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

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

Murakami-San Launches New JAG (3751) Tender Offer

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

Overbid: JAG Special Committee Plays Stupid so Murakami Plays Hardball

Japan Asia Group (3751): Murakami Wins the Mother Of All Bumps +100%

Murakami Fund's Tender for JAG (3751):  May Be Rangebound Near-Term

Quiddity Advisors

Event-Driven

Last week, the Carlyle/Chairman MBO for <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> failed, despite the price having been doubled from the original price. A doubling of the price by the original bidder is unheard of in my experience, but they did it. Unfortunately for them, after bidding JPY 600/share, then finding that noted Japan activist Yoshiaki Murakami and his currently most active entity City Index Eleventh had bought 20%, objected to the free money the chairman was trying to make off with, Murakami-san bid 40% higher at JPY 840/share. So the parties re-jiggered their bid, and made it JPY 1200/share. I discussed this 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>.  The market expected a counter and went another 10% higher before falling back when Murakami-san's counter was JPY 1210/share. But it there, so the Carlyle MBO only got 10.4mm out of the 17.9mm shares needed to get to two-thirds. But the directors were happy to have supported the original deal at JPY 600 and the revised deal at JPY 1200. On Friday 19 February, however, the Board of Directors of Japan Asia Group decided they were against the Murakami bid at JPY 1210. And unlike the original short-form support, this time they have a <a href="https://www.japanasiagroup.jp/wordpress/wp-content/uploads/2021-2-19_2.pdf" target="_blank" rel="noopener">powerpoint deck</a>. <div class="content-highlight">
It's kind of a doozy.
One of the four principle reasons the Board says it rejects the bid is that it "disrespects minority shareholders". Somehow the highest bid out there at JPY 1210/share disrespects minority shareholders in a way that they were not disrespected by the Board itself supporting a JPY 600/share deal. 
One of the ways that minority investors are disrespected is that there is no minimum on the Tender Offer. Any shares they want to sell, they can sell. Everyone can be sure to sell their shares at that price - they do not have to hope that enough others tender. 
Another reason is that City Index Eleventh, which outlined its policies as being the same as the MBO's policies, but at a different price, is said not to have a management policy, and therefore it might mean minority shareholders are obliged to tender to avoid adverse effects. 
Yes. This is, indeed, a possibility. Investors who were asked to tender at JPY 600/share and at JPY 1200/share, with the intention of the originally supported MBOs being to force shareholders out, might find themselves not liking Murakami therefore feeling they have no choice but to accept the JPY 1210 deal which the Board doesn't like. 
Go figure.
</div>The presentation is worth a read.

Last week, the Carlyle/Chairman MBO for Japan Asia (3751 JP) failed, despite the price having been doubled from the original price. A doubling of the price by the original bidder is unheard of in my experience, but they did it. Unfortunately for them, after bidding JPY 600/share, then finding that noted Japan activist Yoshiaki Murakami and his currently most active entity City Index Eleventh had bought 20%, objected to the free money the chairman was trying to make off with, Murakami-san bid 40% higher at JPY 840/share. So the parties re-jiggered their bid, and made it JPY 1200/share. I discussed this in Japan Asia Group (3751): Murakami Wins the Mother Of All Bumps +100%.  The market expected a counter and went another 10% higher before falling back when Murakami-san's counter was JPY 1210/share. But it there, so the Carlyle MBO only got 10.4mm out of the 17.9mm shares needed to get to two-thirds. But the directors were happy to have supported the original deal at JPY 600 and the revised deal at JPY 1200. On Friday 19 February, however, the Board of Directors of Japan Asia Group decided they were against the Murakami bid at JPY 1210. And unlike the original short-form support, this time they have a powerpoint deck. 
It's kind of a doozy.
One of the four principle reasons the Board says it rejects the bid is that it "disrespects minority shareholders". Somehow the highest bid out there at JPY 1210/share disrespects minority shareholders in a way that they were not disrespected by the Board itself supporting a JPY 600/share deal. 
One of the ways that minority investors are disrespected is that there is no minimum on the Tender Offer. Any shares they want to sell, they can sell. Everyone can be sure to sell their shares at that price - they do not have to hope that enough others tender. 
Another reason is that City Index Eleventh, which outlined its policies as being the same as the MBO's policies, but at a different price, is said not to have a management policy, and therefore it might mean minority shareholders are obliged to tender to avoid adverse effects. 
Yes. This is, indeed, a possibility. Investors who were asked to tender at JPY 600/share and at JPY 1200/share, with the intention of the originally supported MBOs being to force shareholders out, might find themselves not liking Murakami therefore feeling they have no choice but to accept the JPY 1210 deal which the Board doesn't like. 
Go figure.
The presentation is worth a read.

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