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

Murakami-San Launches New JAG (3751) Tender Offer

City Index Eleventh OFFICIALLY Launches Next Japan Asia Group (3751) Hostile Tender Offer

CIE Boosts Its Japan Asia Group (3751) TOB Price - Hidden Implications

Hoosiers (3284) Tender Offer Buyback To Buy Out Activist Murakami

Overbid: JAG Special Committee Plays Stupid so Murakami Plays Hardball

Japan Asia Group MBO Fails, Now JAG Against Murakami's Higher Bid

Quiddity Advisors

Equity Bottom-Up

In early November, <a href="https://www.smartkarma.com/entities/japan-asia-group-ltd" target="_blank" data-smartkarma-citation="entities:12428:1" rel="noopener">Japan Asia (3751 JP)</a> was trading at roughly ¥340-350/share. The Chairman, who has a history of failed takeovers, decided an MBO of the company was appropriate. He tied up with Carlyle to execute an odd deal whereby Carlyle would be the buyer, but the company would sell 70-80% of its two trophy assets for cash to Carlyle, and would exit, leaving the chairman long the remaining money-losing SurviveCo asset, stakes in the sold assets, and a big pile of cash.  He managed to convince the directors that a value of ¥600/share was reasonable, and recommendable to investors. Discussed in <a href="https://www.smartkarma.com/insights/japan-asia-3751-jp-management-buyout-should-there-be-a-bump" target="_blank" data-smartkarma-citation="insights:44928" rel="noopener">Japan Asia (3751 JP) Management Buyout: Should There Be a BUMP?</a> Well-known Japanese activist Yoshiaki Murakami took issue with this, bought 20% of the shares outstanding, then proposed his own takeover at ¥840/share. Discussed in <a href="https://www.smartkarma.com/insights/murakami-fund-s-tender-for-jag-3751-may-be-rangebound-near-term" target="_blank" data-smartkarma-citation="insights:47158" rel="noopener">Murakami Fund's Tender for JAG (3751):  May Be Rangebound Near-Term</a>. The company did not engage and Carlyle did not respond, until he was on the verge of launching, and then the chairman and Carlyle rejigged their deal to offer ¥1200/share. Funnily enough, this too was recommended by JAG directors. Discussed in <a href="https://www.smartkarma.com/insights/japan-asia-group-3751-murakami-wins-the-mother-of-all-bumps-100" target="_blank" data-smartkarma-citation="insights:47437" rel="noopener">Japan Asia Group (3751): Murakami Wins the Mother Of All Bumps +100%</a>. Murakami-san objected and requested due diligence to be able to fully formulate the plan to raise Medium-Long-Term Corporate Value and the chance to meet with employees. The Company rejected the due diligence request saying that he did not have a plan to raise Medium-Long-Term Corporate Value and rejected the meeting with employees. Murakami-san responded by launching a Tender Offer at ¥1210/share, ending 22 March 2021. The shares have traded higher since. The MBO conducted by the Chairman and Carlyle failed. Discussed in <a href="https://www.smartkarma.com/insights/overbid-jag-special-committee-plays-stupid-so-murakami-plays-hardball" target="_blank" data-smartkarma-citation="insights:47802" rel="noopener">Overbid: JAG Special Committee Plays Stupid so Murakami Plays Hardball</a>. Somehow, the directors figured out that the Chairman's plan at ¥1200/share was great and recommendable but Murakami-san's plan at ¥1210/share was awful and destined to bring the company to ruin. They opposed his TOB. Discussed in <a href="https://www.smartkarma.com/insights/japan-asia-group-mbo-fails-now-jag-against-murakami-s-higher-bid" target="_blank" data-smartkarma-citation="insights:48360" rel="noopener">Japan Asia Group MBO Fails, Now JAG Against Murakami's Higher Bid</a>. <section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/191/605/original/Screenshot+2021-03-01+at+5.26.07+PM.png?1614598916" class="editor-image img-responsive" data-smartkarma-image-id="191605"></figure></section></section>The Company has now decided that it wants to improve value for all shareholders. Today, it released a Notice Regarding Measures for Improving Corporate Value and Returning Shareholders (<a href="https://www.japanasiagroup.jp/wordpress/wp-content/uploads/2021-3-1_1.pdf" target="_blank" rel="noopener">Japanese only</a>) and in it, the Board proposes to...<ol>
<li>Have a Management Plan for moving forward, including the concept of a "Second Founding" of the company.</li>
<li>Pay a Special Dividend of ¥300/share</li>
<li>Sell large portions of the Two Major Sellable Assets to a "New Partner"</li>
<li>Have a policy regarding implementation of significant returns to shareholders. </li>
</ol><div class="content-highlight">
This plan is effectively quite similar to what JAG's Board accused Murakami-san of planning to do.
It is designed to obstruct the Murakami Tender Offer, and it will likely succeed in doing so.
I could not exclude the possibility of a Bull Dog Sauce situation here.
</div>Much more below the fold.

In early November, Japan Asia (3751 JP) was trading at roughly ¥340-350/share. The Chairman, who has a history of failed takeovers, decided an MBO of the company was appropriate. He tied up with Carlyle to execute an odd deal whereby Carlyle would be the buyer, but the company would sell 70-80% of its two trophy assets for cash to Carlyle, and would exit, leaving the chairman long the remaining money-losing SurviveCo asset, stakes in the sold assets, and a big pile of cash.  He managed to convince the directors that a value of ¥600/share was reasonable, and recommendable to investors. Discussed in Japan Asia (3751 JP) Management Buyout: Should There Be a BUMP? Well-known Japanese activist Yoshiaki Murakami took issue with this, bought 20% of the shares outstanding, then proposed his own takeover at ¥840/share. Discussed in Murakami Fund's Tender for JAG (3751):  May Be Rangebound Near-Term. The company did not engage and Carlyle did not respond, until he was on the verge of launching, and then the chairman and Carlyle rejigged their deal to offer ¥1200/share. Funnily enough, this too was recommended by JAG directors. Discussed in Japan Asia Group (3751): Murakami Wins the Mother Of All Bumps +100%. Murakami-san objected and requested due diligence to be able to fully formulate the plan to raise Medium-Long-Term Corporate Value and the chance to meet with employees. The Company rejected the due diligence request saying that he did not have a plan to raise Medium-Long-Term Corporate Value and rejected the meeting with employees. Murakami-san responded by launching a Tender Offer at ¥1210/share, ending 22 March 2021. The shares have traded higher since. The MBO conducted by the Chairman and Carlyle failed. Discussed in Overbid: JAG Special Committee Plays Stupid so Murakami Plays Hardball. Somehow, the directors figured out that the Chairman's plan at ¥1200/share was great and recommendable but Murakami-san's plan at ¥1210/share was awful and destined to bring the company to ruin. They opposed his TOB. Discussed in Japan Asia Group MBO Fails, Now JAG Against Murakami's Higher Bid. The Company has now decided that it wants to improve value for all shareholders. Today, it released a Notice Regarding Measures for Improving Corporate Value and Returning Shareholders (Japanese only) and in it, the Board proposes to...
Have a Management Plan for moving forward, including the concept of a "Second Founding" of the company.
Pay a Special Dividend of ¥300/share
Sell large portions of the Two Major Sellable Assets to a "New Partner"
Have a policy regarding implementation of significant returns to shareholders. 

This plan is effectively quite similar to what JAG's Board accused Murakami-san of planning to do.
It is designed to obstruct the Murakami Tender Offer, and it will likely succeed in doing so.
I could not exclude the possibility of a Bull Dog Sauce situation here.
Much more below the fold.

Japan Asia Group (3751) : Defense Against Hostile TOB Is Bad News