Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>I wrote about Bain/LY having shown their cards on <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a> on 2 July. Just before I published (but after it went to compliance), Kakaku responded. </li>
<li>Kakaku's response was an exercise in good governance. It was an anti-FujiSoft situation. It was very welcome. Investors should appreciate this and learn from it.</li>
<li>EQT+DG Consortium has bid ¥3,300 unofficially but that's about ¥3,415 equivalent. My bet is they will go higher. And Bain+LY will too (theirs is equivalent ¥3,640 if DG gives up).</li>
</ul>


I wrote about Bain/LY having shown their cards on Kakaku.com Inc (2371 JP) on 2 July. Just before I published (but after it went to compliance), Kakaku responded. 
Kakaku's response was an exercise in good governance. It was an anti-FujiSoft situation. It was very welcome. Investors should appreciate this and learn from it.
EQT+DG Consortium has bid ¥3,300 unofficially but that's about ¥3,415 equivalent. My bet is they will go higher. And Bain+LY will too (theirs is equivalent ¥3,640 if DG gives up).


[Japan M&A] Kakaku Governance A Shining Example; Bain+LY and EQT+DG May Fight Longer

David Blennerhassett

<ul>
<li>I tally 29 - mostly firm, mostly Asia-Pac - arb transactions currently being discussed and analysed on Smartkarma. Those arbs metrics and upcoming events are detailed below.</li>
<li>One new deal was discussed on Smartkarma this week: that <a href="https://www.smartkarma.com/entities/dentsu-inc" target="_blank" data-smartkarma-citation="entities:12434:1" rel="noopener">Dentsu Inc (4324 JP)</a> had finalised plans to take its system integrator subsidiary <a href="https://www.smartkarma.com/entities/dentsu-soken-inc" target="_blank" data-smartkarma-citation="entities:20535:1" rel="noopener">Dentsu Soken (4812 JP)</a> private.</li>
<li>Key updates/news also took place on: <a href="https://www.smartkarma.com/entities/perpetual-ltd" target="_blank" data-smartkarma-citation="entities:599:1" rel="noopener">Perpetual Ltd (PPT AU)</a>, <a href="https://www.smartkarma.com/entities/atlas-arteria-ltd" target="_blank" data-smartkarma-citation="entities:14430:1" rel="noopener">Atlas Arteria (ALX AU)</a>, <a href="https://www.smartkarma.com/entities/qube-holdings-ltd" target="_blank" data-smartkarma-citation="entities:958:1" rel="noopener">Qube Holdings (QUB AU)</a>, and <a href="https://www.smartkarma.com/entities/nippon-dry-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:13528:1" rel="noopener">Nippon Dry Chemical (1909 JP)</a>.</li>
</ul>


I tally 29 - mostly firm, mostly Asia-Pac - arb transactions currently being discussed and analysed on Smartkarma. Those arbs metrics and upcoming events are detailed below.
One new deal was discussed on Smartkarma this week: that Dentsu Inc (4324 JP) had finalised plans to take its system integrator subsidiary Dentsu Soken (4812 JP) private.
Key updates/news also took place on: Perpetual Ltd (PPT AU), Atlas Arteria (ALX AU), Qube Holdings (QUB AU), and Nippon Dry Chemical (1909 JP).


Asia-Pac Weekly Wrap: Info Services Intl Dentsu, Perpetual, Atlas Arteria, Qube, Nippon Dry Chem

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Thematic (Sector/Industry)

GAMING PAYABLES - As part of the fallout from Greensill Capital's collapse, much has been made of the risks involved in supply chain finance and the accounting treatment of payables that can be used to 'flatter' balance sheets that are often overloaded with debt. As @matt_levineobserved yesterday:-<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/193/505/original/2021-03-11_10-33-14.png?1615426510" class="editor-image img-responsive" data-smartkarma-image-id="193505"></figure></section>APPLYING THE 'DUMB RULE OF THUMB' TO JAPAN - Accordingly, we have applied a simple screen to our universe of 3,689 Japanse companies with the following criteria:<ol>
<li>Market Cap, ex Treasury Stock,&gt; ¥100 billion (672 companies)</li>
<li> Last Quarter Payable Days &gt; -100 (93 companies)</li>
<li>1-Year change in Average Days Payable &gt; -25 (7 companies)</li>
</ol>We have excluded <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony (6758 JP)</a>, <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a>, <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten (4755 JP)</a>, and <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post (6178 JP)</a> from the screening due to their consolidation of financial subsidiaries. The results are in the DETAIL section below; however, the TTM Working Capital Day chart for the largest of the seven by market cap is below. It's 'owner' should be no surprise to followers of the Greensill saga.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/193/508/original/2021-03-11_11-04-24.png?1615428279" class="editor-image img-responsive" data-smartkarma-image-id="193508"></figure></section><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div>

GAMING PAYABLES - As part of the fallout from Greensill Capital's collapse, much has been made of the risks involved in supply chain finance and the accounting treatment of payables that can be used to 'flatter' balance sheets that are often overloaded with debt. As @matt_levineobserved yesterday:-APPLYING THE 'DUMB RULE OF THUMB' TO JAPAN - Accordingly, we have applied a simple screen to our universe of 3,689 Japanse companies with the following criteria:
Market Cap, ex Treasury Stock,&gt; ¥100 billion (672 companies)
 Last Quarter Payable Days &gt; -100 (93 companies)
1-Year change in Average Days Payable &gt; -25 (7 companies)
We have excluded Sony (6758 JP), Z Holdings (4689 JP), Rakuten (4755 JP), and Japan Post (6178 JP) from the screening due to their consolidation of financial subsidiaries. The results are in the DETAIL section below; however, the TTM Working Capital Day chart for the largest of the seven by market cap is below. It's 'owner' should be no surprise to followers of the Greensill saga.Source for all charts &amp; tables: Japan Analytics

🇯🇵 JAPAN • Greensill, Gaming Payables & The Seven Samurai of Supply Chain Finance

<ul>
<li>Late night 1 July, <a href="https://www.smartkarma.com/entities/ly-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">LY (4689 JP)</a> released a document showing their hand on the <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a> TOB they proposed. It is astutely structured, in price and context.</li>
<li>It's complicated because it expects different possibilities with two headline numbers - ¥3,384/share if KDDI doesn't sign up, and ¥3,500/share if they do. That's a bit misleading.</li>
<li>They expect a Kakaku response within 4 weeks and a deal launch by end-Sep. The big question here is if EQT+DG stump up to match, or if they play hardball. </li>
</ul>


Late night 1 July, LY (4689 JP) released a document showing their hand on the Kakaku.com Inc (2371 JP) TOB they proposed. It is astutely structured, in price and context.
It's complicated because it expects different possibilities with two headline numbers - ¥3,384/share if KDDI doesn't sign up, and ¥3,500/share if they do. That's a bit misleading.
They expect a Kakaku response within 4 weeks and a deal launch by end-Sep. The big question here is if EQT+DG stump up to match, or if they play hardball. 


[Japan M&A] Bain/LY Show Their Cards on Kakaku.com (They're Good Cards Brent)

Pan-Asia Tactical Market Calls (Quant-Driven), MRM Research

Nico Rosti

Pan-Asia Tactical Market Calls (Quant-Driven)

MRM Research

Quantitative Research

Equity Derivatives

<ul>
<li>While the bidding war for <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a> goes towards the showdown, the stock remains semi-paralized since early June (right when EQT and Bain/LY started to compete).</li>
<li>In this insight we want to evaluate the next possible trend direction and targets, using our quantitative forecast model.</li>
<li>We have to say upfront that the upside looks limited (unless the bidders formally structure binding offers above current market levels).</li>
</ul>


While the bidding war for Kakaku.com Inc (2371 JP) goes towards the showdown, the stock remains semi-paralized since early June (right when EQT and Bain/LY started to compete).
In this insight we want to evaluate the next possible trend direction and targets, using our quantitative forecast model.
We have to say upfront that the upside looks limited (unless the bidders formally structure binding offers above current market levels).


Kakaku.com (2371 JP) Tactical Outlook Ahead of Bain/LY Counter-Offer: Pop or Drop?

Japan

Digital Garage, Inc. is a web solution provider and a business incubator.  The Company provides Internet communications and strategy planning, electronic commerce solution tools, web creation and enhancement, and Internet advertising consulting services.

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Digital Garage (4819 JP)

[Japan M&A] Kakaku Governance A Shining Example; Bain+LY and EQT+DG May Fight Longer

Kakaku has reached ¥3,650 which was my last target. I think given the nuances of who is bidding how much and how means we should think this goes...

Travis Lundy

Asia-Pac Weekly Wrap: Info Services Intl Dentsu, Perpetual, Atlas Arteria, Qube, Nippon Dry Chem

This insight provides a summary of gross/annualised spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and...

David Blennerhassett

🇯🇵 JAPAN • Greensill, Gaming Payables & The Seven Samurai of Supply Chain Finance

As part of the fallout from Greensill Capital's collapse, much has been made of the risks involved in supply chain finance and the accounting...

Campbell Gunn

[Japan M&A] Bain/LY Show Their Cards on Kakaku.com (They're Good Cards Brent)

Bain+LY have made a bid and Kakaku finds it is a "Qualified Competing Tender Offer Proposal" which means they have asked EQT to match Bain's bid....

Travis Lundy

Kakaku.com (2371 JP) Tactical Outlook Ahead of Bain/LY Counter-Offer: Pop or Drop?

The bidding war for Kakaku.com has left the price stagnant since June. We see limited short-term upside (unless the bidders increase their offers)....

Nico Rosti

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