IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/toyota-industries-corp" target="_blank" data-smartkarma-citation="entities:4500:1" rel="noopener">Toyota Industries (6201 JP)</a>’s preconditional tender offer from Toyota Fudosan is susceptible to a bump if there is enough vocal opposition from minorities. </li>
<li>In July, two public pieces have sharply criticised the offer – the <a href="https://www.acga-asia.org/blog-detail.php?id=102" target="_blank" rel="noopener">Asian Corporate Governance Association (ACGA)</a> on 2 July and <a href="https://www.ft.com/content/5c99c107-58a4-4434-b1b3-d6be44cf849e" target="_blank" rel="noopener">Sloane Robinson Investment Management</a> on 8 July.</li>
<li>Some of the criticism has merit, while others do not. Nevertheless, these letters are the first and right step to agitate for terms that are closer to TICO's intrinsic value.</li>
</ul>



Toyota Industries (6201 JP)’s preconditional tender offer from Toyota Fudosan is susceptible to a bump if there is enough vocal opposition from minorities. 
In July, two public pieces have sharply criticised the offer – the Asian Corporate Governance Association (ACGA) on 2 July and Sloane Robinson Investment Management on 8 July.
Some of the criticism has merit, while others do not. Nevertheless, these letters are the first and right step to agitate for terms that are closer to TICO's intrinsic value.


Toyota Industries (6201 JP): Vocal Activism Gathering Pace

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Kokusai Electric  / Equity Capital Markets

<ul>
<li>KKR is looking to raise approximately US$620m through an accelerated secondary offering for around 13% of <a href="https://www.smartkarma.com/entities/kokusai-electric-corp" target="_blank" data-smartkarma-citation="entities:40152:1" rel="noopener">Kokusai Electric (6525 JP)</a>'s (KE) stock.</li>
<li>KKR had sold in the IPO and undertaken an extended selldown in July 2024 as well. Hence, this deal is somewhat well flagged.</li>
<li>In this note, we will talk about the placement and run the deal through our ECM framework.</li>
</ul>


KKR is looking to raise approximately US$620m through an accelerated secondary offering for around 13% of Kokusai Electric (6525 JP)'s (KE) stock.
KKR had sold in the IPO and undertaken an extended selldown in July 2024 as well. Hence, this deal is somewhat well flagged.
In this note, we will talk about the placement and run the deal through our ECM framework.


Kokusai Electric Placement - Well Flagged but past Deal Didn’t Do Well

<ul>
<li>Several investors have sharply criticised <a href="https://www.smartkarma.com/entities/toyota-industries-corp" target="_blank" data-smartkarma-citation="entities:4500:1" rel="noopener">Toyota Industries (6201 JP)</a>’s preconditional tender offer from Toyota Fudosan. Oasis is pushing for a higher offer. </li>
<li>The offer has several issues that are detrimental to minorities' interests. The key grievance is that it is below TICO’s intrinsic value.</li>
<li>Due to TICO’s varied business units, SoTP valuation is the most appropriate methodology. My analysis suggests a base case intrinsic value of around JPY19,000.</li>
</ul>


Several investors have sharply criticised Toyota Industries (6201 JP)’s preconditional tender offer from Toyota Fudosan. Oasis is pushing for a higher offer. 
The offer has several issues that are detrimental to minorities' interests. The key grievance is that it is below TICO’s intrinsic value.
Due to TICO’s varied business units, SoTP valuation is the most appropriate methodology. My analysis suggests a base case intrinsic value of around JPY19,000.


Toyota Industries (6201 JP): Thoughts on Intrinsic Value

<ul>
<li>
<a href="https://www.smartkarma.com/entities/toyota-industries-corp" target="_blank" data-smartkarma-citation="entities:4500:1" rel="noopener">Toyota Industries (6201 JP)</a> disclosed a preconditional tender offer from Toyota Fudosan at JPY16,300, a 23.3% premium to the undisturbed price but a 11.4% discount to last close.</li>
<li>While representing a pre-rumour all-time high, the offer is below the midpoint of the special committee IFA DCF valuation range. The Board has a neutral recommendation. </li>
<li>The offer undermines minorities as it lacks split pricing for the <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a> and its affiliates’ shareholding and likely undervalues the significant real estate holdings. </li>
</ul>



Toyota Industries (6201 JP) disclosed a preconditional tender offer from Toyota Fudosan at JPY16,300, a 23.3% premium to the undisturbed price but a 11.4% discount to last close.
While representing a pre-rumour all-time high, the offer is below the midpoint of the special committee IFA DCF valuation range. The Board has a neutral recommendation. 
The offer undermines minorities as it lacks split pricing for the Toyota Motor (7203 JP) and its affiliates’ shareholding and likely undervalues the significant real estate holdings. 


Toyota Industries (6201 JP): After a High, Comes the Low of a Takeunder

<ul>
<li>
<a href="https://www.47news.jp/12601000.html" target="_blank" rel="noopener">Kyodo news agency</a> reported that <a href="https://www.smartkarma.com/entities/toyota-industries-corp" target="_blank" data-smartkarma-citation="entities:4500:1" rel="noopener">Toyota Industries (6201 JP)</a> plans to accept a tender offer by <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a> and Toyota Chairman Akio Toyoda, potentially in May or June.</li>
<li>The <a href="https://www.nikkei.com/article/DGXZQOFD305LH0Q5A430C2000000/" target="_blank" rel="noopener">Nikkei reported</a> that Toyota plans to borrow JPY3 trillion to fund the acquisition. These articles provide more clarity on price, composition of the offeror, financing structure, and timeline. </li>
<li>These articles increase the probability of a tender offer around JPY18,515 (JPY6 trillion market cap). At the last close, the gross spread was 12.1%.</li>
</ul>



Kyodo news agency reported that Toyota Industries (6201 JP) plans to accept a tender offer by Toyota Motor (7203 JP) and Toyota Chairman Akio Toyoda, potentially in May or June.
The Nikkei reported that Toyota plans to borrow JPY3 trillion to fund the acquisition. These articles provide more clarity on price, composition of the offeror, financing structure, and timeline. 
These articles increase the probability of a tender offer around JPY18,515 (JPY6 trillion market cap). At the last close, the gross spread was 12.1%.


Toyota Industries (6201 JP): A Potential Privatisation Sooner than Expected

Japan

Aisin Corporation manufactures and distributes motor vehicle parts. The Company produces drive train, transmissions, clutches, disc brakes, anti-skid brake system, suspensions, oil pumps, power windows, power door locks, and more. Aisin operates sales and production subsidiaries worldwide.

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Aisin (7259 JP)

Toyota Industries (6201 JP): Vocal Activism Gathering Pace

The onus is now on minorities to publicly advocate for better terms or scuttle the tender offer. Two recent letters are the first and right step to...

Arun George

Kokusai Electric Placement - Well Flagged but past Deal Didn’t Do Well

KKR is looking to raise approximately US$620m through an accelerated secondary offering for around 13% of Kokusai Electric (6525 JP)'s (KE) stock.

Sumeet Singh

Toyota Industries (6201 JP): Thoughts on Intrinsic Value

The offer has several issues that are detrimental to minorities' interests. My analysis suggests a base case intrinsic value of around JPY19,000.

Arun George

Toyota Industries (6201 JP): After a High, Comes the Low of a Takeunder

While representing an all-time high pre-media rumour, the offer leaves minorities short-changed. This long-dated offer is susceptible to a bump but...

Arun George

Toyota Industries (6201 JP): A Potential Privatisation Sooner than Expected

The articles suggest an accelerated timeline for the tender offer and provide incremental clarity on key aspects of the offer. At the last close,...

Arun George

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