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. 7&I (3382) – A Starting Point for the Standalone Plan – The Good, The Bad, The Ugly
- Today, partway through the day, we got a Bloomberg article suggesting a large-scale buyback was to come. Post-close, we got the full details.
- “Seven & i Holdings Announces Plan to Unlock Shareholder Value Through Leadership Changes and Transformational Capital and Business Initiatives”.
- Sale of York. Management change. Update on Special Committee work with ACT. Commitment to return ¥2trln to shareholders via buybacks by FY2030. Higher divs. IPO of 7-Eleven Inc (US).
2. 7&I (3382) Possibility of YUUUUUGE Buyback?
- Last Thurs the MBO died. Tuesday an article said the ACT deal had died. Then 7&i denied that. Yesterday an article said Bain’s York Holdings deal would be approved today.
- That meant a Board meeting which would approve receipt of ~¥700bn of cash. What to do with it?
- Just now, Bloomberg says Seven & I Holdings (3382 JP)‘s board will consider a massive buyback. THAT is the capital allocation news my last piece suggested necessary. It’s HUGE.
3. Li Ka-Ching! Cheung Kong (1 HK) Offloads Panama Ports To Blackrock
- As part of a US$22.8bn transaction, BlackRock, Global Infrastructure Partners and Terminal Investment, have agreed to buy two contentious Panama ports from Li Ka-shing’s CK Hutchison (1 HK) (CKH).
- The transaction also includes an 80% stake in CKH’s ports subsidiaries, which operate 43 ports comprising 199 berths in 23 countries.
- CKH expects cash proceeds in excess of US$19bn. CKH’s current market cap was – at the time of deal – also ~US$19bn.
4. Toyota’s New Shareholder Benefit Program – Either a Bribe for Retail or Odd Advertising
- Today, Toyota Motor (7203 JP) announced a new Shareholder Benefit Program (株主優待 or kabunushiyutai). Often these programs are designed to give small unknown companies a way to build shareholder awareness/loyalty.
- Toyota, needless to say, is not a small, unknown company building awareness. So this is a bribe or inducement to own shares or get people to use higher value product.
- This is not a great look, and not great for shareholders. It smells of Toyota trying to buy votes as crossholders sell. But below we look at the math.
5. Seven & I Holdings (3382 JP): Shares Under Pressure as Rumours Swirl
- Seven & I Holdings (3382 JP) denied a Yomiuri article that the Board has decided not to accept an Alimentation Couche-Tard (ATD CN) bid in favour of the restructuring plan.
- Despite the Board’s assertions that it is still having constructive discussions with Couche-Tard, its actions suggest otherwise.
- Couche-Tard remains interested but faces increasing roadblocks. The valuation is undemanding but the news flow is unlikely to support a rerating in the near-term.
6. Japan Post Bank US$4bn Placement Updates-Performing Similar to Its Last. Past Large Deals Comparison
- Japan Post Holdings (6178 JP) (JPH) aims to sell around US$4bn worth of Japan Post Bank (7182 JP) (JPB), trimming its stake to below 50%.
- JPH had last sold around US$9bn worth of JPB shares in Mar 2023. That deal had a similar structure and it didn’t end up performing well.
- We have looked at the deal dynamics in our previous note. In this note, we talk about the updates since then.
7. A/H Premium Tracker (To 28 Feb 2025): AH Premia Continue to Fall; Expect Widening
- AH Premia continue to fall. Spread curve torsion reverses again with narrow premia trades seeing Hs perform the best.
- Warning signs are starting to flash on spreads. This week I have the biggest week of changes recommended that I have ever had. By a long ways.
- This week threatens to be a very strange week geopolitically. Being smaller in crowded trades is probably a good thing.
8. Biggest Gray Area in Korea’s Short-Selling Overhaul: What Should TRS Clients Do?
- If brokers let shorts exceed borrow, TRS end investors risk getting caught in the legal crossfire.
- Some TRS players are setting up short-book systems and reg numbers proactively, ensuring brokers share borrow data to stay ahead of any compliance risks.
- With most illegal shorts tied to TRS, and TRS dominating the market, the FSS will likely introduce TRS-specific rules rather than granting exemptions.
9. Seven & I Holdings (3382 JP): Board’s Plan to Unlock Value Is a Stop-Gap Measure
- The Seven & I Holdings (3382 JP) Board announced a plan to unlock and distribute significant value to shareholders.
- The initial excitement focused on the positives of leadership changes, US Assets IPO, a higher-than-expected valuation for the Superstore Business and a considerable buyback.
- The negatives of a long-dated buyback, inevitable rejection of the Couche-Tard offer, an uncertain US Assets IPO and ongoing HoldCo discount suggest the initial excitement will fizzle out.
10. OneConnect Financial (6638 HK/OCFT US): Ping An’s Fair NBIO
- Dual-Listed OneConnect Financial Technology (6638 HK/OCFT US), a digital retail banking/commercial banking/ digital insurance play, has announced a non-binding proposal from Ping An, OneConnect’s controlling shareholder with 32.12%.
- Ping An is offering, by way of a Scheme, HK$2.068/share, or US$7.98/ADS, a 72.33% premium to last close, and a 131.66% premium to the 30-day average. The price is final.
- What now? Back in OneConnect’s boards’ court whether to engage or not. Which they should. No competing Offer will emerge.
