In today’s briefing:
- JSR (4185) – Very Juicy Arb Return At Expected Timeline
- Shinko Electric (6967 JP): Tender Offer Risk/Reward
- Recruit: More Challenges Ahead for HR Tech Business
- CG Watch, Which Made Great Strides Will Be Tested Next Time for Substantial Governance Improvements
JSR (4185) – Very Juicy Arb Return At Expected Timeline
- Five weeks ago, JIC announced a delay in the commencement of the Tender Offer to buy JSR Corp (4185 JP), originally scheduled to start by end-December 2023.
- In the announcement, they said they expected the deal to start by end-February. In the press conference afterwards, JIC CEO Yokoo said “no particular issues with the Chinese regulator.”
- He then added he expected the deal to be done by March-end. Language is vague. I expect that means to start by then, but even then, annualised is now 30%.
Shinko Electric (6967 JP): Tender Offer Risk/Reward
- Shinko Electric Industries (6967 JP)‘s pre-conditional tender offer from the JIC alliance is JPY5,920 per share. Since the deal announcement, the gross spread has averaged 8.3%.
- The wide gross spread reflects the risk in satisfying the pre-conditions related to country approvals, particularly China and shareholder approval, due to Ibiden Co Ltd (4062 JP)’s re-rating.
- Ibiden’s re-rating is not necessarily an issue. JIC’s confidence in securing SAMR approval for the JSR Corp (4185 JP) transaction by March is a positive for Shinko’s SAMR approval.
Recruit: More Challenges Ahead for HR Tech Business
- Recruit’s share price had rallied 38% since November 2023 driven by the stake acquisition by the hedge fund ValueAct despite there being a decline in the company’s earnings.
- Labour markets have further weakened in the December quarter while web traffic on Recruit’s job platforms Indeed and Glassdoor have significantly declined during the quarter.
- Though Recruit Holdings (6098 JP) has guided for a decline in earnings, we think there is further downside to the company’s guidance.
CG Watch, Which Made Great Strides Will Be Tested Next Time for Substantial Governance Improvements
- Government ministries, agencies and the TSE want to raise the value of the Tokyo market, even if it means using the opinions of overseas investors, including activist investors.
- Companies with high foreign ownership and large market capitalization are proactive in corporate governance efforts, while many other companies are passive, indicating that differences in efforts among companies are significant.
- Thanks to the revision of the Corporate Governance Code, corporate governance practices have improved mainly in terms of formal criteria, and now substantive improvements are required.
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