In today’s briefing:
- JAPAN ACTIVISM: Activist Elliott Takes on Mitsui Fudosan (8801)
- The Next Step in Lawson’s Big Boots Adventure – KDDI and MitCorp to Take It Private
- India: Free Float Changes & Passive Flows in February
- Lawson (2651 JP): KDDI Corp (9433 JP) Pre-Conditional Tender Offer at JPY10,360
- Cheng Family Seeks Board Control Of Giordano (709 HK)
- Oriental Land: A Storm Brewing from Activist Coalition
- STAR100 Index Rebalance Preview: High Risk/Return Trade Setup
- L’Occitane (973 HK): Blackstone Pondering an Offer
- Red 5/Silver Lake: US$1.5bn Aussie Gold Merger
- NIFTY NEXT50 Index Rebalance Preview: Potential Adds Continue to Run
JAPAN ACTIVISM: Activist Elliott Takes on Mitsui Fudosan (8801)
- The FT carries an article this AM saying Elliott Management have built a stake in Mitsui Fudosan (8801 JP) and has asked it to undertake measures to increase ROE.
- Measures requested apparently include a very large buyback and a demand the company sell down its stake in Oriental Land (4661 JP). The article is worth reading.
- Shares are up sharply on this news. The fund was in the news last year about this time regarding Dai Nippon Printing (7912 JP). I’d expect more noise to come.
The Next Step in Lawson’s Big Boots Adventure – KDDI and MitCorp to Take It Private
- Today, just before the close, the Nikkei sprung a headline saying KDDI Corp (9433 JP) would take over Lawson Inc (2651 JP). The stock immediately headed to limit up.
- Post-Close, details emerged. KDDI will buy the 50% that MitCorp does not own, this will become a 50/50 JV. TOB launch at ¥10,360 will be in April. Squeezeout in September.
- This appears to be the Next Step in Lawson’s Big Boots Adventure. The premium is too light. The price is too low. And that is not counting the synergies.
India: Free Float Changes & Passive Flows in February
- Companies in India have disclosed their shareholding pattern as of end-December in January. There are companies with significant float changes from end-September and/or end-December.
- The changes in free float could be reflected in domestic and global indices over the next few weeks and months resulting in action from passive trackers.
- There are 15 stocks that could have passive inflows from global trackers while 9 could see passive outflows in February.
Lawson (2651 JP): KDDI Corp (9433 JP) Pre-Conditional Tender Offer at JPY10,360
- Lawson Inc (2651 JP) has recommended a pre-conditional tender offer from KDDI Corp (9433 JP) at JPY10,360 per share, an 18.8% premium to the undisturbed (5 February).
- The pre-conditions relate to regulatory approvals in Japan, China, South Korea, and the EU. The offer is expected to start in April, suggesting no significant issues, particularly with SAMR approval.
- Based on the irrevocables, the minimum acceptance condition requires a 30.2% minority acceptance rate, achievable as the offer represents an all-time high.
Cheng Family Seeks Board Control Of Giordano (709 HK)
- Some 17 months after the Cheng Family failed to secure 50%+ of Giordano International (709 HK), the family are now calling an SGM to install friendly directors.
- Sino Wealth, a Cheng family’s vehicle with 24.06% of shares, has requisitioned an SGM to remove CEO Peter Lau, and install Colin Currie as CEO, plus appoint three other NEDs/INEDs.
- If this were to come to pass, the family would have (almost) effective control of the board. The vote will be close. And David Webb is now below 5%.
Oriental Land: A Storm Brewing from Activist Coalition
- Activist investor, Elliott Management has acquired over a 2% stake in Mitsui Fudosan (8801 JP) and is urging it to sell its 6% stake in Oriental Land (4661 JP).
- Elliott appears to have identified the path of least resistance, as Mitsui Fudosan had already indicated a willingness to sell its Oriental Land shares last year.
- If Elliott’s campaign proves successful, it will inadvertently benefit Palliser, which is currently challenging Keisei Electric Railway Co (9009 JP) with a similar proposal.
STAR100 Index Rebalance Preview: High Risk/Return Trade Setup
- The review period for the March rebalance ended 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
- There are 10 stocks in inclusion zone and 11 in deletion zone. There should be 10 changes since that is the cap for the maximum changes at a single rebalance.
- The potential adds and deletes are down between 37-47% over the last 6 months and a long/short trade could provide superior risk-adjusted returns.
L’Occitane (973 HK): Blackstone Pondering an Offer
- Bloomberg reports that L’Occitane (973 HK) draws takeover interest from Blackstone (BX US), which is considering partnering with Chairman and largest shareholder Reinold Geiger.
- Blackstone needs an attractive takeover premium due to the presence of significant disinterested shareholders (Mr. Geiger and Acatis KVG).
- Shareholders will be wary of the latest rumour due to Mr Geiger’s aborted offer on 4 September 2023. Nevertheless, the valuation is undemanding compared to peer multiples.
Red 5/Silver Lake: US$1.5bn Aussie Gold Merger
- Aussie gold miners Red 5 Ltd (RED AU) and Silver Lake Resources (SLR AU) have announced a “merger of equals” via a Scheme of Arrangement.
- Red is offering 3.434 new shares for every SLR share, and will hold ~51.7% of the merged entity, with SLR shareholders holding the remaining 48.3%.
- This has the unanimous backing of both boards. Yet SLR appears to be given short shrift on the merger ratio. Plus SLR holds ~11.9% of shares out in Red.
NIFTY NEXT50 Index Rebalance Preview: Potential Adds Continue to Run
- With the review period for the March rebalance complete, there could be 6 potential changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) using the current index methodology.
- Estimated one-way turnover is 13.9% resulting in a one-way trade of INR 28.6bn. Four inclusions will have over 1x ADV to buy; five deletions will have 2.5x+ ADV to sell.
- The potential adds have outperformed the potential deletes by 28.6% over the last month. With positioning from a rebalance perspective mostly done, gradually unwind over the next few weeks.
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