This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. Kokusai Electric (6525 JP): Placement Price Could Be Determined Today; Index Impact Could Be Delayed
- Kokusai Electric (6525 JP) could price their secondary offering after market close today. The stock is down 10.5% since the rumors of the placement began 7 trading sessions ago.
- The Philadelphia Stock Exchange Semiconductor Index (SOX INDEX) has been dropping over the last few days and is 8.6% lower over the last 8 trading days.
- Kokusai Electric (6525 JP) has been trading higher on expectations of index inclusion in August, but that could move to November now.
2. Furukawa Battery (6937) – Ugly Process in Virtual Take-Under Take-Private
- Today after the close, Advantage Partners announced the intention to launch a TOB to take over Furukawa Battery (6937 JP) at ¥1,400 – a 26% premium to last.
- This will require substantial time to obtain regulatory and foreign investment clearances so it is anticipated the Tender Offer will be launched at end-March 2025. I expect that is conservative.
- The price paid to minorities is a premium. But the price paid by the buyer is actually a takeunder. And it gets worse from there.
3. The Naspers/Tencent & Prosus/Tencent Stub: Entry Levels so Attractive It Looks Too Good to Be True
- Discounts likely set for a re-rating as market continues to overreact to appointment of CEO amid good set of results.
- The discounts of both Naspers and Prosus have continued to widen since the appointment of Fabricio Bloisi to Group CEO was announced in May (effective 10 July).
- At the end of June, the group released its strongest set of results in years, delivering on consolidated ecommerce profitability ahead of target.
4. Fancl (4921 JP): Evaluating the Potential of Kirin (2503 JP) Offer Bump
- Kirin Holdings (2503 JP)’s JPY8,620 offer for Fancl Corp (4921 JP) closes on 29 July. The shares have traded above terms for 25 out of the 26 trading days.
- MY.Alpha Management has amassed 10.3 million shares (8.51% ownership ratio) with several purchases above terms. MY.Alpha could catalyse other shareholders to rally against a light offer.
- The emergence of MY.Alpha, the high volume above terms, peers re-rating, the required minority acceptance rate, and an offer unattractive to historical trading ranges increase the probability of a bump.
5. Canon Marketing (8060) – Finally Using Its Cash, But It Is Walking The Walk With No Talk Behind
- Today after the close, Canon Marketing Japan (8060 JP) announced a large Tender Offer Buyback from its parent company Canon Inc (7751 JP). Canon will tender 20mm shares (15.42%).
- This is a very capital efficient way to conduct a buyback from a parent, and an even better way for a parent to sell shares of a sub.
- This corporate action will reduce equity by 20%, and partially clean up the messy inter-company transactions which should not exist.
6. KRX’s Plan to Integrate KOSPI & KOSDAQ into a Tiered System: Trading Considerations
- The major framework of this realignment is likely decided, integrating KOSPI and KOSDAQ into a tiered system based on liquidity, market cap, and financial status, with periodic replacements.
- The KOSPI 200’s continued existence is uncertain under the new realignment plan, which may shift its role to the value-up index, resembling Japan’s market restructuring model.
- The first-tier market’s entry requirements will likely reflect value-up index criteria, suggesting greater speculative money movement toward the value-up index starting in September.
7. Tohokushinsha (2329 JP) – 3D Investment Partners Proposes Take-Private
- 3D Investment Partners, known to be activist-ish-y, purchased 18% of Tohokushinsha Film (2329 JP) in the 12 months to March 2024. They started a public activism campaign in February.
- The company has started down a better governance track, but now 3D has made a takeover proposal to Tohokushinsha, which will consider it under Special Committee.
- There are a couple of possible outcomes here which are interesting to consider. There are no other spoilers possible except those friendly to founders and management.
8. NIFTY50 Index Rebalance Preview: Big Flow, Big Impact, Big Positioning
- Trent Ltd (TRENT IN) and Bharat Electronics (BHE IN) are shoo-ins to replace LTIMindtree (LTIM IN) and Divi’s Laboratories (DIVI IN) in the NIFTY Index (NIFTY INDEX) in September.
- Passive NIFTY Index trackers will need to trade at least 3.3x ADV and 7.7x delivery volume on the stocks. There is some opposite flow from Nifty Next 50 Index trackers.
- Cumulative excess volume has increased in all stocks but there are some stocks where there will still be more positioning over the next few weeks.
9. Merger Arb Mondays (22 Jul) – China TCM, GA Pack, Huafa, Samson, CPMC, Fancl, Tatsuta, Capitol
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Asia Cement China (743 HK), Canvest Environmental Protection Group (1381 HK), Greatview Aseptic Packaging (468 HK).
- Lowest spreads: Tatsuta Electric Wire & Cable (5809 JP), Alumina Ltd (AWC AU), Fancl Corp (4921 JP), Mimasu Semiconductor Industry (8155 JP), Infocom Corp (4348 JP), Hollysys.
10. Sep24 S&P500 Index Rebal – Two Changes Expected; $6bn One-Way Flow and Two Spinoffs?
- The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
- In this insight, we take a look at the upcoming constituent changes in the run up to the September 2024 index rebal event.
- We expect two regular changes during September. More interestingly, a couple of SP500 members are working on spin-offs which could trigger some high-impact deletions over the next few months.
