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

Bandai Namco Gets That Last Bit of Gundam: Tender Offer for Sotsu (3711 JP)

Gundam Gets Jiggy - A Voice Cries "Chotto Matte"

Quiddity Advisors

Event-Driven

Today after the close, <a href="https://www.smartkarma.com/entities/bandai-namco-holdings-inc" target="_blank" data-smartkarma-citation="entities:13435:1" rel="noopener">Bandai Namco Holdings (7832 JP)</a> announced that its Tender Offer for <a href="https://www.smartkarma.com/entities/sotsu-co-ltd" target="_blank" data-smartkarma-citation="entities:12978:1" rel="noopener">Sotsu Co Ltd (3711 JP)</a> had been completed successfully, with Bandai Namco having bought 8,683,500 shares against the minimum of 7.21mm shares.
So that is that. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/107/932/original/gundam%20chopped.gif?1574769393" class="editor-image img-responsive" data-smartkarma-image-id="107932"></figure>

The combination of the founder Nasu Yuji's personally-held and personal asset management company shares got the Tender Offer over the hurdle anyway, and the Sotsu Foundation's shares got them a bit further. 
HOWEVER, if one assumes Founder Nasu Yuji and the foundation tendered, that would mean another 973,500 shares were tendered out of the unaffiliated 3,604,255 shares.
That is 27% of the unaffiliated shares. 
So a large Controlling Shareholder, long affiliated with the Buyer, standing by to negotiate with the Buyer to buy one company from the Target Company and sell shares in another Related Party Transaction to the Target Company agreed with Buyer to sell his shares in Target Company such that Buyer could squeeze out all the other minorities with not a single one of those minorities having a say in the result other than through a court process. 
<div class="content-highlight">
EVERY SINGLE NON-AFFILIATED SHAREHOLDER COULD HAVE "VOTED AGAINST" by not tendering and this deal still gets done. 
As it happens, it appears "only" 73+% of non-affiliated shareholders "voted against" by not tendering.
</div>
There are those who would say that represents a reason why Japan's Takeover rules need review. "Fair" M&amp;A Guidelines are - in truth - far more function than form. And the Fair M&amp;A Guidelines for MBOs (and this is functionally an MBO) are far from perfect, but even then it seems reasonably clear the standards were not quite met. 
A lot of the minorities felt undercut by the process.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/107/934/original/gundam%20gif%202%20defeated.gif?1574769439" class="editor-image img-responsive" data-smartkarma-image-id="107934"></figure>
As often seems the case in Japan, no matter what precedent says, "whether or not the Transactions would be disadvantageous to the minority shareholders of the Target Company" (when it is a decision about one current stakeholder buying out another stakeholder) is not sufficiently determined without more effort than shown. If you have not asked minorities to agree, or conducted a serious market check, how can you know whether you are not doing transactions disadvantageous to minority shareholders? Was any single consultant to the process a registered investment advisor?
Bandai Namco and Sotsu have not done right by Sotsu minority shareholders.

Today after the close, Bandai Namco Holdings (7832 JP) announced that its Tender Offer for Sotsu Co Ltd (3711 JP) had been completed successfully, with Bandai Namco having bought 8,683,500 shares against the minimum of 7.21mm shares.
So that is that. 


The combination of the founder Nasu Yuji's personally-held and personal asset management company shares got the Tender Offer over the hurdle anyway, and the Sotsu Foundation's shares got them a bit further. 
HOWEVER, if one assumes Founder Nasu Yuji and the foundation tendered, that would mean another 973,500 shares were tendered out of the unaffiliated 3,604,255 shares.
That is 27% of the unaffiliated shares. 
So a large Controlling Shareholder, long affiliated with the Buyer, standing by to negotiate with the Buyer to buy one company from the Target Company and sell shares in another Related Party Transaction to the Target Company agreed with Buyer to sell his shares in Target Company such that Buyer could squeeze out all the other minorities with not a single one of those minorities having a say in the result other than through a court process. 

EVERY SINGLE NON-AFFILIATED SHAREHOLDER COULD HAVE "VOTED AGAINST" by not tendering and this deal still gets done. 
As it happens, it appears "only" 73+% of non-affiliated shareholders "voted against" by not tendering.

There are those who would say that represents a reason why Japan's Takeover rules need review. "Fair" M&amp;A Guidelines are - in truth - far more function than form. And the Fair M&amp;A Guidelines for MBOs (and this is functionally an MBO) are far from perfect, but even then it seems reasonably clear the standards were not quite met. 
A lot of the minorities felt undercut by the process.

As often seems the case in Japan, no matter what precedent says, "whether or not the Transactions would be disadvantageous to the minority shareholders of the Target Company" (when it is a decision about one current stakeholder buying out another stakeholder) is not sufficiently determined without more effort than shown. If you have not asked minorities to agree, or conducted a serious market check, how can you know whether you are not doing transactions disadvantageous to minority shareholders? Was any single consultant to the process a registered investment advisor?
Bandai Namco and Sotsu have not done right by Sotsu minority shareholders.

Sotsu Co Ltd

Gundam Has Fallen! Long Live Gundam!