Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Sawada/HS Holdings (8699 JP) gets the bulk of its earnings from Khan Bank (even more so post-exit from gaitame).</li>
<li>Khan Bank just had a fantastic year with earnings up 77%. </li>
<li>But Sawada has just done a deal with should give one pause.</li>
</ul>


Sawada/HS Holdings (8699 JP) gets the bulk of its earnings from Khan Bank (even more so post-exit from gaitame).
Khan Bank just had a fantastic year with earnings up 77%. 
But Sawada has just done a deal with should give one pause.


Sawada/HS (8699) - A NON-Salutary Development

David Blennerhassett

<ul>
<li>
<a href="https://www.smartkarma.com/entities/keisei-electric-railway-co" target="_blank" data-smartkarma-citation="entities:10876:1" rel="noopener">Keisei Electric Railway Co (9009 JP)</a>'s extreme bifurcation with <a href="https://www.smartkarma.com/entities/oriental-land-co-ltd" target="_blank" data-smartkarma-citation="entities:13517:1" rel="noopener">Oriental Land (4661 JP)</a>, widens even more. The holding in Oriental Land is now worth 275% of Keisei's market cap. </li>
<li>The fact that we don't KNOW what Murakami-san did and <a href="https://www.smartkarma.com/entities/shinsei-bank-ltd" target="_blank" data-smartkarma-citation="entities:16897:1" rel="noopener">Shinsei Bank (8303 JP)</a> shares fell in large volume Friday AND pro-ration was 100% will lead to higher-than-expectd volatility.</li>
<li>The placement, the pledge, the connected party transaction, and a large parcel of shares moving into CCASS (ostensibly the founder/chairman's), suggest all is not well with <a href="https://www.smartkarma.com/entities/shimao-property-holdings-limited" target="_blank" data-smartkarma-citation="entities:8375:1" rel="noopener">Shimao Property (813 HK)</a>. </li>
</ul>



Keisei Electric Railway Co (9009 JP)'s extreme bifurcation with Oriental Land (4661 JP), widens even more. The holding in Oriental Land is now worth 275% of Keisei's market cap. 
The fact that we don't KNOW what Murakami-san did and Shinsei Bank (8303 JP) shares fell in large volume Friday AND pro-ration was 100% will lead to higher-than-expectd volatility.
The placement, the pledge, the connected party transaction, and a large parcel of shares moving into CCASS (ostensibly the founder/chairman's), suggest all is not well with Shimao Property (813 HK). 


Last Week in Event SPACE: Keisei Electric, Shinsei Bank, Shimao, Sawada, Virtus, Senex Energy

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sawada-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:7311:1" rel="noopener">Sawada Holdings (8699 JP)</a> is not done. The Upsilon investors wanted a 50+% control TOB but rules... The tender foundered, but on Oct 1 they got ~33% with MCB approval.</li>
<li>There is an EGM today, to approve AoI changes, a new board slate, a name change to HS Holdings (which tells you something). There is a new Advisory Board too.</li>
<li>And last night, the company announced an asset sale worth 20% of book. It is worth understanding the implications.</li>
</ul>



Sawada Holdings (8699 JP) is not done. The Upsilon investors wanted a 50+% control TOB but rules... The tender foundered, but on Oct 1 they got ~33% with MCB approval.
There is an EGM today, to approve AoI changes, a new board slate, a name change to HS Holdings (which tells you something). There is a new Advisory Board too.
And last night, the company announced an asset sale worth 20% of book. It is worth understanding the implications.


Sawada (8699 JP) Sells A Big Asset at > 2.5x Book; Now New Directors and New Advisory Board

In early July, after not quite 16 months of not getting approval from the Central Bank of Mongolia to purchase more than 50% of <a href="https://www.smartkarma.com/entities/sawada-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:7311:1" rel="noopener">Sawada Holdings (8699 JP)</a> from existing shareholders, in part due to a lack of appropriate preparation and adequate advice, and in part due to a change in the law regarding Mongolian banks which affected the regime by which shareholding is structured on significant Mongolian banks - of which Sawada's subsidiary Khan Bank LLC is the most significant, would be buyer Upsilon Investment Partners walked away from its Tender Offer. This was discussed in <a href="https://www.smartkarma.com/insights/sawada-8699-upsilon-to-end-its-tender-and-khan-bank-applies-to-list" target="_blank" data-smartkarma-citation="insights:53957" rel="noopener">Sawada (8699) - Upsilon To End Its Tender, and Khan Bank Applies to List</a>.The rule changes earlier in 2021 required that any significant shareholder in Sawada who had increased their stake above 20%* after the 2010 Banking Law amendment were required to sell down after obtaining permission to do so, and subsequently required Khan Bank to come up with a plan to list itself, and to see its stake reduced below 20%* by mid 2022. <div class="content-remarks">* Absolutely coincidentally (I believe), Upsilon is the 20th letter in the greek alphabet. </div>This caused considerable upheaval in the share price as the second largest investor sold down their stake from the high 20%s level to near zero in just a few months. The rule change early in the year caused a sharp drop. The 16th of March saw the release of a <a href="http://www.sawada-holdings.co.jp/wp/wp-content/uploads/2021/03/shdpress20210316.pdf" target="_blank" rel="noopener">statement</a> by Sawada detailing the Mongolian Central Bank's demands. After the major shareholder received permission to sell their stake down further. They sold, and the volume spike on a price drop then subsequent bounce saw the transfer of roughly 25% of the shares out and 50% of the float from one shareholder to others. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/233/019/original/Screenshot+2021-10-01+at+7.37.37+PM.png?1633088272" class="editor-image img-responsive" data-smartkarma-image-id="233019"></figure></section>Despite warnings that shareholdings above 5% might trigger a requirement to get permission, <a href="https://www.smartkarma.com/entities/j-trust-co-ltd" target="_blank" data-smartkarma-citation="entities:20246:1" rel="noopener">J Trust Co Ltd (8508 JP)</a> bought a large portion of shares sold in the market, reaching a stake of 14.39% as of mid-June. On July 2, Upsilon asked investors not to tender. On 17 July, the tender offer completed, without Upsilon getting to the minimum stake required under the conditions. At the end of July, Khan Bank reported excellent H1 results, and in mid-August, Sawada Holdings <a href="http://www.sawada-holdings.co.jp/wp/wp-content/uploads/2021/08/shdpress20210817.pdf" target="_blank" rel="noopener">reported</a> that Khan Bank had submitted its Listing Plan to regulators. The play, as it stood until Friday October 1st, was that investors in Sawada at say ¥950-1050/share were long a stock with a 60% stake in a Mongolian bank which where the stake would need to be sold down within 9 months, plus a hodgepodge of other interests. On October 1 2021, that changed somewhat.Upsilon has just bought ~33% of Sawada.

In early July, after not quite 16 months of not getting approval from the Central Bank of Mongolia to purchase more than 50% of Sawada Holdings (8699 JP) from existing shareholders, in part due to a lack of appropriate preparation and adequate advice, and in part due to a change in the law regarding Mongolian banks which affected the regime by which shareholding is structured on significant Mongolian banks - of which Sawada's subsidiary Khan Bank LLC is the most significant, would be buyer Upsilon Investment Partners walked away from its Tender Offer. This was discussed in Sawada (8699) - Upsilon To End Its Tender, and Khan Bank Applies to List.The rule changes earlier in 2021 required that any significant shareholder in Sawada who had increased their stake above 20%* after the 2010 Banking Law amendment were required to sell down after obtaining permission to do so, and subsequently required Khan Bank to come up with a plan to list itself, and to see its stake reduced below 20%* by mid 2022. * Absolutely coincidentally (I believe), Upsilon is the 20th letter in the greek alphabet. This caused considerable upheaval in the share price as the second largest investor sold down their stake from the high 20%s level to near zero in just a few months. The rule change early in the year caused a sharp drop. The 16th of March saw the release of a statement by Sawada detailing the Mongolian Central Bank's demands. After the major shareholder received permission to sell their stake down further. They sold, and the volume spike on a price drop then subsequent bounce saw the transfer of roughly 25% of the shares out and 50% of the float from one shareholder to others. Despite warnings that shareholdings above 5% might trigger a requirement to get permission, J Trust Co Ltd (8508 JP) bought a large portion of shares sold in the market, reaching a stake of 14.39% as of mid-June. On July 2, Upsilon asked investors not to tender. On 17 July, the tender offer completed, without Upsilon getting to the minimum stake required under the conditions. At the end of July, Khan Bank reported excellent H1 results, and in mid-August, Sawada Holdings reported that Khan Bank had submitted its Listing Plan to regulators. The play, as it stood until Friday October 1st, was that investors in Sawada at say ¥950-1050/share were long a stock with a 60% stake in a Mongolian bank which where the stake would need to be sold down within 9 months, plus a hodgepodge of other interests. On October 1 2021, that changed somewhat.Upsilon has just bought ~33% of Sawada. 

Sawada - Upsilon Gets Its Stake And Still We Wait

<h2>It's OFF. </h2>On Friday 2 July, Upsilon Investment Partnership announced that because of the delay of receiving approval from the Bank of Mongolia, and the lack of communication (only administrative emails so far and no response since the document dated 29 January 2021), it deemed it appropriate to end the Tender Offer process.The <a href="https://disclosure.edinet-fsa.go.jp/E01EW/BLMainController.jsp?uji.verb=W00Z1020initialize&amp;uji.bean=ek.bean.EKW00Z1020Bean&amp;TID=W00Z1020&amp;PID=W1E63041&amp;SESSIONKEY=1625288042489&amp;lgKbn=2&amp;dflg=0&amp;iflg=null&amp;row=100&amp;idx=0&amp;str=&amp;kbn=1&amp;flg=&amp;syoruiKanriNo=S100LX4G" target="_blank" rel="noopener">announcement</a> is tediously long. But it indicates that somewhat strangely, it decided not to withdraw the Tender Offer (my understanding is that the lack of Central Bank of Mongolia approval would constitute a legitimate excuse for withdrawal under the FIEA) but instead arrange with shareholders who had previously agreed to tender to have them not tender, hoping that the Tender Offer  would not go through. Both the Tender Offeror and the Company (Sawada) now implore shareholders to not tender. There are agreements in place to not tender to the tune of 44.69%. This is not a "blocking stake" but it is significant. <h2>And It's ON. </h2>The other news this week is that Khan Bank has applied with the Central Bank of Mongolia and the Financial Supervisory Commission to list its shares. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/216/613/original/Screenshot+2021-07-03+at+12.48.08+PM.png?1625287863" class="editor-image img-responsive" data-smartkarma-image-id="216613"></figure></section>The application was made under the auspices of the Amended Banking Law which requires the top 5 banks in Mongolia to list their shares by 30 June 2022. This is the beginning of the next step. But first we have to get past the end of the previous step. And there is some gamesmanship involved.<hr>The history of insights on the Sawada Tender Offer situation is below.    <a href="https://www.smartkarma.com/insights/sawada-holdings-partial-tender-an-odd-duck" target="_blank" data-smartkarma-citation="insights:36802" rel="noopener">Sawada Holdings Partial Tender - An Odd Duck</a>     <a href="https://www.smartkarma.com/insights/sawada-holdings-partial-offer-arb-grids-pro-ration" target="_blank" data-smartkarma-citation="insights:37141" rel="noopener">Sawada Holdings Partial Offer - Arb Grids &amp; Pro-Ration</a>     <a href="https://www.smartkarma.com/insights/sawada-withholds-opinion-on-tob-mongolia-deal-risk-may-exist" target="_blank" data-smartkarma-citation="insights:36959" rel="noopener">Sawada Withholds Opinion on TOB - Mongolia Deal Risk May Exist</a>     <a href="https://www.smartkarma.com/insights/sawada-withholds-opinion-on-tob-mongolia-deal-risk-may-exist" target="_blank" data-smartkarma-citation="insights:36959" rel="noopener">Sawada Withholds Opinion on TOB - Mongolia Deal Risk May Exist</a>     <a href="https://www.smartkarma.com/insights/sawada-holdings-tender-holding-pattern" target="_blank" data-smartkarma-citation="insights:37764" rel="noopener">Sawada Holdings Tender Holding Pattern</a>     <a href="https://www.smartkarma.com/insights/sawada-holdings-partial-offer-update-it-s-a-buy-here" target="_blank" data-smartkarma-citation="insights:37345" rel="noopener">Sawada Holdings Partial Offer Update - It's a Buy Here</a>     <a href="https://www.smartkarma.com/insights/sawada-holdings-8699-partial-tender-delayed-again-13th-time-a-charm" target="_blank" data-smartkarma-citation="insights:42124" rel="noopener">Sawada Holdings (8699) Partial Tender. Delayed Again. 13th Time a Charm?</a>     <a href="https://www.smartkarma.com/insights/sawada-holdings-still-a-long-but" target="_blank" data-smartkarma-citation="insights:43548" rel="noopener">Sawada Holdings - Still A Long But...</a>     <a href="https://www.smartkarma.com/insights/sawada-holdings-change-of-paradigm-means-opportunity" target="_blank" data-smartkarma-citation="insights:47739" rel="noopener">Sawada Holdings - Change of Paradigm Means Opportunity</a>     <a href="https://www.smartkarma.com/insights/sawada-8699-jp-stuck-between-mongolian-central-bank-idealism-and-reality" target="_blank" data-smartkarma-citation="insights:48921" rel="noopener">Sawada (8699 JP) Stuck Between Mongolian Central Bank Idealism and Reality</a>     <a href="https://www.smartkarma.com/insights/sawada-gets-some-good-news-expect-a-selldown" target="_blank" data-smartkarma-citation="insights:50551" rel="noopener">Sawada Gets Some Good News - Expect a Selldown</a>     <a href="https://www.smartkarma.com/insights/sawada-selldown-may-be-done-now-on-to-earnings" target="_blank" data-smartkarma-citation="insights:50721" rel="noopener">Sawada Selldown May Be Done - Now On To Earnings</a>     <a href="https://www.smartkarma.com/insights/sawada-selldown-was-not-done-shareholder-structure-looks-different-now" target="_blank" data-smartkarma-citation="insights:51240" rel="noopener">Sawada Selldown Was NOT Done - Shareholder Structure Looks Different Now</a>     <a href="https://www.smartkarma.com/insights/sawada-is-a-different-stock-now" target="_blank" data-smartkarma-citation="insights:51901" rel="noopener">Sawada Is A Different Stock Now</a>     <a href="https://www.smartkarma.com/insights/be-careful-of-expectations-on-sawada-8699" target="_blank" data-smartkarma-citation="insights:52303" rel="noopener">Be Careful of Expectations on Sawada (8699)</a>

It's OFF. On Friday 2 July, Upsilon Investment Partnership announced that because of the delay of receiving approval from the Bank of Mongolia, and the lack of communication (only administrative emails so far and no response since the document dated 29 January 2021), it deemed it appropriate to end the Tender Offer process.The announcement is tediously long. But it indicates that somewhat strangely, it decided not to withdraw the Tender Offer (my understanding is that the lack of Central Bank of Mongolia approval would constitute a legitimate excuse for withdrawal under the FIEA) but instead arrange with shareholders who had previously agreed to tender to have them not tender, hoping that the Tender Offer  would not go through. Both the Tender Offeror and the Company (Sawada) now implore shareholders to not tender. There are agreements in place to not tender to the tune of 44.69%. This is not a "blocking stake" but it is significant. And It's ON. The other news this week is that Khan Bank has applied with the Central Bank of Mongolia and the Financial Supervisory Commission to list its shares. The application was made under the auspices of the Amended Banking Law which requires the top 5 banks in Mongolia to list their shares by 30 June 2022. This is the beginning of the next step. But first we have to get past the end of the previous step. And there is some gamesmanship involved.The history of insights on the Sawada Tender Offer situation is below.    Sawada Holdings Partial Tender - An Odd Duck     Sawada Holdings Partial Offer - Arb Grids &amp; Pro-Ration     Sawada Withholds Opinion on TOB - Mongolia Deal Risk May Exist     Sawada Withholds Opinion on TOB - Mongolia Deal Risk May Exist     Sawada Holdings Tender Holding Pattern     Sawada Holdings Partial Offer Update - It's a Buy Here     Sawada Holdings (8699) Partial Tender. Delayed Again. 13th Time a Charm?     Sawada Holdings - Still A Long But...     Sawada Holdings - Change of Paradigm Means Opportunity     Sawada (8699 JP) Stuck Between Mongolian Central Bank Idealism and Reality     Sawada Gets Some Good News - Expect a Selldown     Sawada Selldown May Be Done - Now On To Earnings     Sawada Selldown Was NOT Done - Shareholder Structure Looks Different Now     Sawada Is A Different Stock Now     Be Careful of Expectations on Sawada (8699) 

Sawada (8699) - Upsilon To End Its Tender, and Khan Bank Applies to List

Japan

HS Holdings Co., Ltd. offers banking services. The Company provides deposits, loans, domestic settlement, fund management, and other services. HS Holdings also offers securities dealing, securities brokerage, securities underwriting, and other services.

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HS Holdings (8699 JP)

Sawada/HS (8699) - A NON-Salutary Development

HS/Sawada Holdings has a majority stake in a great small and high-growth asset and it just sold a little bit of it at the wrong price. That's not a...

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Last Week in Event SPACE: Keisei Electric, Shinsei Bank, Shimao, Sawada, Virtus, Senex Energy

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Sawada (8699 JP) Sells A Big Asset at > 2.5x Book; Now New Directors and New Advisory Board

Sawada announced October 1 that Meta Capital would buy shares from World Capital and Hideo Sawada. It didn't say who the LPs were. We may know now....

Travis Lundy

Sawada - Upsilon Gets Its Stake And Still We Wait

Upsilon tried for 16 months to get permission to buy 50% of Sawada Holdings from the Founder and his associate. It didn't work. The Tender ended,...

Travis Lundy

Sawada (8699) - Upsilon To End Its Tender, and Khan Bank Applies to List

The Sawada Tender Offer Will End. The Khan Bank listing saga is about to begin. There is gamesmanship, a prisoner's dilemma, and a new example of...

Travis Lundy

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