In today’s briefing:
- System Information Co (3677 JP) “MBO” By Bain an Exit Trade for Founder+CEO+Employees
- Kokusai Electric IPO – Don’t Worry, This’ll Be Fine Too
- Updated TOPIX Selldown and Index Flows This Week – Initial TOPIX Selldown of Toshiba NEXT Month
- Quiddity JPX-Nikkei 400 Rebal 2024: End-Sep 2023
- System Information (3677 JP): Bain Backed MBO’s JPY930 Tender Offer
- Nihon M&A: Not Many Catalysts to Move the Stock Price Up
- At the Root of the Diversity Issue Is Traditional Familism in Society and the Workplace
System Information Co (3677 JP) “MBO” By Bain an Exit Trade for Founder+CEO+Employees
- The stock is down more than 50% from its high 3yrs ago. The founder is 79. The CEO is 75. Employees and former directors own another 10%.
- This is an exit vs an MBO. And the Target Side negotiating the exit were rolled by Bain. This is NOT an expensive purchase. Bain’s equity check is 2.3x EBIT.
- But it probably gets done anyway unless someone gets noisy. For that, they’d have to buy a 10-15% stake I expect.
Kokusai Electric IPO – Don’t Worry, This’ll Be Fine Too
- Early last year there were articles suggesting that KKR would IPO Kokusai Electric at a valuation of about ¥700bn.
- A year plus later the company is now set to IPO for something on the order of ¥436bn.
- We are sure KKR is breathing a sigh of relief that they didn’t unload shares 60% higher and can now offer other investors some “value”.
Updated TOPIX Selldown and Index Flows This Week – Initial TOPIX Selldown of Toshiba NEXT Month
- Last week on 20 Sep I published Toshiba Tender Offer Ends Today – Upcoming Index Selldown Schedule and Sunday, The Biggish Sep 2023 “Wednesday-Thursday Trade” With Added Monday/Friday Flavour.
- They were based on an expectation the TSE would announce the initial selldown for Sep-end as they normally would. Unbeknownst to me, on 22 Sep they announced end-Oct.
- The initial TOPIX selldown is 30 Oct, not 28 Sep. This affects expected reverse funding today.
Quiddity JPX-Nikkei 400 Rebal 2024: End-Sep 2023
- JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
- A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
- Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2024 based on trading data as of end-September 2023.
System Information (3677 JP): Bain Backed MBO’s JPY930 Tender Offer
- System Information (3677 JP) has recommended Bain’s tender offer of JPY930 per share, a 21.9% premium to the undisturbed price (27 September).
- 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 50.69% ownership ratio.
- Irrevocables to accept the offer represent a 19.69% ownership ratio. The minimum acceptance condition (lower limit) requires a 37.0% minority acceptance rate. The tender offer is reasonable.
Nihon M&A: Not Many Catalysts to Move the Stock Price Up
- Nihon M&A Center’s share price has dropped more than 50% YTD despite several news media outlets reporting that there has been a surge in M&A activity among Japanese companies.
- At the same time, the Japanese government also issued new guidelines to promote more M&A activities in the nation to boost competitiveness.
- The no. of M&A transactions for the company has continued to grow however, value per transaction has been on a declining trend suggesting these deals are smaller in size.
At the Root of the Diversity Issue Is Traditional Familism in Society and the Workplace
- Increase in the number of non-regular workers is a factor in gender wage disparity and has also put pressure on profit margin since labor was invested in low value-added jobs.
- In Japan, childcare is assumed to be dependent on the efforts of the family, and there is little thought of society solving childcare issues, and government policies reflect this idea.
- Problems also exist on the part of employers, with low rates of men taking childcare leave, and the top reason being an atmosphere that makes it difficult take childcare leave.
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