In today’s briefing:
- 7 & I (3382) – York Holdings Sale Process, Timeline, Nuances
- Kioxia (285A JP) IPO: The Bear Case
- Merger Arb Mondays (02 Dec) – Shinko, WealthNavi, AVJennings, SG Fleet, Latin Res, Get Nice, GA Pack
- Japan CorpGovReports: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Dec24), TSE Updates
- (Mostly) Asia M&A, Nov 2024: Net One System, Amcor/Berry, I D & E Holdings, SG Fleet, Macromill
- P/B Reform: Effective Disclosure to Include that “going Private” Is an Option
- ECM Weekly (2nd Dec 2024) – Kioxia, FineToday, MNC Solutions, JST, Pateo, Carraro, Hulic, Sanrio
- Megmilk Snow Brand (2270 JP): Coverage initiation,1H FY03/25 flash update
7 & I (3382) – York Holdings Sale Process, Timeline, Nuances
- The sale process of Seven & I Holdings (3382 JP) “unit” York Holdings, with 31 sub-units, has started. 7+ bidders bid in Round 1. Due dili follows then Round 2.
- I expect SST+support ops get sold, and the specialty stores get carved out. I expect the deal to get decided by end-Feb 2025. Noises about real estate enhancement are encouraging.
- This is still all to the good, so I include a Gratuitous Chart Showing 7&i’s Up-And-To-The-Rightness
Kioxia (285A JP) IPO: The Bear Case
- Kioxia Holdings (285A JP) is a leading player in the NAND flash memory market. It will list on 18 December and seek to raise up to US$740 million.
- In Kioxia (285A JP) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The bear case rests on unrealistic long-term financial model assumptions, market share losses, high customer concentration risk, volatile gross margin due to JV and weak FCF profile.
Merger Arb Mondays (02 Dec) – Shinko, WealthNavi, AVJennings, SG Fleet, Latin Res, Get Nice, GA Pack
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: WealthNavi (7342 JP), Shanghai Henlius Biotech (2696 HK), Shinko Electric Industries (6967 JP), Get Nice Financial Group Ltd (1469 HK), Arcadium Lithium (LTM AU), Canvest.
- Lowest spreads: Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks & System Integr (1973 JP), Elematec Corp (2715 JP), I-PEX (6640 JP).
Japan CorpGovReports: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Dec24), TSE Updates
- TSE-Listed companies are asked to file “Management Conscious of Capital Cost/Stock Price” awareness reports/policies. Many have. Some are still working on it. And policies change, and CGR reports are updated.
- 344 new CGRs were filed since 31 October. Our tools show every report, links to every document, and now a new diff file tool. Input a name, see the changes.
- The TSE Council for the Followup to Market Restructuring met a month ago. They want more progress and more fairness in fair takeovers. Worth reading the docs (here).
(Mostly) Asia M&A, Nov 2024: Net One System, Amcor/Berry, I D & E Holdings, SG Fleet, Macromill
- For the month of November 2024, 14 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$15bn.
- The average premium for the new transactions announced (or first discussed) in November was ~44%. The average premium YTD is ~43%.
- This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.
P/B Reform: Effective Disclosure to Include that “going Private” Is an Option
- Since there’s little confidence that merely disclosed share buybacks and medium-term management plans will increase corporate value in future, it’s natural that institutional investors’ evaluation of these plans is low.
- For companies that develop budgets and plans each January, the key is to incorporate into their budgets the use of cash that will ensure future growth in corporate value.
- For companies that lack the time to translate “mid-term management plan” into strategy to increase corporate value within two months, including “going private is an option” is an effective disclosure.
ECM Weekly (2nd Dec 2024) – Kioxia, FineToday, MNC Solutions, JST, Pateo, Carraro, Hulic, Sanrio
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPOs front, listing in the past week didn’t do much, while a number of comapnies are still looking to beat the year end deadline.
- On the placements front, there were a number of secondary selldowns in Japan.
Megmilk Snow Brand (2270 JP): Coverage initiation,1H FY03/25 flash update
- Revenue for 1H FY03/25 was JPY311.7bn (+2.0% YoY), with operating profit at JPY11.8bn (+5.1% YoY).
- Dairy Products segment revenue was JPY128.5bn (+1.5% YoY), operating profit decreased to JPY4.5bn (-11.7% YoY).
- Beverages and Desserts segment revenue was JPY136.7bn (+3.5% YoY), operating profit increased to JPY4.9bn (+33.9% YoY).
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