In today’s briefing:
- DCM Takeover for Keiyo (8168) – Pretty Easy Deal
- Disclosure of Management Strategies with Cost of Capital and Stock Price in Mind Is Still Limited
- Keiyo (8168 JP): DCM’s JPY1,300 Tender Offer
- Supports Starting to Break; Upgrading Non-U.S. Small-Caps to Overweight; Transports/Comm/HC Buys
- EQD | Nikkei 225 (NKY) Forecast for October: Not So Good…
DCM Takeover for Keiyo (8168) – Pretty Easy Deal
- Today after the close, DCM Holdings (3050 JP) announced it would launch a friendly takeover by Tender Offer for Keiyo Co Ltd (8168 JP)
- This is totally not a surprise. They signed a Business and Capital Alliance in 2017. DCM bought more at a premium last autumn. This takeover was obvious in the long-term.
- There are enough friendly holders to get this done. Activism would be hard unless it was really cheap, which it does not seem to be, but process wasn’t great.
Disclosure of Management Strategies with Cost of Capital and Stock Price in Mind Is Still Limited
- Regardless of “TSE request,” only 31% of prime market listed companies disclosed “measures to realize management with awareness of cost of capital and stock price” in their corporate governance reports.
- The lack of ready disclosure measures on companies’ side seems to be the reason why few companies disclosed information, but many of those that did are also poor in content.
- For companies with large shareholders and low P/B, the parent company has not yet TOB or sold the company, which may be the reason for the delay in disclosure.
Keiyo (8168 JP): DCM’s JPY1,300 Tender Offer
- Keiyo Co Ltd (8168 JP) has recommended DCM Holdings (3050 JP)’s tender offer of JPY1,300 per share, a 58.3% premium to the undisturbed price (29 September).
- 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 35.68% ownership ratio.
- Irrevocables represent a 0.88% ownership ratio. The minimum acceptance condition (lower limit) requires a 50.4% minority acceptance rate, which is achievable as the offer price represents a ten-year high.
Supports Starting to Break; Upgrading Non-U.S. Small-Caps to Overweight; Transports/Comm/HC Buys
- Key support levels on global equity indexes (EURO STOXX 50, $ACWX, $EFA) are beginning to break as the U.S. dollar (DXY) and 10-year Treasury yield break above $105.70 and 4.35%.
- This significantly increases the odds of a break below major $92-$93 support on $ACWI, and we would shift to a more cautious outlook only on a break below $92.
- We shifted to overweight value within non-U.S. equities last week, and we are now also shifting to overweight small-caps within non-U.S. equities as well. Buys in Transportation, Communications, and HealthCare
EQD | Nikkei 225 (NKY) Forecast for October: Not So Good…
- The Nikkei 225 INDEX closed September down at 31857.62, CC=-3 (3 months down). Did not double-bottom at August’s lows (31674), but is starting to be OVERSOLD MONTHLY (time perspective).
- A new Market Reversal Matrix Seasonality model is hinting that October 2023 probably will not see a rally/reversal, but just below-average gains (if any).
- One possible scenario (due to concomitant WEEKLY OVERSOLD conditions) is to see the Nikkei up early in October, then down again, closing the month with small gains or a loss.
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