In today’s briefing:
- Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying
- JIC Consortium Possibly In Line to Win Shinko At “¥800bn”, Which Makes You Go 🤔…
- Benefit One (2412): M3 Extends For a Full Month
- Shinko Electric (6967 JP): JIC’s Pre-Conditional Tender Offer at JPY5,920
- JIC Deal For Shinko Electric Is LIGHT, and There’s Room To Complain, But Will Trade Wide
- NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade
- Hollysys Gives Ascendent Capital The Nod. “Agnostic” Shareholders Will Approve
- HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)
- Recruit (6098 JP) Buyback – It’s Big But Not THAT Big; Value Act Effect Vs Corp Selldown Vs Multiple
- Hollysys (HOLI US): Merger Agreement Leaves the Door Ajar for a Higher Recco Offer
Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying
- There could be a US$4.6bn secondary placement in Denso Corp (6902 JP) before year-end as Toyota Motor (7203 JP), Toyota Industries (6201 JP) and Aisin Corp (7259 JP) unwind cross-holdings.
- Denso Corp (6902 JP) was down 4.85% yesterday (and even more intra-day) and the stock could remain under pressure for the next few weeks.
- There will be limited passive buying in conjunction with the secondary offering and active investors will need to buy a lot of stock.
JIC Consortium Possibly In Line to Win Shinko At “¥800bn”, Which Makes You Go 🤔…
- A Nikkei article today suggested that Fujitsu had granted preferential negotiating rights to buy Shinko Electric Industries (6967 JP) to a JIC-led consortium (including DNP and Mitsui Chem) for ~¥800bn.
- This happened late in the afternoon session. Shares spiked 5+%, then were halted. A gray market ensued.
- A Bloomberg article provided more info, and the same info nuanced slightly differently. The wording in yet other articles was interesting enough that it is worth discussing.
Benefit One (2412): M3 Extends For a Full Month
- Today after the close, Benefit One Inc (2412 JP) amended its Tender Offer Target Opinion Statement to note that Dai Ichi Life had made a proposal to acquire 100%.
- To allow the Board time to evaluate this proposal, the Company requested a Tender extension. Bidder M3 Inc (2413 JP) was obliged to extend 10 days. They extended 20 days.
- This tells us a bunch of things. It is worth thinking about what happened to get here.
Shinko Electric (6967 JP): JIC’s Pre-Conditional Tender Offer at JPY5,920
- After months of speculation, Shinko Electric Industries (6967 JP) has recommended the JIC alliance’s preconditional tender offer of JPY5,920 per share, an 18.9% premium to the undisturbed price (31 May).
- The pre-condition relates to regulatory approvals in Japan, China, Korea, and possibly Vietnam. The offeror may waive the pre-condition. The offer is long-dated and expected to start in August 2024.
- The minimum acceptance condition requires a 33.3% minority acceptance rate. Despite the low 7.1% premium to the last close, the offer resulted from a competing bidding process.
JIC Deal For Shinko Electric Is LIGHT, and There’s Room To Complain, But Will Trade Wide
- 29 minutes after I published a long, musing piece on the possibilities of structure and announcement later this week, JIC and Shinko Electric announced 5 minutes before midnight.
- A warning for the future: The Nikkei and every other media outlet got the number wrong. It is NOT a total acquisition cost of “around ¥800bn”. It is under ¥700bn.
- It IS a split deal. And if JIC won with that price, it tells you something about the state of the market and future deals in the space.
NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade
- There were 6 inclusions and 6 exclusions for the Nasdaq-100 Stock Index (NDX INDEX) at the annual December reconstitution. Then another ad hoc change was added on top of that.
- Impact on the inclusions ranges from 1-8 days of ADV to buy, while the impact on the deletions varies from 0.7-2.6 days of ADV to sell.
- Apart from the constituent changes, there are expected to be inflows in Tesla Motors and Broadcom and outflows from Apple, Microsoft, Amazon.com and NVIDIA.
Hollysys Gives Ascendent Capital The Nod. “Agnostic” Shareholders Will Approve
- Hollysys Automation Technologies (HOLI US)‘s board persistent stonewalling was effectively terminated after the its court injunction was dismissed last month. An SGM will now take place sometime next month.
- A firm merger agreement was expected this month, and Hollysys announced yesterday Ascendent Capital has emerged as the preferred suitor with a (revised) US$26.50/share Offer.
- This looks to be (finally) all stitched up. Trading wide-ish to terms. Get involved.
HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)
- Tongcheng Travel Holdings (780 HK) is expected to replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the March review.
- Constituent changes and capping changes will result in a one-way turnover of 2.32% and that will result in a round-trip trade of US$628m.
- Short interest on Tongcheng Travel Holdings (780 HK) is near its lows while there has been some recent short covering in GDS Holdings (9698 HK).
Recruit (6098 JP) Buyback – It’s Big But Not THAT Big; Value Act Effect Vs Corp Selldown Vs Multiple
- Last month, Reuters reported that activist-ish investor Value Act Capital Management had bought a stake in Recruit Holdings (6098 JP) and separately in Expedia Group, Inc. (EXPE US)).
- It was “revealed” in a letter to its clients. And there were reasons stated why Value Act thought Recruit was worth a lot more than it was trading for.
- Today, Recruit announced an on-market buyback for ¥200bn. That’s nice. But it is not enormous, and it may signal other info, and it is worth understanding details and context.
Hollysys (HOLI US): Merger Agreement Leaves the Door Ajar for a Higher Recco Offer
- Bloomberg reports that the Recco consortium is considering “a significantly higher” Hollysys Automation Technologies (HOLI US) offer than Ascendent’s US$26.50 binding offer.
- The Hollysys 6-K filling outlines the closing conditions – a simple majority YES vote, regulatory approvals, minimum net cash (waivable) and a 10% maximum dissent condition (waivable).
- Recco is a committed suitor and will not easily give up. The merger agreement clauses point to a Recco offer floor of US$27.03 and a ceiling of US$30.48.
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