Nissan Shatai - Strong Cash Position and Cash Flows Seem to Have Attracted Effissimo

Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
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Event-Driven

In our previous insight, ‘<a href="https://www.smartkarma.com/insights/nissan-shatai-strong-cash-position-and-cash-flows-seem-to-have-attracted-effissimo" target="_blank" data-smartkarma-citation="insights:38067" rel="noopener">Nissan Shatai - Strong Cash Position and Cash Flows Seem to Have Attracted Effissimo</a> ’, we viewed Shatai as a company with potential mainly due to its cash position and its under-developed LCV business. We stated that this makes Shatai a potential candidate for some form of M&amp;A. In this note, we will look at some of the possible M&amp;A scenarios with Shatai.
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M&amp; A Scenarios
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Why?
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How?
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Possible Barriers
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<a href="https://www.smartkarma.com/entities/nissan-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:72:1" rel="noopener">Nissan Motor (7201 JP)</a> buying out <a href="https://www.smartkarma.com/entities/nissan-shatai-co-ltd" target="_blank" data-smartkarma-citation="entities:9104:1" rel="noopener">Nissan Shatai (7222 JP)</a>
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<li>Capture LCV business to boost growth</li>
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<li>Use Shatai’s cash position for investments in other core business areas</li>
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<li>Strong influence over Shatai</li>
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<li>LBO Style?: Given Shatai’s fundamentals, especially positive FCF and low gearing level, and Nissan’s potential need to shore up cash at the parent level.</li>
<li>Share Swap: A difficult option, given Nissan Group’s current business situation.</li>
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<li>Effissimo’s rising stake in the company could mean that it might demand a higher premium in the event of a buy-out, making the deal expensive for Nissan. It could also oppose non-cash transactions.</li>
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Effissimo Buying Out Shatai
 
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<li>Rising stake in the company</li>
<li>Interest in aiming towards greater growth for Shatai, considering the latter to be an undervalued company whose growth prospects have been overlooked</li>
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<li>Could use Shatai’s strong assets as collateral to raise debt funding.</li>
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<li>Nissan’s willingness to sell and Shatai’s dependence on Nissan for business.</li>
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Nissan Withdrawing from the LCV Business
 
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<li>Group’s desire to primarily focus on core business-PVs</li>
<li>Restructuring of the Shonan plant (the key LCV plant for the group), such that a smaller area is now used for production of LCVs</li>
<li>A need to raise cash to keep the PV business running.</li>
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<li>Sell the company or the LCV plant.</li>
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<li>Closing an appropriate deal for sale, such that Effissimo agrees. Finding a strategic buyer at this time may be difficult and could take time.</li>
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In our previous insight, ‘Nissan Shatai - Strong Cash Position and Cash Flows Seem to Have Attracted Effissimo ’, we viewed Shatai as a company with potential mainly due to its cash position and its under-developed LCV business. We stated that this makes Shatai a potential candidate for some form of M&amp;A. In this note, we will look at some of the possible M&amp;A scenarios with Shatai.




M&amp; A Scenarios


Why?


How?


Possible Barriers




Nissan Motor (7201 JP) buying out Nissan Shatai (7222 JP)



Capture LCV business to boost growth

 

Use Shatai’s cash position for investments in other core business areas

 

Strong influence over Shatai




LBO Style?: Given Shatai’s fundamentals, especially positive FCF and low gearing level, and Nissan’s potential need to shore up cash at the parent level.
Share Swap: A difficult option, given Nissan Group’s current business situation.




Effissimo’s rising stake in the company could mean that it might demand a higher premium in the event of a buy-out, making the deal expensive for Nissan. It could also oppose non-cash transactions.





Effissimo Buying Out Shatai
 



Rising stake in the company
Interest in aiming towards greater growth for Shatai, considering the latter to be an undervalued company whose growth prospects have been overlooked




Could use Shatai’s strong assets as collateral to raise debt funding.




Nissan’s willingness to sell and Shatai’s dependence on Nissan for business.





Nissan Withdrawing from the LCV Business
 



Group’s desire to primarily focus on core business-PVs
Restructuring of the Shonan plant (the key LCV plant for the group), such that a smaller area is now used for production of LCVs
A need to raise cash to keep the PV business running.




Sell the company or the LCV plant.




Closing an appropriate deal for sale, such that Effissimo agrees. Finding a strategic buyer at this time may be difficult and could take time.






Nissan Shatai

Nissan Shatai: Possible M&A Scenarios