In today’s briefing:
- Aeon (8267) Wants To Buy a Bigger Stake in Tsuruha (3391); What Does Tsuruha Want?
- Benesse (9783) – Tender Offer To Launch; No Change in Terms (¥2,600/Share)
- Japan Activism – Bumpity Bumpity – Lowball Macnica Bid for Glosel (9995) Is Bumped! (+16.3% to ¥750)
- Benesse Holdings (9783 JP): EQT-Backed MBO Offer Unchanged at JPY2,600
- Oriental Land: Earnings Preview
- Glosel (9995 JP): Murakami’s Tactics Result in Macnica (3132 JP) Bumping to JPY750
- Japanese Laggard Opportunity #3: Paltac Corporation (8283 JP)
- Is the Deflationary Mindset of Managers Still Prevailing?
Aeon (8267) Wants To Buy a Bigger Stake in Tsuruha (3391); What Does Tsuruha Want?
- Aeon Co Ltd (8267 JP) owns 13% of Tsuruha Holdings (3391 JP). Oasis owns 13% too. Oasis ran a governance campaign but lost last summer’s AGM. Aeon supported Tsuruha.
- Tsuruha shares popped in November when Tsuruha said it was looking at its strategic options. BBG reported PE firms were circling. Now Aeon wants to buy Oasis’ stake.
- That would put Aeon in a near-blocking position without consolidating. And it would mean minorities stayed minorities. The real question is whether this is what Tsuruha wants.
Benesse (9783) – Tender Offer To Launch; No Change in Terms (¥2,600/Share)
- The “MBO” for Benesse traded through terms from the 6th day post-announcement onwards. 37% total traded since announcement, 20% since that 6th day.
- The deal as announced 10 November was entirely too cheap. It was somewhat egregious if you look through the balance sheet. Plus there was a free museum on top.
- But to no avail. There is no bump. There have been no activists peeping above the parapet (yet). It isn’t impossible to block, but if nobody shows their face…
Japan Activism – Bumpity Bumpity – Lowball Macnica Bid for Glosel (9995) Is Bumped! (+16.3% to ¥750)
- Two months ago, Macnica Holdings Inc (3132 JP) launched a tender on semiconductor trading house Glosel (9995 JP). OK, but… it was too cheap at 0.71x book. Why?
- Glosel is special because it has three main assets. 1) 61% of net assets are inventory (<3mos), 2) 34% of net assets are net receivables (<3mos), 3) 8+% is securities.
- It took two months to get approvals in place and two months of trading well through terms, and so now the terms have been bumped 16%. Thank Murakami-san.
Benesse Holdings (9783 JP): EQT-Backed MBO Offer Unchanged at JPY2,600
- Benesse Holdings (9783 JP) notes that the pre-condition for EQT-backed MBO has been satisfied. The offer price remains unchanged at JPY2,600 per share, a 45.1% premium to the undisturbed price.
- EQT has noted a possibility of extending the tender offer close from 4 to 13 March, which suggests a limited appetite to bump the offer.
- The shares are trading 1.3% above terms. A 51% minority acceptance rate and no competing bidder indicate an unfavourable risk/reward profile – a 27% downside on deal break.
Oriental Land: Earnings Preview
- In 3QFY24, Oriental Land (4661 JP)‘s revenue may fall short of the consensus estimate by approximately 3%, and its OP could be about 6% below the consensus.
- Despite revising up its annual guidance in October 2023, the share price has not surpassed its previous highs since June of last year.
- As such, a minor deviation from consensus, as we anticipate, has the potential to significantly impact price perfromance.
Glosel (9995 JP): Murakami’s Tactics Result in Macnica (3132 JP) Bumping to JPY750
- Glosel (9995 JP) has recommended Macnica Holdings Inc (3132 JP)’s revised tender offer of JPY750 per share, a 16.3% premium to the previous JPY645 offer.
- Murakami’s clever manoeuvring to build a 12.67% stake and propose a JPY750 competing offer has forced Macnica to bump its offer.
- The minimum acceptance condition requires a 66.7% minority acceptance rate. This acceptance rate is achievable because the offer is attractive and Murakami is supportive.
Japanese Laggard Opportunity #3: Paltac Corporation (8283 JP)
- Paltac Corporation (8283 JP) is a good candidate to boost its shareholder value via share buybacks as it net cash and has fairly low P/BV and PE
- Management has elaborated a detailed plan to boost its P/BV ratio, with targets to boost revenues and profit margins, as well as a 30% dedicated payout for dividends
- Our fair value is JPY4750 (3% UPSIDE) pegged to 14.7x (its LT mean) FY2024 earnings; as FY2024 earnings guidance is a lowly 5%. Management needs to do more
Is the Deflationary Mindset of Managers Still Prevailing?
- Looking at BOJ’s fund flows for private non-financial corporations for 4 cumulative quarters, Cash and Deposits have increased, and Outward Direct Investment has increased steadily as a destination for cash.
- The average dividend payout ratio for listed companies has remained flat, while both ROE and DOE have declined slightly, which may reinforce the view that shareholder returns are not sufficient.
- With cash on hand still increasing while capital expenditures have not grown much, the use of cash is expected to remain a focus of discussion next fiscal year.
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