In today’s briefing:
- 7&I (3382) – Bain Gets York Holdings with a Surprising Price, And We Approach Deal Deadlines
- Seven & I Holdings (3382 JP): A Potential Derailing of the MBO
- Korea: Short Selling Is Back in March; Trade Ideas
- Japan Post Bank (7182 JP): Another BIG Offering of US$4bn Expected; Overhang Will Be Removed
- Japan Post Bank (7182) – Report of ¥600bn Offer Would Lead to Index Flows, and a New Future
- ZTO Express (2057 HK): Not Delivering Despite Double Index Inclusion
- CICC (3908 HK) & China Galaxy (6881 HK): The Next Mega Brokerage Merger
- Japan Post Bank (7182 JP): Japan Post Holding (6178 JP)’s Rumoured Offering
- Tonami Holdings (9070 JP): Japan Post Holdings’ (6178 JP) JPY10,200 Tender Offer
- Korean IPOs: Cornerstone Bill Back in Play—This Time, It Might Stick
7&I (3382) – Bain Gets York Holdings with a Surprising Price, And We Approach Deal Deadlines
- Over the weekend, the Nikkei and Jiji reported the 7&i Board met Saturday and decided Bain would have preferred negotiating rights to buy York Holdings. They bid “over ¥700bn.”
- That’s a trifle lower than the ¥1.2trn Reuters reported (on Christmas Day) Bain bid but details aren’t known. Proper structuring would get the vast majority to 7&i in post-tax cash.
- For 7&i to decide by the AGM (which could be contentious), they need time to debate. Bids are likely needed in 3wks. In the meantime, “Trump Risk” lurks.
Seven & I Holdings (3382 JP): A Potential Derailing of the MBO
- Bloomberg reports that the MBO is stalling due to disagreements within the consortium over who will control Seven & I Holdings (3382 JP) after it is privatised.
- The Nikkei reported that Itochu Corp (8001 JP) was set to withdraw from the MBO consortium. Along with CP ALL PCL (CPALL TB)’s non-participation, the MBO’s financing is in trouble.
- An Alimentation Couche-Tard (ATD CN) bid remains in play but has issues. While progressing, the Board’s restructuring plan fails to prove a credible alternative.
Korea: Short Selling Is Back in March; Trade Ideas
- Since short selling was banned in November 2023, short interest has plunged in Korea as shorts were covered. Markets have not done much over the last 16 months though.
- Foreign investor holdings have dropped from 32.05% in July to 28.57%. The top 25 stocks bought by foreign investors outperformed the top 25 stocks sold by 128% in 16 months.
- There will be trade opportunities across indices, pref/ords, index migrations and deletions, potential market upgrades and overvalued stocks being sold.
Japan Post Bank (7182 JP): Another BIG Offering of US$4bn Expected; Overhang Will Be Removed
- Media reports indicate that Japan Post Holdings (6178 JP) could sell JPY 600bn (US$4.02bn) of Japan Post Bank (7182 JP) with the announcement coming as early as this week.
- The selldown is driven by Japan Post Holdings (6178 JP) needing to reduce its holding in Japan Post Bank (7182 JP) to 50% or lower by March 2026.
- Passive index trackers will buy around 11.4% of the offering at the time of settlement of the placement shares with the balance being bought in January 2026.
Japan Post Bank (7182) – Report of ¥600bn Offer Would Lead to Index Flows, and a New Future
- On 22-February-2023 a Reuters suggested JPH (6178) had “started talks” to sell a big stake in JP Bank (7182). Five days later they announced a complicated deal discussed here.
- Today, an article suggests Japan Post Holdings (6178 JP) will sell ¥600bn in Japan Post Bank (7182 JP) to get ownership below 50% (as with JPI). A buyback might appear.
- JPB has issued a “there’s smoke” release. Like last time. Expected unwind of known overhang means minimal surprise here. The question is whether they could surprise (big buyback? capital plan?).
ZTO Express (2057 HK): Not Delivering Despite Double Index Inclusion
- ZTO Express Cayman (2057 HK) will be added to the Hang Seng China Enterprises Index (HSCEI INDEX) next week and to a global index couple of weeks after that.
- Despite passives needing to buy more than 5% of float inside a month, the stock has barely budged in a rallying China market.
- The increase in cumulative excess volume has been very gradual, indicative of low positioning in the stock. With a lot to buy over the next few weeks, that could change.
CICC (3908 HK) & China Galaxy (6881 HK): The Next Mega Brokerage Merger
- Reportedly, China International Capital Corporation (3908 HK) and China Galaxy Securities (6881 HK), two of China’s leading state-backed brokerages, intend to merge via a share swap, forming China’s third-largest broker.
- This report/rumour arrives shortly after the successful merger of Guotai Junan Securities (2611 HK) (GJS) and Haitong Securities (6837 HK).
- As with GJS/Haitong, expect a Merger by Absorption structure, and that Galaxy (or CICC?) issue new A and H shares to the target. I’d be picking up CICC shares here.
Japan Post Bank (7182 JP): Japan Post Holding (6178 JP)’s Rumoured Offering
- Reuters reports that Japan Post Holdings (6178 JP) (JPH) is planning to sell shares in Japan Post Bank (7182 JP) (JPB), which could total some JPY600 billion (US$4.0 billion).
- The potential offering would align with JPH’s stated goal of reducing its equity interest in JPB to 50% or less by FY 2025.
- The potential offering is relatively smaller than JPB’s 2023 offering. Compared to its peers, JPB’s valuation remains undemanding.
Tonami Holdings (9070 JP): Japan Post Holdings’ (6178 JP) JPY10,200 Tender Offer
- Tonami Holdings (9070 JP) has recommended a Japan Post Holdings (6178 JP)-sponsored MBO at JPY10,200, a 73.8% premium to the last close.
- The offer is attractive compared to historical trading ranges and peer multiples. The offer represents an all-time high.
- The offer is above the midpoint of the special committee IFA’s DCF valuation range but below that of the target IFA. However, the required minority acceptance rate is not onerous.
Korean IPOs: Cornerstone Bill Back in Play—This Time, It Might Stick
- The odds of the cornerstone system getting the green light are significantly higher than they were two years ago.
- With bills typically taking a year to kick in, we need to stay on this—if all goes smoothly, cornerstone investors could hit Korean IPOs as early as next year.
- In the early stages, cornerstone allocations will be key to shaping our IPO trading playbook. Staying ahead of these shifts is crucial.
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