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>Japan Industrial Partners (JIP) will launch the <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> tender offer of JPY4,620 per share from 8 August to 20 September.</li>
<li>The Board has reaffirmed its recommendation to accept the offer. JIP’s inability to raise its bid is used as an excuse to ignore the material peer rerating and unattractive terms.</li>
<li>The 1Q results undermine the Board’s view of an overstated DCF and show its unwillingness to entertain a potential Kioxia merger as a superior alternative, increasing deal risks. </li>
</ul>


Japan Industrial Partners (JIP) will launch the Toshiba Corp (6502 JP) tender offer of JPY4,620 per share from 8 August to 20 September.
The Board has reaffirmed its recommendation to accept the offer. JIP’s inability to raise its bid is used as an excuse to ignore the material peer rerating and unattractive terms.
The 1Q results undermine the Board’s view of an overstated DCF and show its unwillingness to entertain a potential Kioxia merger as a superior alternative, increasing deal risks. 


Toshiba (6502 JP): Tender Offer Launches, 1Q Results Increase Deal Risks

<ul>
<li>On 28 July, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> disclosed that JIP delayed the tender start to “<em>sometime in August 2023</em>” vs the target “<em>in the last ten days of July 2023.</em>”</li>
<li>Toshiba reports 1Q results on 7 August. A solid 1Q will undermine the Board’s recommendation of the offer in part on the premise that the IFA’s DCF valuation is unrealistic.</li>
<li>The current low spread points to a done deal, partly due to shareholder fatigue. However, risks persist as the rerating of peers continues to chip away at the offer’s attractiveness. </li>
</ul>


On 28 July, Toshiba Corp (6502 JP) disclosed that JIP delayed the tender start to “sometime in August 2023” vs the target “in the last ten days of July 2023.”
Toshiba reports 1Q results on 7 August. A solid 1Q will undermine the Board’s recommendation of the offer in part on the premise that the IFA’s DCF valuation is unrealistic.
The current low spread points to a done deal, partly due to shareholder fatigue. However, risks persist as the rerating of peers continues to chip away at the offer’s attractiveness. 


Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach

<ul>
<li>
<a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> Board now recommends shareholders accept Japan Industrial Partners (JIP)’s pre-conditional tender offer of JPY4,620 per share. The Board also effectively rules out a bump.</li>
<li>The Board unconvincingly recommends the offer in part on the premise that the IFA’s DCF valuation is unrealistic due to punchy forecasts and positive feedback from stakeholders.  </li>
<li>The Board fails to consider that the peers have materially re-rated, the offer’s price ratio remains unattractive and the declining premium of the offer’s implied multiple vs peers’ multiples.</li>
</ul>



Toshiba Corp (6502 JP) Board now recommends shareholders accept Japan Industrial Partners (JIP)’s pre-conditional tender offer of JPY4,620 per share. The Board also effectively rules out a bump.
The Board unconvincingly recommends the offer in part on the premise that the IFA’s DCF valuation is unrealistic due to punchy forecasts and positive feedback from stakeholders.  
The Board fails to consider that the peers have materially re-rated, the offer’s price ratio remains unattractive and the declining premium of the offer’s implied multiple vs peers’ multiples.


Toshiba (6502 JP): Risk/Reward as Board Unconvincingly Recommends JIP’s Offer

<ul>
<li>
<a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> reports FY2022 results on 12 May. Since the announcement of Japan Industrial Partners (JIP)’s pre-conditional tender offer of JPY4,620 per share, there have been no progress updates. </li>
<li>The spread to the offer is currently 4.2%, suggesting a reasonable probability of success. However, the offer's success ultimately depends on shareholder backing, particularly from the activists on the register.</li>
<li>Shareholder support continues to pose a considerable risk as the peers have re-rated, the offer’s price ratio remains unattractive and the declining premium of the offer’s implied multiple vs peers.</li>
</ul>



Toshiba Corp (6502 JP) reports FY2022 results on 12 May. Since the announcement of Japan Industrial Partners (JIP)’s pre-conditional tender offer of JPY4,620 per share, there have been no progress updates. 
The spread to the offer is currently 4.2%, suggesting a reasonable probability of success. However, the offer's success ultimately depends on shareholder backing, particularly from the activists on the register.
Shareholder support continues to pose a considerable risk as the peers have re-rated, the offer’s price ratio remains unattractive and the declining premium of the offer’s implied multiple vs peers.


Toshiba (6502 JP): Tender Offer Risk/Reward

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>Toshiba is trading at a 12-13% annualised return on the arb when using the expected Tender Offer Start Date proposed in the Takeover Announcement on 23 March 2023.</li>
<li>On Day 1-2 post-announcement, Toshiba traded at an 11-13% annualised spread. Since the announcement, a 12-name Peer Basket is up 11+% meaning Toshiba back end risk has shrunk.</li>
<li>Forward consensus EPS ratios have fallen, in part due to the shift forward one fiscal year by comps. We'll see where those lie in a week when earnings come.</li>
</ul>


Toshiba is trading at a 12-13% annualised return on the arb when using the expected Tender Offer Start Date proposed in the Takeover Announcement on 23 March 2023.
On Day 1-2 post-announcement, Toshiba traded at an 11-13% annualised spread. Since the announcement, a 12-name Peer Basket is up 11+% meaning Toshiba back end risk has shrunk.
Forward consensus EPS ratios have fallen, in part due to the shift forward one fiscal year by comps. We'll see where those lie in a week when earnings come.


Japan

Hitachi, Ltd. manufactures communications and electronic equipment, heavy electrical and industrial machinery, and consumer electronics.  The Company's diverse product line ranges from nuclear power systems to kitchen appliances. Hitachi also operates subsidiaries in the wire and cable, metal, and chemical industries.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Hitachi Ltd Adr (HTHIY US)

Toshiba (6502 JP): Tender Offer Launches, 1Q Results Increase Deal Risks

The 1Q results undermine the Board’s view of an overstated DCF and show its unwillingness to entertain a potential Kioxia merger as a superior...

Arun George

Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach

The current low spread points to a done deal, partly due to shareholder fatigue. However, risks persist as the rerating of peers continues to chip...

Arun George

Toshiba (6502 JP): Risk/Reward as Board Unconvincingly Recommends JIP’s Offer

Peers have materially re-rated, the offer’s price ratio remains unattractive and the declining premium of the offer’s implied multiple vs peers’...

Arun George

Toshiba (6502 JP): Tender Offer Risk/Reward

Shareholder support continues to pose a considerable risk as the peers have re-rated, the offer’s price ratio remains unattractive and the...

Arun George

Toshiba (6502) - Thinking About the Arb

Toshiba has seen shares rise a bit since Day1 post-anncmt ~6 weeks ago, but Peers have risen further and the earnings shift on forward consensus is...

Travis Lundy

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)