Daily Brief Japan: Shinko Electric Industries, Inageya Co Ltd, Softbank Group and more

In today’s briefing:

Shinko Electric (6967 JP): Widening Spread Is an Opportunity
Inageya (8182 JP): Share Exchange Offer from USMH (3222 JP)
SoftBank (9984 JP): Arm Out-Stretched (On Valuation) And Is JPY Depreciation Largely Done?

Shinko Electric (6967 JP): Widening Spread Is an Opportunity

Shinko Electric Industries (6967 JP)‘s pre-conditional tender offer from the JIC alliance is JPY5,920 per share. The gross spread widened from a low of 3.1% on 14 March to 7.0%.
The widening spread can be attributed to China SAMR approval timing, earnings risk, Ibiden Co Ltd (4062 JP)’s material underperformance lowering the break price and a large fund liquidating positions.
The deal break risks remain low with the timing remaining the key risk. The current 7.0% spread is an attractive opportunity to add.

Inageya Co Ltd (8182 JP) announced a share exchange offer by United Super Markets (3222 JP) at 1.46 USMH shares per Inageya share.
The share exchange aligns with Aeon Co Ltd (8267 JP)’s well-flagged intention of making Inageya a wholly-owned subsidiary of USMH.
Aeon’s 50%+ shareholding in Inageya and USMH facilitates the two EGM votes. The deal metrics are broadly fair for both sets of shareholders.

Arm – which we estimate accounts for 45% of SoftBank group’s equity value – is experiencing limits to its “growth at any price” stock status; the shares fell 12% yesterday
The JPY’s depreciation is supportive of the group NAV, but with the Fed’s hawkish stance well known and BoJ expected to raise interest rates, JPY weakness may be largely done
SoftBank shares trade at a wide 53%+ discount to the estimated NAV; yet we see downside risks to Arm’s valuation, along with the potential for JPY weakness to reverse

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