Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal Trades & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

ARRK was originally a design company making wooden objects and models. Fast-forward half a century later to the late 90s and <a href="https://www.smartkarma.com/entities/arrk-corp" target="_blank" data-smartkarma-citation="entities:4929:1" rel="noopener">Arrk Corp (7873 JP)</a> was a well-known model-maker for the electronics and auto industry and as that business moved into the software space so did ARRK. It listed in 1996, and in the early noughties expanded rapidly in CAD design. The stock price rose 8-fold from 2000 to 2005 and the share price peaked in February 2006 just as the Livedoor Marketing scandal started ripping a hole in small caps. Since then, the shares have fallen 98%.<a href="https://www.smartkarma.com/entities/mitsui-chemicals-inc" target="_blank" data-smartkarma-citation="entities:1703:1" rel="noopener">Mitsui Chemicals (4183 JP)</a> previously conducted a <a href="https://jp.mitsuichemicals.com/en/release/2017/171129.htm" target="_blank" rel="noopener">tender offer</a> acquiring a majority stake in <a href="https://www.smartkarma.com/entities/arrk-corp" target="_blank" data-smartkarma-citation="entities:4929:1" rel="noopener">Arrk Corp (7873 JP)</a> in January 2018. ARRK operates as a business group that provides development support for new products in the industrial goods sector and Mitsui Chemicals acquired this company as part of a plan for business growth in their "Mobility domain" which is a business segment that focuses on automotive materials (such as performance resin). On 14th May 2020, <a href="https://www.smartkarma.com/entities/mitsui-chemicals-inc" target="_blank" data-smartkarma-citation="entities:1703:1" rel="noopener">Mitsui Chemicals (4183 JP)</a><a href="https://jp.mitsuichemicals.com/sites/default/files/media/document/2020/kessan_200514_2e.pdf" target="_blank" rel="noopener">announced</a> a merger deal to buy out minorities in ARRK. The share exchange ratio will be 0.0511 Mitsui Chem Share for 1 Arrk Corp Share. The effective date of the share exchange is scheduled to be 1st August 2020. The shares of Mitsui Chem and ARRK last closed at ¥1,935 and ¥87. These prices currently translate to a gross spread of 13.7% with less than 3 months to completion. The spread will tighten immediately and trade tight until deal completion. As usual, there is more below the fold.

ARRK was originally a design company making wooden objects and models. Fast-forward half a century later to the late 90s and Arrk Corp (7873 JP) was a well-known model-maker for the electronics and auto industry and as that business moved into the software space so did ARRK. It listed in 1996, and in the early noughties expanded rapidly in CAD design. The stock price rose 8-fold from 2000 to 2005 and the share price peaked in February 2006 just as the Livedoor Marketing scandal started ripping a hole in small caps. Since then, the shares have fallen 98%.Mitsui Chemicals (4183 JP) previously conducted a tender offer acquiring a majority stake in Arrk Corp (7873 JP) in January 2018. ARRK operates as a business group that provides development support for new products in the industrial goods sector and Mitsui Chemicals acquired this company as part of a plan for business growth in their "Mobility domain" which is a business segment that focuses on automotive materials (such as performance resin). On 14th May 2020, Mitsui Chemicals (4183 JP)announced a merger deal to buy out minorities in ARRK. The share exchange ratio will be 0.0511 Mitsui Chem Share for 1 Arrk Corp Share. The effective date of the share exchange is scheduled to be 1st August 2020. The shares of Mitsui Chem and ARRK last closed at ¥1,935 and ¥87. These prices currently translate to a gross spread of 13.7% with less than 3 months to completion. The spread will tighten immediately and trade tight until deal completion. As usual, there is more below the fold.

Japan

ARRK CORPORATION provides support for new product development focusing on design.  The Company produces sample models for major companies in the automobile manufacturing and electronics industries.

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