Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: China Youzan, Mcdonald's, Beijing Jingneng, Ricoh, Melco Resorts, LG Corp

Travis Lundy

On Friday 5 March, 2021, Bain Capital and the entity formed by itself, the CTO, and the President of <a href="https://www.smartkarma.com/entities/ignis-ltd" target="_blank" data-smartkarma-citation="entities:6124:1" rel="noopener">IGNIS Ltd (3689 JP)</a> announced they would launch a Tender Offer to buy out the minorities in the company. They call this an MBO and it is one of the clearest examples of an MBO in recent memory. 
Management will own 70% of the resulting company, and Bain will own the rest.
At a 63% premium to last trade, it is reasonably generous. But it didn't have to be. Like many Japanese MBOs and buyouts, the bidders came in with a low-ball bid and the Board/Special Committee dutifully responded by saying they wanted more. This time, the lowball bid was below the previous day's close when they made it so it was a pretty healthy lowball. 
The price they got to was 58% higher than the first lowball offer, which is proof yet again that Boards need to be diligent in fighting back against MBOs. Just because management wants to buy out the company doesn't mean it needs to happen. 
+63% will be a tough thing to fight against, but for a SaaS/online company which itself expects to grow revenues 25% a year for the next several years, and 4yrs from now expects EBITDA margins of nearly 30%, a Takeover EV of 13x that forward EBITDA does not seem outrageously high. 
But it will probably get done.

On Friday 5 March, 2021, Bain Capital and the entity formed by itself, the CTO, and the President of IGNIS Ltd (3689 JP) announced they would launch a Tender Offer to buy out the minorities in the company. They call this an MBO and it is one of the clearest examples of an MBO in recent memory. 
Management will own 70% of the resulting company, and Bain will own the rest.
At a 63% premium to last trade, it is reasonably generous. But it didn't have to be. Like many Japanese MBOs and buyouts, the bidders came in with a low-ball bid and the Board/Special Committee dutifully responded by saying they wanted more. This time, the lowball bid was below the previous day's close when they made it so it was a pretty healthy lowball. 
The price they got to was 58% higher than the first lowball offer, which is proof yet again that Boards need to be diligent in fighting back against MBOs. Just because management wants to buy out the company doesn't mean it needs to happen. 
+63% will be a tough thing to fight against, but for a SaaS/online company which itself expects to grow revenues 25% a year for the next several years, and 4yrs from now expects EBITDA margins of nearly 30%, a Takeover EV of 13x that forward EBITDA does not seem outrageously high. 
But it will probably get done.

IGNIS (3689) MBO +63% Is Probably Too Light

Japan

IGNIS Ltd. plans, develops, and manages free native application for smartphones.

IGNIS Ltd (3689 JP)

Last Week in Event SPACE: China Youzan, Mcdonald's, Beijing Jingneng, Ricoh, Melco Resorts, LG Corp

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

IGNIS (3689) MBO +63% Is Probably Too Light

IGNIS MBO is a true MBO. The execs taking it private already own 42%, and friends own another 10%. At up 60% it looks healthy, but for a high...

Travis Lundy