Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>The <a href="https://www.smartkarma.com/entities/hitachi-transport-system-ltd" target="_blank" data-smartkarma-citation="entities:2395:1" rel="noopener">Hitachi Transport System (9086 JP)</a> deal announced last week was a big win for minorities, discussed in <a href="https://www.smartkarma.com/insights/hitachi-transport-system-9086-shareholders-get-the-big-win-in-this-vlbo" target="_blank" data-smartkarma-citation="insights:69131" rel="noopener">Hitachi Transport System (9086) Shareholders Get the BIG Win in This VLBO</a>. </li>
<li>Market ructions and the Hitachi Metals saga have this trading wide. </li>
<li>This deal looks different in terms of approval risk and timing risk than Hitachi Metals and is worth a closer look now.</li>
</ul>


The Hitachi Transport System (9086 JP) deal announced last week was a big win for minorities, discussed in Hitachi Transport System (9086) Shareholders Get the BIG Win in This VLBO. 
Market ructions and the Hitachi Metals saga have this trading wide. 
This deal looks different in terms of approval risk and timing risk than Hitachi Metals and is worth a closer look now.


Hitachi Transport (9086 JP):  Trading Too Wide

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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.

<ul>
<li>Hitachi Metals started drifting noticeably below terms from early Nov last year and fell as low as 14% below the ¥2,181 offer price in early March. </li>
<li>Along with relatively strong guidance yesterday the company reaffirmed the commitment of the Bain consortium to the offer despite some delays. </li>
<li>We have no special insight into the actual likelihood of a break here but we do believe downside may be limited even if one occurs.</li>
</ul>


Hitachi Metals started drifting noticeably below terms from early Nov last year and fell as low as 14% below the ¥2,181 offer price in early March. 
Along with relatively strong guidance yesterday the company reaffirmed the commitment of the Bain consortium to the offer despite some delays. 
We have no special insight into the actual likelihood of a break here but we do believe downside may be limited even if one occurs.


Hitachi Metals – Steel Price Recovery Probably Limits Downside Even in the Event of a Break

<ul>
<li>On 24 March, the EGM defeated both company and 3D Investment proposals. That night, a leak in the Nikkei said the company would pursue privatisation measures. Supply side interest. Check. </li>
<li>That same day, Bain signed a "Confirmation Agreement" with lead Toshiba shareholder Effissimo would tender into a Bain Tender Offer. Demand Side interest confirmed. Check. </li>
<li>Now we have a 3D public letter to the Board demanding 3 measures before the AGM. </li>
</ul>


On 24 March, the EGM defeated both company and 3D Investment proposals. That night, a leak in the Nikkei said the company would pursue privatisation measures. Supply side interest. Check. 
That same day, Bain signed a "Confirmation Agreement" with lead Toshiba shareholder Effissimo would tender into a Bain Tender Offer. Demand Side interest confirmed. Check. 
Now we have a 3D public letter to the Board demanding 3 measures before the AGM. 


Toshiba (6502) - 3D Writes Another Letter

<ul>
<li>
<a href="https://www.smartkarma.com/entities/hitachi-metals-ltd" target="_blank" data-smartkarma-citation="entities:8561:1" rel="noopener">Hitachi Metals (5486 JP)</a> is currently awaiting regulatory approval for its takeover by a consortium led by Bain Capital, announced in late April 2021. </li>
<li>The deal was originally expected to see a Tender Offer launched in November 2021, but that was delayed because the bidders lacked some necessary regulatory approvals.</li>
<li>Since then, the stock has sold off. Today it sold off a LOT. Deal break? Market ructions? Someone getting a tap on the shoulder? How far down is the gap?</li>
</ul>



Hitachi Metals (5486 JP) is currently awaiting regulatory approval for its takeover by a consortium led by Bain Capital, announced in late April 2021. 
The deal was originally expected to see a Tender Offer launched in November 2021, but that was delayed because the bidders lacked some necessary regulatory approvals.
Since then, the stock has sold off. Today it sold off a LOT. Deal break? Market ructions? Someone getting a tap on the shoulder? How far down is the gap?


Hitachi Metals (5486) - Where IS Undisturbed?

Hitachi Construction Machinery / Event-Driven

<ul>
<li>An NHK report today post-close said <a href="https://www.smartkarma.com/entities/hitachi-ltd" target="_blank" data-smartkarma-citation="entities:7797:1" rel="noopener">Hitachi Ltd (6501 JP)</a> would sell "about half" its stake in sub <a href="https://www.smartkarma.com/entities/hitachi-construction-machinery" target="_blank" data-smartkarma-citation="entities:19433:1" rel="noopener">Hitachi Construction Machinery (6305 JP)</a> to Itochu and Japan Industrial Partners.</li>
<li>That is quite similar to the announcement 15 months ago in the Nikkei which precipitated a large drop. While unconfirmed, it smells like there is fire behind the smoke.</li>
<li>The big question is <em>What Next</em>? and <em>What Impact</em> for shareholders? That's a tough couple of questions. </li>
</ul>


An NHK report today post-close said Hitachi Ltd (6501 JP) would sell "about half" its stake in sub Hitachi Construction Machinery (6305 JP) to Itochu and Japan Industrial Partners.
That is quite similar to the announcement 15 months ago in the Nikkei which precipitated a large drop. While unconfirmed, it smells like there is fire behind the smoke.
The big question is What Next? and What Impact for shareholders? That's a tough couple of questions. 


Hitachi Finally Bailing on Hitachi Construction (6305); Too Early To Buy

Japan

Hitachi Metals Ltd. manufactures a wide range of specialty steel and metal products, including industrial machinery, magnetic and electronic materials and parts, and aluminium castings and wheels.  The Company's products are marketed to a variety of users including the automobile, aerospace, nuclear, and computer industries worldwide.  The Company is a subsidiary of Hitachi, Ltd.

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Hitachi Metals (5486 JP)

Hitachi Transport (9086 JP): Trading Too Wide

Hitachi Transport System is trading quite wide for what appears to be a reasonably generic deal. There are few high market share segments overseas...

Travis Lundy

Hitachi Metals – Steel Price Recovery Probably Limits Downside Even in the Event of a Break

While we have no special insight into the probability of Bain's bid being rejected in our view recoveries in steel company earnings limit downside...

Mio Kato

Toshiba (6502) - 3D Writes Another Letter

Toshiba (6502) has been racking up its "positive newsflow points" in the last several days. This may be the last near-term shoe to fall.

Travis Lundy

Hitachi Metals (5486) - Where IS Undisturbed?

Hitachi Metals (5486) has been awaiting regulatory approval for a couple of months. In December, I expected a Q1 or April approval. But today the...

Travis Lundy

Hitachi Finally Bailing on Hitachi Construction (6305); Too Early To Buy

NHK had an article out post-close saying Hitachi would sell "About half" it's stake in Hitachi Construction Machinery to Itochu and JIP. It will be...

Travis Lundy

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