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

Panahome Rejects Oasis' Higher Tender Offer Proposal

Quiddity Advisors

Event-Driven

In late December, <a href="https://www.smartkarma.com/entities/222" target="_blank" data-smartkarma-citation="entities:222:1">Panasonic Corp (6752 JP)</a> and <a href="https://www.smartkarma.com/entities/19983" target="_blank" data-smartkarma-citation="entities:19983:1">Panahome Corp (1924 JP)</a><a href="https://www.panahome.jp/english/news/release/2016/1220.pdf" target="_blank">announced</a> they would merge. This was an event that Japan observers of parents and their subsidiaries had been awaiting for a decade or more.Shareholders were disappointed. As <a href="https://www.smartkarma.com/profiles/8" target="_blank" data-smartkarma-citation="accounts:8">Jon Foster</a> discussed in <a href="https://www.smartkarma.com/insights/an-easy-to-pan-panny-deal-for-panahome" target="_blank" data-smartkarma-citation="insights:7789">An Easy-To-Pan Panny Deal for PanaHome</a>, the ratio Panasonic offered was a paltry 0.8 shares of its own, below the midpoint of the "independent financial advisors" (IFAs) estimated fair value, lacking any type of control premium vs "fair value", and the "fair value" analysis was substantially lacking in fairness itself. Jon pointed out the problems in the valuation, then in the process itself. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/024/761/original/EasyToPanPannyDealShapshot2.png?1492851842" class="editor-image img-responsive" data-smartkarma-image-id="24761"></figure><div class="content-caption">excerpted from <a href="https://www.smartkarma.com/insights/an-easy-to-pan-panny-deal-for-panahome" target="_blank">An Easy-To-Pan Panny Deal for PanaHome</a></div>He expected shareholders might make a stink.  And they did.Hedge fund Oasis Capital established a website <a href="https://www.protectpanahome.com/oasis-history-of-engagement/" target="_blank">www.protectpanahome.com</a> to inform shareholders about the valuation issues, the inherent issues, and what shareholders might do about it. The website is worthwhile reading. The fund's managers had been meeting and communicating with Panahome for 10 months prior to the announcement of a deal, specifically warning of potential abuse to minorities, then a deal was announced which did so. Oasis upped its position in Panahome shares to 5.04% as of the end of January and then bought more, reaching 8.95% at end March according to a <a href="https://disclosure.edinet-fsa.go.jp/E01EW/download?uji.verb=W0EZA104CXP001003Action&amp;uji.bean=ee.bean.parent.EECommonSearchBean&amp;PID=W1E63011&amp;SESSIONKEY=1492847042825&amp;lgKbn=2&amp;pkbn=0&amp;skbn=1&amp;dskb=&amp;askb=&amp;dflg=0&amp;iflg=&amp;preId=1&amp;mul=1924&amp;fls=on&amp;lpr=on&amp;cal=1&amp;era=H&amp;yer=&amp;mon=&amp;pfs=4&amp;row=100&amp;idx=0&amp;str=&amp;kbn=1&amp;flg=&amp;syoruiKanriNo=&amp;s=S100A0XN" target="_blank">filing</a> in early April. <h2>The New News - Panasonic &amp; Panahome Cancel Merger; Panasonic to Launch TOB</h2>On Friday, after the close, Panahome <a href="http://www.panahome.jp/company/news/release/2017/pdf/2017042101.pdf" target="_blank">announced</a> a sharp downward revision to its income forecast for the fiscal year just ended March 31, Panasonic and Panahome announced they had cancelled their share scrip deal to merge and that Panasonic intends to launch a Tender Offer for Panahome shares; Panahome directors <a href="http://www.panahome.jp/company/news/release/2017/pdf/2017042102.pdf" target="_blank">announced</a> they would support the Tender Offer. The announcements are only in Japanese and not on any of the Panasonic parent's websites as far as I can tell. I expect English-language docs shortly.This new deal at ¥1200/share is a 16.4% premium to where the shares closed Friday, and a 37.7% premium to where the shares were trading on December 20th, and represents a 19-year high price. At an implied EV of just over 4x the company's own 2020 EBITDA forecast and slightly improved transparency of calculations, the price offers little to no takeover premium or control premium to the recalculated "fair value" as provided by the two financial advisors and a third-party "fairness opinion provider". In addition, it gives no consideration to the idea that anyone else could do more for the company (the suggestion that at just 45-60% the EBITDA margin of its peers someone other than Panasonic owning it would cause damage to corporate value doesn't quite fly). While the TOB Price looks attractive at a 19-year high, vs comps it is stilllight. <h2>What Next? </h2>It looks like a deal to quell misgivings among investors that perhaps the first one wasn't good enough. But I think it might get more interesting.More below the fold for subscribers.

In late December, Panasonic Corp (6752 JP) and Panahome Corp (1924 JP)announced they would merge. This was an event that Japan observers of parents and their subsidiaries had been awaiting for a decade or more.Shareholders were disappointed. As Jon Foster discussed in An Easy-To-Pan Panny Deal for PanaHome, the ratio Panasonic offered was a paltry 0.8 shares of its own, below the midpoint of the "independent financial advisors" (IFAs) estimated fair value, lacking any type of control premium vs "fair value", and the "fair value" analysis was substantially lacking in fairness itself. Jon pointed out the problems in the valuation, then in the process itself. excerpted from An Easy-To-Pan Panny Deal for PanaHomeHe expected shareholders might make a stink.  And they did.Hedge fund Oasis Capital established a website www.protectpanahome.com to inform shareholders about the valuation issues, the inherent issues, and what shareholders might do about it. The website is worthwhile reading. The fund's managers had been meeting and communicating with Panahome for 10 months prior to the announcement of a deal, specifically warning of potential abuse to minorities, then a deal was announced which did so. Oasis upped its position in Panahome shares to 5.04% as of the end of January and then bought more, reaching 8.95% at end March according to a filing in early April. The New News - Panasonic &amp; Panahome Cancel Merger; Panasonic to Launch TOBOn Friday, after the close, Panahome announced a sharp downward revision to its income forecast for the fiscal year just ended March 31, Panasonic and Panahome announced they had cancelled their share scrip deal to merge and that Panasonic intends to launch a Tender Offer for Panahome shares; Panahome directors announced they would support the Tender Offer. The announcements are only in Japanese and not on any of the Panasonic parent's websites as far as I can tell. I expect English-language docs shortly.This new deal at ¥1200/share is a 16.4% premium to where the shares closed Friday, and a 37.7% premium to where the shares were trading on December 20th, and represents a 19-year high price. At an implied EV of just over 4x the company's own 2020 EBITDA forecast and slightly improved transparency of calculations, the price offers little to no takeover premium or control premium to the recalculated "fair value" as provided by the two financial advisors and a third-party "fairness opinion provider". In addition, it gives no consideration to the idea that anyone else could do more for the company (the suggestion that at just 45-60% the EBITDA margin of its peers someone other than Panasonic owning it would cause damage to corporate value doesn't quite fly). While the TOB Price looks attractive at a 19-year high, vs comps it is stilllight. What Next? It looks like a deal to quell misgivings among investors that perhaps the first one wasn't good enough. But I think it might get more interesting.More below the fold for subscribers.

Panasonic Launches Tender For Panahome... Still Light.

Panasonic Homes

Panasonic Launches Tender For Panahome... Still Light.