In today’s briefing:
- 7&I (3382 JP) – An ITO Family MBO? With Itochu? At ¥9trln? Maybe. Information Is Scarce
- KEPCO (9503 JP): Index Implications of US$3.5bn Primary + Secondary Offering
- Kansai Electric (9503 JP) – HUGE Equity Offering To Stuff Retail
- INDIA: Index Changes Due to the 45 New Additions to the F&O Segment
- NEC Network (1973 JP) Tender Offer – The Landscape Has Fully Changed
- Trump Trade: Korean Construction Vs Military Stocks Amid Potential End of War in Ukraine?
- CVC Offers ¥1150 for Macromill (3978) – Wrong Price, Wrong Register – Expect Activism or An Overbid
- Boqi Env (2377 HK)’s Partial Offer
- Macromill (3978 JP): CVC’s Light Tender Offer at JPY1,150 Begs for Activism
- Korea Pushes to Expand Director’s Duty of Loyalty: Focus on Hostile Takeover-Risk Conglomerates
7&I (3382 JP) – An ITO Family MBO? With Itochu? At ¥9trln? Maybe. Information Is Scarce
- Yesterday a news article from Bloomberg suggested 7&i was “considering” an MBO. Seven & I Holdings (3382 JP) later confirmed they had received a non-binding proposal from ITO Junro/family.
- The initial number was ¥9trln. If market cap? High. If EV, too low. That would have implied a price just over the first “grossly inadequate” ACT price.
- There is a lot we don’t know. This changes the landscape. It probably shifts the range trade, but it will shift more when we get more clarity on ITO-san’s price.
KEPCO (9503 JP): Index Implications of US$3.5bn Primary + Secondary Offering
- Kansai Electric Power (9503 JP) is looking to raise up to US$3.5bn via a primary offering and a sale of Treasury shares. Pricing date is between 26-29 November.
- Kansai Electric Power (9503 JP) is among the better performing stocks from the Electric Utilities industry and trades at higher valuations compared to its peers.
- There will be a fair bit of passive buying with around 29% of the offering being bought at the time of settlement of the shares.
Kansai Electric (9503 JP) – HUGE Equity Offering To Stuff Retail
- The past few years, large equity offerings have either been IPOs or secondary offerings (without dilution). Today we get a big dilutive secondary offering from Kansai Electric Power (9503 JP).
- This is ~223mm shares or roughly ¥530bn against a current market cap of ¥2.1+trln. A 25% increase in share count. It is quite dilutive, but the stock is not rich.
- Because dilutive, not overly-well-flagged, and mostly retail, this could get hammered. The div is not high enough to make it attractive, so one has to appreciate high earnings yield.
INDIA: Index Changes Due to the 45 New Additions to the F&O Segment
- The National Stock Exchange (NSEIN IN) has announced a list of 45 stocks that will be added to the Futures & Options (F&O) segment of the market from 29 November.
- There will be changes to the NIFTY Index, NSE Nifty Next 50 Index, S&P BSE SENSEX Index and the CNXIT Index over the next couple of rebalances.
- There are some interesting situations out there, including a change to the universe for the NSE Nifty Next 50 Index (NIFTYJR INDEX) that could lead to more changes.
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.
Trump Trade: Korean Construction Vs Military Stocks Amid Potential End of War in Ukraine?
- Although it is UNCERTAIN when the wars in Ukraine and the Middle East will end, if these wars indeed come to an end, this could POSITIVELY IMPACT Korean construction sector.
- The end of the wars in Ukraine and the Middle East is likely to NEGATIVELY IMPACT the Korean military/defense sector.
- The major Korean construction companies have low valuation multiples. On the other hand, the major Korean military/defense companies have high valuation multiples.
CVC Offers ¥1150 for Macromill (3978) – Wrong Price, Wrong Register – Expect Activism or An Overbid
- Today, CVC announced a deal to buy out Macromill, Inc (3978 JP). It is agreed and supported by management and the Board.
- The shareholder register on this stock is wide open. It is not burdened by crossholders. It IS burdened by 7 large active holders who have 55%.
- Those holders may complain about the process, the transparency, and the low price. This could be a target for an activist or a strategic overbidder.
Boqi Env (2377 HK)’s Partial Offer
- Back on the 23rd October, flue gas treatment play China Boqi Environmental Hol (2377 HK) announced a buyback of 15% of shares out, at HK$1.20/share, a 16.5% premium to undisturbed.
- The upshot of the buyback lifts the stake of co-founder Zeng Zhijun and concert parties to 32.59% – up from 27.71% – before options. A whitewash waiver is required.
- A expected, the Offer Doc has now been delayed. It is now expected to be dispatched on or before the 29th November.
Macromill (3978 JP): CVC’s Light Tender Offer at JPY1,150 Begs for Activism
- Macromill, Inc (3978 JP) has recommended CVC’s tender offer at JPY1,150, a 40.1% premium to the last close.
- While the offer is attractive compared to historical trading ranges, it is 41% below the IPO price and 11% below the midpoint IFA DCF valuation range.
- The lack of an irrevocable, open shareholder register and large foreign institutions’ shareholding increases the odds of activism to force a bump.
Korea Pushes to Expand Director’s Duty of Loyalty: Focus on Hostile Takeover-Risk Conglomerates
- A Democratic Party insider noted some proposals need legal tweaks, so the December 10 deadline may slip, but they’re set on passing the expanded director loyalty duty.
- FKI analyzed top conglomerates’ shareholder structures and found four of the top 10 facing substantial risks.
- We need more clarity before jumping in, but with MBK driving Korea’s hostile M&A scene and the Commercial Act amendments, local chaebols facing control battles are a key KOSPI theme.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Analytics and News
- ✓ Events & Webinars
