In this briefing:
- Kosaido (7868 JP) TOB Extended
- StubWorld: PCCW Is “Cheap” but Stub Ops Are Deteriorating
- MODEC: Add
- Panalpina To Have EGM to Approve One Share One Vote
1. Kosaido (7868 JP) TOB Extended
As discussed in previous insights, Kosaido Co Ltd (7868 JP) is currently the subject of a TOB (Takeover Bid) by an SPV established by Bain to acquire all the shares outstanding. This has been discussed in three different insights so far.
❖ Smallcap Kosaido (7868 JP) Tender Offer: Wrong Price But Whaddya Gonna Do?
❖ Kosaido: Activism Drives Price 30+% Through Terms
❖ Kosaido TOB: Situation Gets Weird – Activists+Independent Opposition to MBO
The TOB started as a lowball price TOB with the explanation that the MBO was needed to rehabilitate the printing/information business which makes up three-quarters of consolidated revenue of the company and is the basis upon which the company was founded decades ago.
A read between the lines showed quite quickly that the more ostensible reason for taking the company private was to be able to own 61% of the company which provided the other 25% of consolidated revenue and made up materially all of the operating profit of Kosaido over the past few years. And that business was being bought at just over half of book while the rest of the business was being bought for effectively zero.
My first insight questioned that despite “independent directors” not doing so, and an activist in the form of Yoshiaki Murakami’s firm Reno KK did something about it, quickly buying just under 10% of the company in the two weeks after announcement. On that news, the stock shot up to 30-40% through terms, and fell back, but since it started rising above terms and peaking, it has not fallen below about 15% through terms.
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The New News
YESTERDAY, the directors of Kosaido released an amendment to their Statement of Support of the Tender Offer adding a phrase to the effect that “subsequent to the initial meeting where all the statutory auditors had expressed support, at the Board Meeting on the 25th of February, Independent Statutory Auditor Nakatsuji-[san] expressed his opposition to the Tender Offer.” This follows his notice of opposition on the 19th.
TODAY, the Offeror announced an Amendment to the Tender Offer and was extending its Tender Offer by 7 business days – from 30 business days to 37 business days – which has the effect of changing the Closing Date from March 1 to March 12.
Terms & Schedule of Bain (BCJ-34) Tender Offer for Kosaido Co., Ltd | |
Tender Offer Price | JPY 610 |
Tender Offer Start Date | 18 January 2019 |
Tender Offer Close Date | |
Tender Agent | SMBC Securities |
Maximum Shares To Buy | 24,913,439 shares |
MINIMUM Shares To Buy | 16,609,000 shares |
Currently Owned Shares | 100 shares |
Irrevocable Undertakings | Sawada Holdings’ 3,088,500 shares or 12.40% (includes the holdings at both Sawada Holdings and HS Securities). |
With the shares 20% through terms (¥738/share as I write) despite what appears to be no increase by the main activist in the last two weeks, the likelihood retail will tender at ¥610/share this looks like a situation where the deal may fail unless there is a bump.
But it would still be up for grabs.
2. StubWorld: PCCW Is “Cheap” but Stub Ops Are Deteriorating
This week in StubWorld …
- Select media ops (Free TV and OTT), together with substantial losses booked to other businesses and eliminations, continue to weigh heavily on PCCW Ltd (8 HK)‘s stub ops.
Preceding my comments on PCCW and other stubs are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.
3. MODEC: Add
Towards the end of 2018 Modec Inc (6269 JP)‘s share price dropped 46.5% as the price of crude oil also cratered, falling 44.4% . Since that plunge, the stock price has rebounded 53.9% as the company posted excellent results at 4Q and guidance, while conservative, was for continued healthy earnings.
Having visited the company today, we believe earnings should continue to be strong and actually strengthen over the next few years with MODEC likely to start running into capacity constraints over the course of this year.
4. Panalpina To Have EGM to Approve One Share One Vote
Yesterday, Panalpina Welttransport Holding (PWTN SW)‘s largest shareholder with 45.9% of shares out, the Ernst Göhner Foundation, made a formal request to the directors of Panalpina to hold an Extraordinary General Meeting to be held prior to the Annual General Meeting scheduled for early May 2019 so that the Articles of Association be changed – specifically Article 5 – such that the limit on transfer rights and voting rights enshrined in Article 5 be abolished and a “One Share One Vote” structure be adopted.
The directors complied with this request.
The limit to now has been that Shareholders have their votes capped at 5% of shares outstanding EXCEPT FOR the votes of the Ernst Göhner Foundation which were deemed “grandfathered” prior to the change. The directors have the right to grant exceptions to this 5% rule, as discussed in The Panalpina Conundrum a bit over a week ago, but have not, leaving the combined 24+% total held by Cevian and Artisan Partners with only ~11.6% of the vote.
This move by the EGF is both “sneaky” AND interesting (and bullish) news. Given the current shareholder vote structure, it wouldn’t be impossible for the EGF to vote it down in the EGM, but I think EGF very specifically do not want to vote it down because the alternative is worse. But getting this passed would suddenly change the outlook for a Panalpina/Agility deal or any deal which required significant issuance.
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