In today’s briefing:
- NEC Network (1973 JP) Tender Offer – The Landscape Has Fully Changed
- Kansai Electric Power (9503 JP) – Huge Offering Is Smaller Now; Reward/Risk Skews Upwards
- [JAPAN ACTIVISM] Keisei Elec (9009) – Murakami Stake Causes Pop But the Oppty Is Still Unconvincing
- StubWorld: Keisei Electric’s Big Gain On Activist Stake News
- Sanrio (8136 JP) Large Secondary Offering – Don’t Say Hello Kitty! Too Soon
- Oriental Land ToSTNeT-3 Buyback From Keisei (9009) – It’s In the Plan And Looks Better Than It Is
- Sanrio (8136 JP) Placement: Potential Global Index Migration Leads to Interesting Dynamics
- Sanrio (8136 JP): A US$840 Million Secondary Offering
- Sanrio Placement – Opportunistic >US$800m Selling at All-Time Highs
- Hyundai Motor Securities Announces a Rights Offering Involving a 49% Shares Dilution
NEC Network (1973 JP) Tender Offer – The Landscape Has Fully Changed
- On 29-October, NEC Corp (6701 JP) announced a low-ball TOB to buy out subsidiary Nec Networks & System Integr (1973 JP). It deserved activism, but finding an activist was tough.
- On 7 November, it got an activist, and I wrote on 8-November the Landscape Had Changed that they might have bought 6mm shares more in 5 days. They bought 8.4mm.
- The Landscape Has FULLY Changed. The details now matter quite a bit. NEC has two basic choices. Neither are that palatable. But Target Advisor DCF was ¥3,073-4,688 without synergies.
Kansai Electric Power (9503 JP) – Huge Offering Is Smaller Now; Reward/Risk Skews Upwards
- On 13 November, Kansai Electric Power (9503 JP) announced an equity offering to raise capital for capex expenditures over the next several years. It is significantly dilutive.
- The shares responded by falling 23% to 8-months lows of ¥1,850 last Thursday and Friday. That puts the stock at the same forward PER post-offering as it was pre-offering.
- That’s probably not an awful place to own now that the stock will have been slightly de-risked/de-levered.
[JAPAN ACTIVISM] Keisei Elec (9009) – Murakami Stake Causes Pop But the Oppty Is Still Unconvincing
- 13mos ago, activist investor Palliser Capital spoke at a conference about the value offered by Keisei Electric Railway Co (9009 JP) due to its large stake in Oriental Land (4661).
- Keisei outperformed OLC by 30% over 3.5mos. Then it fell all the way back, and more, over the next five months. Asset sale, buyback, AGM proposals. Meh.
- Nov 25th, Toyo Keizai wrote activist Murakami-san had acquired stakes of <5% in Keikyu Corp (9006 JP) and <1% in Keisei Electric Railway Co (9009 JP). Shares in both jumped.
StubWorld: Keisei Electric’s Big Gain On Activist Stake News
- Keisei Electric Railway Co (9009 JP) gained 13.8% yesterday on news that activist investor Murakami-san had acquired a stake.
- Preceding my comments on Keisei Electric 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%.
Sanrio (8136 JP) Large Secondary Offering – Don’t Say Hello Kitty! Too Soon
- Today, Sanrio (8136 JP) announced a large secondary offering where banks would sell down shares and the Tsuji family would sell a few shares at the margin.
- The stock has been on a rocket for two years. It’s expensive. Growth slows next year. Will this cause momentum to turn? Maybe. The offering is 38% of Max RWF.
- I think one could give this a pass, and even sell it if it opens down small.
Oriental Land ToSTNeT-3 Buyback From Keisei (9009) – It’s In the Plan And Looks Better Than It Is
- In October 2023 and then in early 2024, activist Palliser Capital demanded that Keisei Electric Railway Co (9009 JP) sell down its stake in Oriental Land (4661 JP) to sub-15%.
- Keisei in March sold 1% of OLC but in doing so, rejected the concept of removing equity affiliate status. They could go to a level just >15%, or just >20%.
- Today, OLC announced a ToSTNeT-3 buyback of 18mm shares – the total for the 2yrs to Mar-26 announced (p19) in April. Keisei will sell and will stay above 20%.
Sanrio (8136 JP) Placement: Potential Global Index Migration Leads to Interesting Dynamics
- Overnight, Sanrio (8136 JP) announced a placement of 25.87m shares to unwind crossholdings and improve corporate value. There is an overallotment option for another 3.88m shares.
- There will be limited passive buying in the short-term and the shares offered is a large percentage of real float of the stock.
- However, Sanrio (8136 JP) is the highest ranked non-constituent stock in a global index universe and a drop in the stock price could be used to accumulate positions.
Sanrio (8136 JP): A US$840 Million Secondary Offering
- Sanrio (8136 JP) has announced a secondary offering of up to 25.9 million shares (29.8 million including overallotment), worth around US$840 million (US$970 million including overallotment).
- Sanrio’s goal with the secondary offering is (i) to reduce cross-shareholdings and (ii) to expand and diversify the shareholder base, which should further enhance liquidity.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 10 and 13 December (likely 10 December).
Sanrio Placement – Opportunistic >US$800m Selling at All-Time Highs
- A group of domestic financial institutions and the firm’s executives are looking to raise US$840m from trimming their stakes in Sanrio (8136 JP).
- While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
- In this note, we will talk about the placement and run the deal through our ECM framework.
Hyundai Motor Securities Announces a Rights Offering Involving a 49% Shares Dilution
- Hyundai Motors Securities announced a rights offering worth nearly 200 billion won involving a 49% shares dilution.
- The amount of shares dilution is excessive which is likely to result in a share price weakness in Hyundai Motor Securities in the coming weeks.
- The expected rights offering price for now is 6,640 won per share which is 24.5% discount to the closing price on 26 November.
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