) by 8.0% to JPY4,750 and lowered the minimum number of shares to be purchased from 3.8 to 3.3m.
- True Wind’s offer has inadvertently spotlighted the valuation disparity vs the Cellebrite DI (CLBT US) stake, resulting in the shares trading through terms.
- True Wind’s revised offer will struggle to succeed as the 8% price uplift is materially lower than the 19% value increase in the Cellebrite stake (since the offer announcement).
Nidec (6594)| Q1 Beat, but Some One-Offs
- Nidec reported Q1 OP of ¥60b, above the consensus of ¥53b. However this also included a gain from the consolidation of Nidec PSA
- The key earnings driver was small precision motors, which are benefiting from recovery in HDD market and new earnings from cooling systems from AI Servers
- We revise up our full year forecasts but do not believe the share price will react strongly to the “beat.” Maintain bullish view on valuations
What Is Needed for More Engagement to Be Effective Is to Reduce Policy Shareholdings
- Few companies file their annual securities reports prior to AGM, and since they are filed 1-2 days prior to AGM, there’s insufficient time for a thorough review of useful information.
- Profitable companies that gain the support of overseas investors further increase their return on capital through engagement, and the gap between them and those that don’t will continue to widen.
- Since reducing policy shareholdings will reduce the percentage of voting rights that unconditionally favor company proposals, engagement will be more effective and speed up the process of management improvement.
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