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

Event-Driven

Late in December 2015, the boards of <a href="https://www.smartkarma.com/entities/5032" target="_blank" data-smartkarma-citation="entities:5032:1">Minebea</a> (a maker of miniature ball bearings and precision parts) and <a href="https://www.smartkarma.com/entities/20361" target="_blank" data-smartkarma-citation="entities:20361:1">Mitsumi Electric</a> (electronics parts, antennae) <a href="http://www.minebea.co.jp/english/news/press/2015/__icsFiles/afieldfile/2015/12/21/pressrelease_en_20151221.pdf" target="_blank">resolved</a> to discuss and negotiate a business integration (the <a href="http://www.minebea.co.jp/english/corp/investors/disclosure/presentation/p2016/__icsFiles/afieldfile/2015/12/22/e2016_presentation_en_1221.pdf" target="_blank">presentation</a>). The day before the announcement, Mitsumi had a market cap of 51bn yen (ex-Treasury stock) while Minebea's was eight times larger at 415bn yen. There was, as is often the case in Japanese merger situations, speculation about the share exchange ratio and the ratio which was  0.572 at the closing prices before the announcement of a potential deal. The 12mo ratio was approximately 0.47 at the time, but down from 2.0x or higher 5yrs before.The ratio climbed sharply to 0.66 before falling to the low 0.6s then to 0.65 just before the ratio <a href="http://www.mitsumi.co.jp/ir/pdf/20160330_1.pdf" target="_blank">announcement</a> on March 30 where it was announced at 0.59x.Since the announcement, Mitsumi has been trading tight to terms and many people put on short positions (short Mitsumi long Minebea) expecting the ratio to widen back out. This was similar to the Daihatsu deal dynamics. The range was tight but persistent until early-mid-June when the spreads started widening in Mitsumi's favor, driving the spread to ~7.3% through terms as of today's close.Why?  This has been a persistent question.I suggest it is because the Is have it...  And the As don't.More below the fold...

Late in December 2015, the boards of Minebea (a maker of miniature ball bearings and precision parts) and Mitsumi Electric (electronics parts, antennae) resolved to discuss and negotiate a business integration (the presentation). The day before the announcement, Mitsumi had a market cap of 51bn yen (ex-Treasury stock) while Minebea's was eight times larger at 415bn yen. There was, as is often the case in Japanese merger situations, speculation about the share exchange ratio and the ratio which was  0.572 at the closing prices before the announcement of a potential deal. The 12mo ratio was approximately 0.47 at the time, but down from 2.0x or higher 5yrs before.The ratio climbed sharply to 0.66 before falling to the low 0.6s then to 0.65 just before the ratio announcement on March 30 where it was announced at 0.59x.Since the announcement, Mitsumi has been trading tight to terms and many people put on short positions (short Mitsumi long Minebea) expecting the ratio to widen back out. This was similar to the Daihatsu deal dynamics. The range was tight but persistent until early-mid-June when the spreads started widening in Mitsumi's favor, driving the spread to ~7.3% through terms as of today's close.Why?  This has been a persistent question.I suggest it is because the Is have it...  And the As don't.More below the fold...

Minebea-Mitsumi: Why Rich To Terms? The "I"s Have It