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

Nippon Steel Aiming at 51% of Sanyo Special Steel

Sanyo Special Steel - A MISUNDERESTIMATED Tender Opportunity

Japan Crossholdings: Japan Exchange's Sale of SGX Shares Sets A Precedent - Watch Closely

Quiddity Advisors

Event-Driven

<p>A week after <a href="https://www.smartkarma.com/entities/20606" target="_blank" data-smartkarma-citation="entities:20606:1">Nisshin Steel Co Ltd (5413 JP)</a> reported <a href="http://v4.eir-parts.net/v4Contents/View.aspx?template=ir_material_for_fiscal_ym&amp;sid=47933&amp;code=5413" target="_blank">earnings</a> showing a 16.9%yoy rise in revenues, a 127% rise in OP, and a 678% rise in Net Profit, the company announced May 16th (<a href="http://v4.eir-parts.net/v4Contents/View.aspx?cat=tdnet&amp;sid=1589315" target="_blank">Japanese</a>, <a href="http://www.nssmc.com/common/secure/en/news/20180516_100.pdf" target="_blank">English</a>) that it would merge with <em>as-of-not-that-long-ago</em> parent company <a href="https://www.smartkarma.com/entities/961" target="_blank" data-smartkarma-citation="entities:961:1">Nippon Steel &amp; Sumitomo Metal Corp (5401 JP)</a> ("NSSMC") effective January 1st 2019 at a ratio of 0.71 shares of NSSMC for every share of Nisshin Steel held. </p><p>This ratio was announced during market hours (puhleez?) at an 18% premium to the last traded ratio. The ratio is, perhaps not coincidentally, a lifetime high ratio. The highest closing price ratio seen prior to this was 0.7096 in early 2016.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/052/711/original/54135401%20pair%20chart.PNG?1526638096" class="editor-image img-responsive" data-smartkarma-image-id="52711"></figure><div style="text-align: left;" class="content-caption">source: Bloomberg</div><p></p><h2>The Announcements &amp; Links</h2><div><table class="table table-striped"><tbody><tr><td>Announcement</td><td>Language</td></tr><tr><td>Nisshin Steel announcement of the deal</td><td><a href="http://v4.eir-parts.net/v4Contents/View.aspx?cat=tdnet&amp;sid=1589315" target="_blank">Japanese</a></td></tr><tr><td>Nisshin Steel presentation of the deal</td><td><a href="http://v4.eir-parts.net/v4Contents/View.aspx?template=announcement&amp;sid=42156&amp;code=5413" target="_blank">Japanese</a></td></tr><tr><td>Nippon Steel announcement of the deal</td><td><a href="http://www.nssmc.com/common/secure/en/news/20180516_200.pdf" target="_blank">English</a></td></tr><tr><td colspan="2"></td></tr><tr><td>Company IR Pages</td><td><strong><a href="http://www.nisshin-steel.co.jp/ir/" target="_blank">Nisshin</a> (J)  / <a href="http://www.nssmc.com/en/ir/index.html" target="_blank">NSSMC</a> (English)</strong></td></tr></tbody></table></div><div><table class="table table-striped"><tbody><tr><td>Datapoint</td><td>Data in the Data Point</td></tr><tr><td>Ratio</td><td>0.71 shares of NSSMC for every share of Nisshin Steel</td></tr><tr><td>NSSMC Shares Delivered</td><td>38,161,032 shares of NSSMC (all Treasury shares - no new shares issued)</td></tr></tbody></table></div><h2>Tentative Schedule</h2><div><table class="table table-striped"><tbody><tr><td>Event</td><td>Expected Date as Per Document</td></tr><tr><td>Board Agreement</td><td>16 May 2018</td></tr><tr><td>Execution of the Share Exchange Agreement</td><td>16 May 2018</td></tr><tr><td>Announcement of the Deal</td><td>16 May 2018</td></tr><tr><td>Record Date for Nisshin Steel shareholders to vote</td><td>30 Sep 2018</td></tr><tr><td>Extraordinary General Meeting (Nisshin) to vote on the deal</td><td>early/mid Dec 2018</td></tr><tr><td>Last Day of Trading</td><td>25 Dec 2018</td></tr><tr><td>Delisting Date</td><td>26 Dec 2018</td></tr><tr><td>Merger Effective Date</td><td>1 January 2019</td></tr></tbody></table></div><p></p><p>Given that Nisshin was trading at 7.3x EV/EBITDA (with a fair bit of debt), an 18% premium looked pretty good - and suggested a market-equivalent acquisition price of ~8x EV/EBITDA.</p><p>Looks, however, can be deceiving.</p>

A week after Nisshin Steel Co Ltd (5413 JP) reported earnings showing a 16.9%yoy rise in revenues, a 127% rise in OP, and a 678% rise in Net Profit, the company announced May 16th (Japanese, English) that it would merge with as-of-not-that-long-ago parent company Nippon Steel &amp; Sumitomo Metal Corp (5401 JP) ("NSSMC") effective January 1st 2019 at a ratio of 0.71 shares of NSSMC for every share of Nisshin Steel held. This ratio was announced during market hours (puhleez?) at an 18% premium to the last traded ratio. The ratio is, perhaps not coincidentally, a lifetime high ratio. The highest closing price ratio seen prior to this was 0.7096 in early 2016.source: BloombergThe Announcements &amp; LinksAnnouncementLanguageNisshin Steel announcement of the dealJapaneseNisshin Steel presentation of the dealJapaneseNippon Steel announcement of the dealEnglishCompany IR PagesNisshin (J)  / NSSMC (English)DatapointData in the Data PointRatio0.71 shares of NSSMC for every share of Nisshin SteelNSSMC Shares Delivered38,161,032 shares of NSSMC (all Treasury shares - no new shares issued)Tentative ScheduleEventExpected Date as Per DocumentBoard Agreement16 May 2018Execution of the Share Exchange Agreement16 May 2018Announcement of the Deal16 May 2018Record Date for Nisshin Steel shareholders to vote30 Sep 2018Extraordinary General Meeting (Nisshin) to vote on the dealearly/mid Dec 2018Last Day of Trading25 Dec 2018Delisting Date26 Dec 2018Merger Effective Date1 January 2019Given that Nisshin was trading at 7.3x EV/EBITDA (with a fair bit of debt), an 18% premium looked pretty good - and suggested a market-equivalent acquisition price of ~8x EV/EBITDA.Looks, however, can be deceiving.

Nisshin Steel / NSSMC Merger - Whatcha Gonna Do?