In today’s briefing:
- Big M3 (2413) Partial TOB As Pasona Sells Control of Benefit One (2412): Really Interesting Dynamics
- I Like Big Bank Buybacks And I Cannot Lie
- Benefit One (2412 JP): M3’s Partial Tender Offer
- EOFLOW/Medtronic Tender: Trading Suspension Lifted, Now for the Hard Part
- FRTIB Switches Benchmarks: +EM/-DM; US$56bn Trade as Asia EM Benefits & HK Loses Out
- Aeon/DCM/Keiyo Deal Changes on DCM TOB for Keiyo – Watch for Market Impact
- StubWorld: Pasona’s Expanding Cash Pile
- Eoflow: Outlook After Trading Resumes on 16 November
- Atlantic Lithium (A11 AU) Knocks Back Major Shareholder’s Offer. Again
- US Fed. Rtir’mt Thrift Board Changes Intl Benchmark, Excludes HK, US$1.6bn HK to Sell, $20bn 1-Way
Big M3 (2413) Partial TOB As Pasona Sells Control of Benefit One (2412): Really Interesting Dynamics
- Today after the close with Benefit One Inc (2412 JP) reporting earnings, M3 Inc (2413 JP) announced a Partial Tender Offer to buy 81.21-83.31mm shares of Benefit One at ¥1600/share.
- That cleans out Pasona, which owns 81.21mm shares. Or does it… Shareholder structure dynamics and the problems they cause later bear some detailed examination.
- This one is going to be a fun special sit.
I Like Big Bank Buybacks And I Cannot Lie
- Today, Sumitomo Mitsui Financial Group (8316 JP) and Mitsubishi UFJ Financial (MUFG) (8306 JP) reported H1 earnings. Mizuho Financial Group (8411 JP) reported yesterday.
- Mizuho raised full-year NP guidance by ~5%, passing the Street. SMFG raised its FY NP guidance 12.2%, also beating the Street. MUFG didn’t raise guidance but H1 saw 71% progress.
- Today, SMFG raised its div, and both SMFG (¥150bn) and MUFG (¥400bn) announced buybacks. Cross-holding unwind progress is waaay lower than we’d like, but capital stronger as a result.
Benefit One (2412 JP): M3’s Partial Tender Offer
- Benefit One Inc (2412 JP) announced a partial tender offer from M3 Inc (2413 JP) at JPY1,600 per share, a 40.0% premium to the undisturbed price.
- The transaction facilitates Pasona Group (2168 JP)‘s exit. The offer is for a minimum of 81.2 million shares (51.16% ownership ratio) and a maximum of 87.3 million shares (55.00%).
- Irrevocables from Pasona represent a 51.16% ownership ratio, satisfying the minimum acceptance condition. The offer is light vs. historical multiples and share prices.
EOFLOW/Medtronic Tender: Trading Suspension Lifted, Now for the Hard Part
- The KRX has completed its review and excluded Eoflow (294090 KS) from the substantive review for listing eligibility. Therefore, trading will resume tomorrow, 16 November.
- The shares should rise on trading resumption as Medtronic’s tender remains in play, KRX’s review supported Eoflow’s business continuity and the short-selling ban-driven market rally.
- Deal break risks remain significant. Medtronic Plc (MDT US)’s long-dated closing date and lack of Eoflow integration job postings suggest it remains concerned about near-term unfavourable court rulings.
FRTIB Switches Benchmarks: +EM/-DM; US$56bn Trade as Asia EM Benefits & HK Loses Out
- The FRTIB has decided to switch its benchmark for the International Stock Index Investment Fund from the EAFE Index to the ACWI IMI ex-USA ex-China ex-Hong Kong Index.
- With around US$68bn invested in the I Fund, this will set off churn among the constituent stocks in 2024. One-way trade is around US$28bn with DM outflows and EM inflows.
- The benchmark shift could be done over a 4 month period with higher trading during periods where liquidity opportunities arise.
Aeon/DCM/Keiyo Deal Changes on DCM TOB for Keiyo – Watch for Market Impact
- DCM Holdings (3050 JP) and Keiyo Co Ltd (8168 JP) and Aeon Co Ltd (8267 JP) signed capital and business tie-up agreements 30+yrs ago. Recently, DCM bought Keiyo.
- Aeon got some money from this and has decided to put that money back into DCM shares.
- That changes both the current dynamics and future shareholder structure. And that leads to interesting questions about the outcome.
StubWorld: Pasona’s Expanding Cash Pile
- A double dose of StubWorld this week as Pasona Group (2168 JP) finally takes the hint to sell (if not exit altogether) its holding in Benefit One Inc (2412 JP).
- Preceding my comments on Pasona/Benefit One are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Eoflow: Outlook After Trading Resumes on 16 November
- On 15 November, the Korea Exchange announced that Eoflow (294090 KS) will start trading again on 16 November.
- The fact that KRX has allowed Eoflow to trade again will be viewed positively by many investors. Plus, the recent temporary ban on short selling should also positively impact Eoflow.
- We believe a higher probability event is for Medtronic to complete a tender offer of Eoflow sometime in 2Q 2024 at about 26,000 won.
Atlantic Lithium (A11 AU) Knocks Back Major Shareholder’s Offer. Again
- Livent (LTHM US)‘s CEO recently said, regarding its merger with Allkem Ltd (AKE AU), that while falling lithium prices put pressure on marginal producers, the sector’s fundamental outlook remains strong.
- And so, another week goes by, and another lithium Offer Down Under unfolds.
- African-Focused lithium play Atlantic Lithium (A11 AU) announced this morning it has twice rejected Offers from South African-based Assore International, its major shareholder. Shares spiked 43% on the news.
US Fed. Rtir’mt Thrift Board Changes Intl Benchmark, Excludes HK, US$1.6bn HK to Sell, $20bn 1-Way
- The Federal Retirement Thrift Investment Board which manages the four major funds in the Thrift Savings Plan for US federal government employees will change benchmark for its International Fund
- This was announced on 14 November. The transition will take place “in 2024.” It entails moving from MSCI EAFE to MSCI All Country World ex-USA ex-China ex-HongKong Investable Market Index.
- The explanation: double the countries, lots more stocks, BUT CHINA! This means selling ~US$1.6bn of HK stocks but US$20bn of one-way flow in total (lots of Japan/UK/Europe to sell)
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