In today’s briefing:
- 7&I (3382) Ito Family MBO – New Urgency for ACT
- Integrated Design & Engineering (9161 JP): Tokio Marine (8766 JP) Tender Offer at JPY6,500
- I D & E Holdings (9161 JP) Gets a TOB Offer from Tokio Marine at +63% (¥6,500) – Probably Done
- Asics (7936) | Upgraded Targets on Fashion Pivot
- Santen Pharmaceutical (4536 JP): Subdued H1 Performance; FY25 Guidance Reiterated; Robust Pipeline
- Japan Elevator Service Holdings (6544 JP) – Demonstrating High-Quality Characteristics
- Mash Buys into LeSportsac with Itochu
- Market Shakeout Should Come with Business Portfolio Restructuring Especially for Small-Cap Companies
- D. Western Therapeutics Institute (4576 JP) – News Flash – November 19, 2024
7&I (3382) Ito Family MBO – New Urgency for ACT
- Days ago we got a dramatic headline about Ito family scion ITO Junro and his family company Ito Kogyo making a bid for Seven & I Holdings (3382 JP).
- The stock popped, then fell. Details were not clear. Was the ¥9trln an EV number? A market cap? Was he serious? How would he get funding. Skepticism was rife.
- Today we get more headlines from NHK. who says the family wants to raise ¥8trln to take 7&i private by end-Feb 2025.
Integrated Design & Engineering (9161 JP): Tokio Marine (8766 JP) Tender Offer at JPY6,500
- Integrated Design & Engineering Holdings (9161 JP) has recommended Tokio Marine Holdings (8766 JP)’s tender offer at JPY6,500 per share, a 63.3% premium to the last close.
- The offer is attractive as it represents an all-time high, above NAV (including latent real estate gains) and above the midpoint of the IFA DCF valuation range.
- Despite the high required minority acceptance rate, an attractive offer facilitates deal completion. The tender runs from 20 November to 15 January 2025 (35 business days).
I D & E Holdings (9161 JP) Gets a TOB Offer from Tokio Marine at +63% (¥6,500) – Probably Done
- In 2023, Integrated Design & Engineering Holdings (9161 JP) was created as a technical listing, succeeding Nippon Koei (1954 JP). It has been listed for decades.
- On Tuesday 19 November, Tokio Marine Holdings (8766 JP) announced an agreed/supported deal to buy out Integrated Design & Engineering Holdings (9161 JP). The register is open. Should be easy.
- It’s a nice high price for a boring stock, but it is cheap. They are NOT overpaying, but I don’t see who would want to run interference on this.
Asics (7936) | Upgraded Targets on Fashion Pivot
- ASICS has demonstrated exceptional brand rejuvenation and profitability improvements, with an ambitious 2026 plan that capitalizes on high-growth lifestyle categories
- However, the pivot toward fashion and luxury markets introduces heightened execution risk.
- While the upgraded MTP targets are commendable, much of the good news appears to be priced in.
Santen Pharmaceutical (4536 JP): Subdued H1 Performance; FY25 Guidance Reiterated; Robust Pipeline
- Santen Pharmaceutical (4536 JP) witnessed flat revenues while core operating profit and net profit declined in H1FY25. Overseas business grew 6% YoY and remained the main driver.
- Santen reiterated FY25 guidance as overseas markets are performing well, reviewed impact of generics in Japan, and continued progress in company-wide cost optimizations.
- Santen signed collaboration agreement for ARVN001 suprachoroidal injectable suspension, a treatment for uveitic macular oedema, for exclusive commercialization rights in China, excluding Hong Kong, Macau, and Taiwan.
Japan Elevator Service Holdings (6544 JP) – Demonstrating High-Quality Characteristics
- Ongoing growth and margin expansion – The company continues to display positive characteristics of a high-quality franchise business with growth opportunities, with Q1-2 FY3/25 results showing sustained double-digit sales (+17.0% YoY) and OP growth (+30.6% YoY).
- Maintenance contracts grew 13.8% YoY organically, and Modernization units remain on a positive trajectory with strong underlying demand given the company’s competitive advantage as an independent provider.
- The company has maintained FY3/25 guidance; we believe the earnings outlook for H2 FY3/25 remains positive given the increasing utilization at the JIK (JES Innovation Center Kansai) and geographic reach, and ongoing productivity enhancement of its engineers resulting in operating leverage.
Mash Buys into LeSportsac with Itochu
- Seven & I Holdings (3382 JP) isn’t the only consumer-facing business Itochu wants more interest in. It has also been mopping up multiple fashion and sports brands recently.
- The latest is LeSportsac which Itochu already owned the global rights for but which didn’t really translate into success in Japan..
- It will now run the brand with Mash Holdings – Itochu is an increasingly important partner for Mash – which is likely to IPO in a few years.
Market Shakeout Should Come with Business Portfolio Restructuring Especially for Small-Cap Companies
- While good for small-cap stocks to disclose stock price improvement plans, which is the minimum to be eligible for TOPIX, few global investors can invest in company of this size.
- Since many Japanese small-cap companies have diversified businesses and compete with numerous companies for a market that is not large, forcing low profit margins, a market shakeout is necessary.
- The key is whether small cap companes that are beyond the reach of overseas investor engagement can execute a business portfolio review on its own initiative.
D. Western Therapeutics Institute (4576 JP) – News Flash – November 19, 2024
- DWTI announced topline results from its Phase 2B clinical trial of its H-1337 Ophthalmic Solution, for the treatment of elevated intraocular pressure in patients with primary open-angle glaucoma or ocular hypertension.
- This study was a double-masked, active- controlled, dose-response study in 201 subjects with primary open-angle glaucoma or ocular hypertension, where subjects were dosed for 28 days during the period from August 2023 – August 2024.
- The study was designed to evaluate the ocular safety and hypotensive efficacy of three doses of multi-kinase inhibitor H-1337 Ophthalmic Solution: 0.6% twice-daily, 1.0% twice daily, and 1.0% once-daily.
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