Daily Brief Japan: Ryoyo Electro, TSE Tokyo Price Index TOPIX, Intloop and more

In today’s briefing:

Ryoyo (8068) – Ryosan (8140): Recent and Former Activist Targets To Merge

Today post-close, Ryoyo Electro (8068 JP) and larger equity affiliate (20.1%) Ryosan Co Ltd (8140 JP) announced their final Management Integration Plan (merger by holdco) after signalling a deal May23.
Activist-Ish-Y Silchester sold their stake in Ryosan to Ryoyo in February at a 20% premium. Activist Murakami-san had a top10 Ryosan stake end-March, went substantial 27 June, now owns 10%.
Both low-margin/ROE electronics traders have been subject to activist campaigns over the years. Both “survived”. Now they are banding together to be a bigger independent low-margin electronics trader.

In TOB case from a parent company, managers of acquired company finally realized that there’s litigation risk from shareholders if there’s flaw in their fiduciary duty to maximize shareholder interests.
In the past, acquisitions with negative goodwill were conducted, but a TOB at a price below book value would require plausible rationales. TSE’s request to raise P/B may have affected.
In addition to the increasing dissolution of parent-subsidiary listings, TOBs (or sales) of equity-method affiliates are expected to increase, as in the case of Daiken Kogyo.

Business model transforming – INTLOOP is an upstream consulting services firm utilizing both freelance and in-house consultants primarily as a competitive ‘hybrid’ subcontractor offering
It has successfully sustained high double-digit sales growth and embarked on a strategic transformation to become a full-service consultancy.
This is being driven by bolt-on M&A starting with the 58.3% acquisition of DICS Holdings in September 2023 and accelerated recruitment to grow its in-house consultant resources.

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