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>In 2014, electronic parts giant <a href="https://www.smartkarma.com/entities/9924" target="_blank" data-smartkarma-citation="entities:9924:1">Taiyo Yuden (6976 JP)</a> bought Class A pref shares in storied smallcap capacitor maker <a href="https://www.smartkarma.com/entities/5087" target="_blank" data-smartkarma-citation="entities:5087:1">Elna Co Ltd (6972 JP)</a> from Japan Industrial Partners. In late 2015 Taiyo Yuden exercised its right to convert the 15mm pref shares to 15mm common shares. In February of this year, Taiyo Yuden concluded a Capital and Business Alliance with ELNA and underwrote a third-party allotment lifting its stake from 22.3% to 63.8%, spending a total of ¥5bn, buying 76.924mm shares (now worth 7.6924mm shares after the 1:10 share consolidation at the end of Sep-2018) at ¥65 (now ¥650-equivalent) apiece. That was done in part because ELNA had seen its liabilities exceed its assets so entered into a grace period. The third party allotment was conducted at a significant discount to the then-current share price, so required the AGM to approve, which it did on 30 March. The deal was executed the following week.</p>
<h2>The New News </h2>
<p>Today, Taiyo Yuden announced that it was going to merge with ELNA, effectively buying/squeezing out the minorities in ELNA. This will take the form of a share exchange whereby 4 shares in ELNA will get you 1 share in Taiyo Yuden. Given that Taiyo Yuden traded today at ¥2,554/share, this means your ELNA shares trading at ¥883 yen today are worth a quarter less (¥638.5). </p>
<p>This is a reasonably aggressively-priced takeunder, to be executed on a short timeline. Some people will object. Others may be happy to be taken out of their misery as the company has lost money every year since 2013 and is on its way to a sixth consecutive year of losses. </p>
<h2>Schedule</h2>
<p>The proposed schedule looks as follows:</p>
<div>
<table class="table table-striped">
<tbody>
<tr>
<td colspan="2" style="width: 848px;">
<h2>Schedule</h2>
</td>
</tr>
<tr>
<td style="width: 467px;"><strong>Event</strong></td>
<td style="text-align: center; width: 381px;"><strong>Date</strong></td>
</tr>
<tr>
<td style="width: 467px;">Announcement Date</td>
<td style="text-align: center; width: 381px;">28-Sep-18</td>
</tr>
<tr>
<td style="width: 467px;">Signing of Merger Agreement</td>
<td style="text-align: center; width: 381px;">28-Sep-18</td>
</tr>
<tr>
<td style="width: 467px;">Expected Announcement Date of Record Date of EGM</td>
<td style="text-align: center; width: 381px;">5 Oct 2018</td>
</tr>
<tr>
<td style="width: 467px;">Record Date for ELNA EGM</td>
<td style="text-align: center; width: 381px;">20 Oct 2018</td>
</tr>
<tr>
<td style="width: 467px;">ELNA Extraordinary Shareholder Meeting</td>
<td style="text-align: center; width: 381px;">4 Dec 2018</td>
</tr>
<tr>
<td style="width: 467px;">ELNA Last Trading Date</td>
<td style="text-align: center; width: 381px;">25 Dec 2018</td>
</tr>
<tr>
<td style="width: 467px;">ELNA Delisting Date</td>
<td style="text-align: center; width: 381px;">26 Dec 2018</td>
</tr>
<tr>
<td style="width: 467px;">Effective Date</td>
<td style="text-align: center; width: 381px;">1-Jan-19</td>
</tr>
</tbody>
</table>
</div>

In 2014, electronic parts giant Taiyo Yuden (6976 JP) bought Class A pref shares in storied smallcap capacitor maker Elna Co Ltd (6972 JP) from Japan Industrial Partners. In late 2015 Taiyo Yuden exercised its right to convert the 15mm pref shares to 15mm common shares. In February of this year, Taiyo Yuden concluded a Capital and Business Alliance with ELNA and underwrote a third-party allotment lifting its stake from 22.3% to 63.8%, spending a total of ¥5bn, buying 76.924mm shares (now worth 7.6924mm shares after the 1:10 share consolidation at the end of Sep-2018) at ¥65 (now ¥650-equivalent) apiece. That was done in part because ELNA had seen its liabilities exceed its assets so entered into a grace period. The third party allotment was conducted at a significant discount to the then-current share price, so required the AGM to approve, which it did on 30 March. The deal was executed the following week.
The New News 
Today, Taiyo Yuden announced that it was going to merge with ELNA, effectively buying/squeezing out the minorities in ELNA. This will take the form of a share exchange whereby 4 shares in ELNA will get you 1 share in Taiyo Yuden. Given that Taiyo Yuden traded today at ¥2,554/share, this means your ELNA shares trading at ¥883 yen today are worth a quarter less (¥638.5). 
This is a reasonably aggressively-priced takeunder, to be executed on a short timeline. Some people will object. Others may be happy to be taken out of their misery as the company has lost money every year since 2013 and is on its way to a sixth consecutive year of losses. 
Schedule
The proposed schedule looks as follows:





Schedule



Event
Date


Announcement Date
28-Sep-18


Signing of Merger Agreement
28-Sep-18


Expected Announcement Date of Record Date of EGM
5 Oct 2018


Record Date for ELNA EGM
20 Oct 2018


ELNA Extraordinary Shareholder Meeting
4 Dec 2018


ELNA Last Trading Date
25 Dec 2018


ELNA Delisting Date
26 Dec 2018


Effective Date
1-Jan-19





Taiyo Yuden (6976 JP) Takeunder of ELNA (6972 JP)