In today’s briefing:
- Renesas Electronics Placement – Well Flagged US$1.8bn Deal, Accelerated but Index Flows Should Help
- Renesas Electronics (6723 JP): INCJ Clean Up; Index Buying Smaller than Expected
- Trend Micro BIG Bonanza But Shareholder AND Balance Sheet Structure Matter. N225 Divs Get a Fillip
- P.S. Mitsubishi Construction (1871 JP): Taisei’s Partial Tender Offer
- Cybernet Systems (4312 JP): Fuji Soft’s Tender Offer at JPY1,095
- Prime Market Is Still the Market with the Most Listed Companies Even After 171 Companies Are Removed
Renesas Electronics Placement – Well Flagged US$1.8bn Deal, Accelerated but Index Flows Should Help
- INCJ aims to raise around US$1.8bn via a secondary sell-down in Renesas Electronics (6723 JP). This will be a clean-up trade as INCJ has been paring down its stake.
- The deal is a slightly large one to digest at 12 days of three month ADV and around 6% of current mcap.
- In this note, we will talk about the placement and run the deal through our ECM framework.
Renesas Electronics (6723 JP): INCJ Clean Up; Index Buying Smaller than Expected
- INCJ is selling the last of its stake in Renesas Electronics (6723 JP). This will remove the overhang but could lead to selling in the short-term.
- Renesas Electronics (6723 JP) has outperformed its peers over the last couple of years but valuations are in-line with the peer group (or slightly cheaper).
- The float increase in global indices will coincide with the offering, but the TSE Tokyo Price Index TOPIX (TPX INDEX) float increase will take quite a while.-
Trend Micro BIG Bonanza But Shareholder AND Balance Sheet Structure Matter. N225 Divs Get a Fillip
- Trend Micro Inc (4704 JP) has been under pressure to improve capital allocation after Value Act bought in 2022. In February 2023, Trend announced a weak sauce capital return policy.
- They promised a 100% payout ratio with 70% div payout ratio. But with huge piles of cash and securities, it wasn’t going to be enough, and shareholder structure ALWAYS matters.
- Here it meant Trend Micro was vulnerable to further attack. Today, Trend announced a HUGE capital return with buyback, and a special div and this will excite Nikkei 225 arbs.
P.S. Mitsubishi Construction (1871 JP): Taisei’s Partial Tender Offer
- Ps Mitsubishi Construction (1871 JP)/PSMIC announced a partial tender offer for Taisei Corp (1801 JP) at JPY1,010 per share, a 22.4% premium to the undisturbed price.
- The partial offer is for a minimum of 20.4 million shares (42.94% ownership ratio) and a maximum of 23.8 million shares (50.20% ownership ratio).
- Irrevocables represent a 42.94% ownership ratio, satisfying the minimum acceptance condition. The offer is attractive and represents a ten-year high. The tender offer runs from 10 November to 11 December.
Cybernet Systems (4312 JP): Fuji Soft’s Tender Offer at JPY1,095
- Cybernet Systems Co (4312 JP) has recommended Fuji Soft Inc (9749 JP)’s tender offer of JPY1,095 per share, a 31.8% premium to the undisturbed price (8 November).
- 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 12.28% ownership ratio.
- The offer price is attractive and marginally below the ten-year share price high. The minimum acceptance condition (lower limit) requires a 26.9% minority acceptance rate, which is doable.
Prime Market Is Still the Market with the Most Listed Companies Even After 171 Companies Are Removed
- The baseless confidence of the 177 companies that finally moved to Standard Market that their market capitalization would increase in18 months was nothing more than a waste of time.
- It is fine for a company to aim to be listed on the highest prime market, but high shareholder returns and quality management must come first.
- If the listing criteria for prime market was JPY100 billion market capitalization, the gap with investors who initially expected prime market before the market restructuring would have been much smaller.
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