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

Quiddity Advisors

Event-Driven

<p>On Friday 26 October, <a href="https://www.smartkarma.com/entities/9936" target="_blank" data-smartkarma-citation="entities:9936:1">Orix Corp (8591 JP)</a> <a href="https://www.orix.co.jp/grp/en/pdf/news/181026_ORIXE2.pdf" target="_blank">announced</a> that it would launch a Tender Offer to buy the ~36.3% of the common shares of <a href="https://www.smartkarma.com/entities/4461" target="_blank" data-smartkarma-citation="entities:4461:1">Daikyo Inc (8840 JP)</a> that it does not already own. ORIX also owns 1mm Class 1 Preferred Shares which takes its ownership ratio to 67.95% on a fully-consolidated direct and indirect (and diluted) basis.</p>
<p>This is not too much of a surprise, it was going to happen eventually. The capital alliance between ORIX and Daikyo commenced in 2005 after the IRCJ support program was authorized and executed in 2004, and had a share exchange and pref exchange in 2009, then in February 2014 Daikyo became a consolidated subsidiary of ORIX after ORIX converted the Class 2, Class 4, Class 7, and Class 8 prefs outstanding.</p>
<p>The Tender Offer Price is ¥2,970/share, which is a 24 % premium to the close and a 34.5% premium and 25.8% premium to the one-month and 6-month average, respectively, to the day before the announcement. </p>
<table class="table table-striped">
<tbody>
<tr>
<td colspan="2">
<h2>Schedule of the Tender Offer Event &amp; Other Details</h2>
</td>
</tr>
<tr>
<td><strong>Milestone</strong></td>
<td><strong>Date</strong></td>
</tr>
<tr>
<td>Announcement of The Tender</td>
<td>26 October 2018</td>
</tr>
<tr>
<td>Public Announcement of Commencement of Tender Offer</td>
<td>29 October 2018</td>
</tr>
<tr>
<td>Tender Offer Commences</td>
<td>29 October 2018</td>
</tr>
<tr>
<td>Tender Offer Closes</td>
<td>10 December 2018</td>
</tr>
<tr>
<td>Payment Date of Tender Offer</td>
<td>17 December 2018</td>
</tr>
<tr>
<td>Likely Completion of Squeezeout (if &gt;90%)</td>
<td>mid-late January 2019</td>
</tr>
<tr>
<td colspan="2"></td>
</tr>
<tr>
<td><strong>Data</strong></td>
<td><strong>Data in the Datapoint</strong></td>
</tr>
<tr>
<td>Maximum Number of Shares To Buy</td>
<td>25,919,190 shares</td>
</tr>
<tr>
<td>Minimum Number of Shares To Buy</td>
<td>0 shares</td>
</tr>
<tr>
<td>Tender Offer Price</td>
<td>¥2,970/share</td>
</tr>
<tr>
<td>Minority Squeezeout</td>
<td>Yes</td>
</tr>
<tr>
<td>Likelihood of Minority Squeezeout</td>
<td>100%</td>
</tr>
<tr>
<td>Tender Agent</td>
<td>Nomura Securities</td>
</tr>
</tbody>
</table>
<p>Is this the right price? It probably isn't too far off. It looks reasonable compared to where other comps are trading, though they are smaller. And while it is a "cyclical" business, it may be less cyclical than commonly thought, so it is perhaps a decent buy for ORIX. But as they consolidate already, it is already bought. </p>
<p>And because they own a super-majority already, there isn't really anything investors can do about it.</p>

On Friday 26 October, Orix Corp (8591 JP) announced that it would launch a Tender Offer to buy the ~36.3% of the common shares of Daikyo Inc (8840 JP) that it does not already own. ORIX also owns 1mm Class 1 Preferred Shares which takes its ownership ratio to 67.95% on a fully-consolidated direct and indirect (and diluted) basis.
This is not too much of a surprise, it was going to happen eventually. The capital alliance between ORIX and Daikyo commenced in 2005 after the IRCJ support program was authorized and executed in 2004, and had a share exchange and pref exchange in 2009, then in February 2014 Daikyo became a consolidated subsidiary of ORIX after ORIX converted the Class 2, Class 4, Class 7, and Class 8 prefs outstanding.
The Tender Offer Price is ¥2,970/share, which is a 24 % premium to the close and a 34.5% premium and 25.8% premium to the one-month and 6-month average, respectively, to the day before the announcement. 




Schedule of the Tender Offer Event &amp; Other Details



Milestone
Date


Announcement of The Tender
26 October 2018


Public Announcement of Commencement of Tender Offer
29 October 2018


Tender Offer Commences
29 October 2018


Tender Offer Closes
10 December 2018


Payment Date of Tender Offer
17 December 2018


Likely Completion of Squeezeout (if &gt;90%)
mid-late January 2019





Data
Data in the Datapoint


Maximum Number of Shares To Buy
25,919,190 shares


Minimum Number of Shares To Buy
0 shares


Tender Offer Price
¥2,970/share


Minority Squeezeout
Yes


Likelihood of Minority Squeezeout
100%


Tender Agent
Nomura Securities



Is this the right price? It probably isn't too far off. It looks reasonable compared to where other comps are trading, though they are smaller. And while it is a "cyclical" business, it may be less cyclical than commonly thought, so it is perhaps a decent buy for ORIX. But as they consolidate already, it is already bought. 
And because they own a super-majority already, there isn't really anything investors can do about it.

Daikyo Inc

ORIX Tender Offer for Daikyo (8840 JP)