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

The Amended FamilyMart Document Is A MUST READ For Investor-Stewards

FamilyMart Tender Offer - Winnie and HunnyPot Redux

Quiddity Advisors

Event-Driven

On Friday 31 July 2020, after the close, <a href="https://www.smartkarma.com/entities/sumitomo-bakelite-co-ltd" target="_blank" data-smartkarma-citation="entities:7902:1" rel="noopener">Sumitomo Bakelite (4203 JP)</a> announced a Tender Offer to buy out minorities in medical device manufacturer <a href="https://www.smartkarma.com/entities/kawasumi-laboratories-inc" target="_blank" data-smartkarma-citation="entities:11993:1" rel="noopener">Kawasumi Laboratories (7703 JP)</a>.This deal comes at a knockout premium of 116.8% or ¥1700/share, which is a 20+yr high. But it is not that much of a knockout price. Most of the market cap at takeover price is in net cash and securities, and net receivables. Using those terms, the Adjusted EV/EBITDA of this deal is under 4x the 20yr low EBITDA. Get some synergies in place and it's cheaper. It is hard to say how much the Special Committee's presence is theater or how much it helped. The first bid at ¥1250/share was a 10+yr high price, but it was still came out to be a negative Adjusted EV. At ¥1700, if the PP&amp;E were sold and leased back, the takeover price is still negative Adjusted EV. But the price was marched upward, even if the Special Committee had no advisors, no fairness opinion, no market check, and the conflicted advisors provided little in the way of transparency of calculation except for the transparency that the "fair value" did not include synergies, despite METI Fair M&amp;A Guidelines suggesting is due general shareholders (or at least an "appropriate portion" is). There IS a majority of minority, but that is simply mechanical as the Sumi in Kawasumi Labs has less than one third currently. But with crossholding likely to tender into Sumitomo Bakelite's bid, ex-crossholders the deal does NOT require a majority of minority. However, it will likely get done anyway. More below the fold.

On Friday 31 July 2020, after the close, Sumitomo Bakelite (4203 JP) announced a Tender Offer to buy out minorities in medical device manufacturer Kawasumi Laboratories (7703 JP).This deal comes at a knockout premium of 116.8% or ¥1700/share, which is a 20+yr high. But it is not that much of a knockout price. Most of the market cap at takeover price is in net cash and securities, and net receivables. Using those terms, the Adjusted EV/EBITDA of this deal is under 4x the 20yr low EBITDA. Get some synergies in place and it's cheaper. It is hard to say how much the Special Committee's presence is theater or how much it helped. The first bid at ¥1250/share was a 10+yr high price, but it was still came out to be a negative Adjusted EV. At ¥1700, if the PP&amp;E were sold and leased back, the takeover price is still negative Adjusted EV. But the price was marched upward, even if the Special Committee had no advisors, no fairness opinion, no market check, and the conflicted advisors provided little in the way of transparency of calculation except for the transparency that the "fair value" did not include synergies, despite METI Fair M&amp;A Guidelines suggesting is due general shareholders (or at least an "appropriate portion" is). There IS a majority of minority, but that is simply mechanical as the Sumi in Kawasumi Labs has less than one third currently. But with crossholding likely to tender into Sumitomo Bakelite's bid, ex-crossholders the deal does NOT require a majority of minority. However, it will likely get done anyway. More below the fold. 

Kawasumi Labs Takeout Tender Offer - Big Premium Is Not Too Big