Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

Kinki Osaka Games - How A Deal Might Work

Minato Bank: Kansai Urban Pref Conversion Implications

Quiddity Advisors

Event-Driven

Early this past week, during the day, the Nikkei and Yomiuri had intraday headlines suggesting that <a href="https://www.smartkarma.com/entities/217" target="_blank" data-smartkarma-citation="entities:217">Sumitomo Mitsui Financial Gr (8316 JP)</a> and <a href="https://www.smartkarma.com/entities/6841" target="_blank" data-smartkarma-citation="entities:6841">Resona Holdings Inc (8308 JP)</a> would seek to merge still-listed SMFG-affiliated regional banks <a href="https://www.smartkarma.com/entities/9407" target="_blank" data-smartkarma-citation="entities:9407">Kansai Urban Banking Corp (8545 JP)</a> of Osaka and <a href="https://www.smartkarma.com/entities/1735" target="_blank" data-smartkarma-citation="entities:1735">Minato Bank Ltd/The (8543 JP)</a> of Hyogo Prefecture with Resona subsidiary Kinki Osaka Bank (of Osaka). Fifteen minutes later and several percent higher, the listed regional banks saw trading halted and shortly after that we got a series of releases from the various banks saying that they had not been the source of the information and what had been reported was not fact.This is not, strictly speaking, "fake news." Under the Japanese standard of announcement and "news", companies would regard "news" as a "fact", not a "possibility." And until a decision by the company's board of directors to the effect that the possibility is indeed an OfficialPossibility, such a possibility is not Fact but Speculation.All that said, after the various denials, and four days lacking new news, Kansai Urban Bank and Minato Bank gave up 80+% of their first-day impulse moves (8-12%) to end the week up 1% and 2% (MB), respectively.But over the weekend we got some NEW news stories. And for those who like to trade events and invest in restructurings, there are some interesting angles. The main points: <ul><li>A basic agreement will likely come in March, perhaps as early as this week.</li><li>The combined bank would become a holding company in April 2018</li><li>The Holdco would remain listed on the TSE1.</li><li>Resona would own more than 50% and consolidate. SMFG would own more than 20% and would treat the new Holdco as an equity method affiliate. The numbers suggest minorities would have a 25-29% stake. </li><li>The combined company would become the largest regional bank in terms of corporate main bank account coverage in the Kansai area, effectively twice the size of current #1 <a href="https://www.smartkarma.com/entities/5248" target="_blank" data-smartkarma-citation="entities:5248">Bank Of Kyoto Ltd/The (8369 JP)</a> (though only 30-40% larger in terms of total assets).</li></ul>If you look at the asset bases of each of the banks, it is not clear how you get to 51% ownership by Resona without considerable contortions.  I expect an interesting game of capital base Twister to be played among the players here. There is a fair bit of wonky detail below so pay attention kiddies.More below the fold.

Early this past week, during the day, the Nikkei and Yomiuri had intraday headlines suggesting that Sumitomo Mitsui Financial Gr (8316 JP) and Resona Holdings Inc (8308 JP) would seek to merge still-listed SMFG-affiliated regional banks Kansai Urban Banking Corp (8545 JP) of Osaka and Minato Bank Ltd/The (8543 JP) of Hyogo Prefecture with Resona subsidiary Kinki Osaka Bank (of Osaka). Fifteen minutes later and several percent higher, the listed regional banks saw trading halted and shortly after that we got a series of releases from the various banks saying that they had not been the source of the information and what had been reported was not fact.This is not, strictly speaking, "fake news." Under the Japanese standard of announcement and "news", companies would regard "news" as a "fact", not a "possibility." And until a decision by the company's board of directors to the effect that the possibility is indeed an OfficialPossibility, such a possibility is not Fact but Speculation.All that said, after the various denials, and four days lacking new news, Kansai Urban Bank and Minato Bank gave up 80+% of their first-day impulse moves (8-12%) to end the week up 1% and 2% (MB), respectively.But over the weekend we got some NEW news stories. And for those who like to trade events and invest in restructurings, there are some interesting angles. The main points: A basic agreement will likely come in March, perhaps as early as this week.The combined bank would become a holding company in April 2018The Holdco would remain listed on the TSE1.Resona would own more than 50% and consolidate. SMFG would own more than 20% and would treat the new Holdco as an equity method affiliate. The numbers suggest minorities would have a 25-29% stake. The combined company would become the largest regional bank in terms of corporate main bank account coverage in the Kansai area, effectively twice the size of current #1 Bank Of Kyoto Ltd/The (8369 JP) (though only 30-40% larger in terms of total assets).If you look at the asset bases of each of the banks, it is not clear how you get to 51% ownership by Resona without considerable contortions.  I expect an interesting game of capital base Twister to be played among the players here. There is a fair bit of wonky detail below so pay attention kiddies.More below the fold.

Sumitomo Mitsui Financial Group (8316 JP)

Minato Bank

A Kinki Osaka Ménage à Trois?