Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/infroneer-holdings-inc" target="_blank" data-smartkarma-citation="entities:35785:1" rel="noopener">INFRONEER Holdings (5076 JP)</a> is the new name of the holding company which was comprised of Maeda Corporation, Maeda Road Construction, and Maeda Seisakusho.</li>
<li>Infroneer owns a 20% stake in smaller construction company <a href="https://www.smartkarma.com/entities/toyo-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:1176:1" rel="noopener">Toyo Construction (1890 JP)</a> through subsidiary Maeda Construction. It has launched a Tender Offer for the rest at a 28.5% premium.</li>
<li>This could get complicated. If you own, I would not sell at terms.</li>
</ul>



INFRONEER Holdings (5076 JP) is the new name of the holding company which was comprised of Maeda Corporation, Maeda Road Construction, and Maeda Seisakusho.
Infroneer owns a 20% stake in smaller construction company Toyo Construction (1890 JP) through subsidiary Maeda Construction. It has launched a Tender Offer for the rest at a 28.5% premium.
This could get complicated. If you own, I would not sell at terms.


Infroneer (5076 JP) Tender Offer for Toyo Construction (1890 JP) Could Get Funky

<ul>
<li>The <a href="https://www.smartkarma.com/entities/katakura-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:2007:1" rel="noopener">Katakura Industries (3001 JP)</a> MBO was launched in early November at a price which was too light but activist/long-time holder Oasis agreed to sell (with an up-and-out exception).  </li>
<li>Another would-be activist bought Oasis' shares at a premium to the Tender, encouraging hopes of a bump in the Tender Offer Price. </li>
<li>Yesterday, the bidder dashed those hopes, and today the shares fell, but not to the TOB Price. This has longer-term designs.</li>
</ul>


The Katakura Industries (3001 JP) MBO was launched in early November at a price which was too light but activist/long-time holder Oasis agreed to sell (with an up-and-out exception).  
Another would-be activist bought Oasis' shares at a premium to the Tender, encouraging hopes of a bump in the Tender Offer Price. 
Yesterday, the bidder dashed those hopes, and today the shares fell, but not to the TOB Price. This has longer-term designs.


Katakura Tender Offer Bump Now Looks Off. It Is Take-The-Loss or Hold-On-For-Later

The long and sordid history of MBO attempts on <a href="https://www.smartkarma.com/entities/japan-asia-group-ltd" target="_blank" data-smartkarma-citation="entities:12428:1" rel="noopener">Japan Asia (3751 JP)</a> is... long and sordid.First, the board recommended a deal whereby the personally indebted chairman would take over the company with the help of a PE Fund at ¥600/share, the PE Fund would buy the two large capital assets in JAG's possession at a price well above that price, and would sell the residual to Tetsuo YAMASHITA at a price which left him owning basically the whole company which would be the residual money-losing assets plus an enormous pile of cash, plus large income-earning stakes in the assets just sold. The board thought that appropriate. Noted activist Yoshiaki MURAKAMI disagreed. He bought nearly 20% of the company in the market, then offered to buy the company 40% higher than the proposed MBO. The board thought that was unreasonable. So the Chairman decided to up his bid by 100% to ¥1,200/share.He did this by a) spending a bit more money, b) taking on a bit more debt, c) NOT receiving more than the MBO market cap in cash and income securities post-MBO.The Board thought that reasonable. MURAKAMI-san bid about 1% more. The Board thought that unreasonable. They accused him of being willing to sell the main assets (which was the stated plan of the chairman's bid) and thought that the only way that MURAKAMI-san could make money at ¥1,210/share was by stripping the assets out and paying himself a giant dividend, then squeezing the rest. Somehow the ¥10/share really was problematic. The Board decided to create a post-facto poison pill, and a ¥300/share special dividend, hoping to make Murakami-san go away. He waited until the Court stopped the poison pill, then bid ¥910 (the same ¥1,210/share less ¥300 dividend). He extended. <h3>Newer News</h3>On Friday 11 June, the company issued a <a href="https://www.japanasiagroup.jp/wordpress/wp-content/uploads/2021-6-11.pdf" target="_blank" rel="noopener">press release</a> on "progress" of the sales process of the units.  The indicative sale price of the two units is ¥58.5bn. The sale of the assets appears to need to be approved by a Special Resolution of an EGM.The document is long, and includes much detail about ongoing negotiations for the possible aftermath of a Tender Offer by City Index Eleventh. It included efforts by the company to get CIE's implicit approval for the asset sale, and by CIE to make the sale more convenient for tax purposes, and there is a construct proposed whereby the company would conduct a Tender Offer share buyback for its own shares in a region of ¥950-980/share, or up to ¥1,050 if banks are accommodating.On that news, the shares popped on Monday 14 June.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/213/211/original/Screenshot+2021-06-15+at+8.22.09+PM.png?1623760171" class="editor-image img-responsive" data-smartkarma-image-id="213211"></figure></section><h3>Even Newer News</h3>And now today, MURAKAMI-san's bid vehicle City Index Eleventh extended yet again, and <a href="https://www.japanasiagroup.jp/wordpress/wp-content/uploads/2021-6-15.pdf" target="_blank" rel="noopener">raised the bid to ¥960/share</a>. Investors should be VERY aware of the implications of what is in the June 11 press release. They are not telling it to you outright, but this deal is being wrapped up.And not in a way which is as rosy as it looks on paper.

The long and sordid history of MBO attempts on Japan Asia (3751 JP) is... long and sordid.First, the board recommended a deal whereby the personally indebted chairman would take over the company with the help of a PE Fund at ¥600/share, the PE Fund would buy the two large capital assets in JAG's possession at a price well above that price, and would sell the residual to Tetsuo YAMASHITA at a price which left him owning basically the whole company which would be the residual money-losing assets plus an enormous pile of cash, plus large income-earning stakes in the assets just sold. The board thought that appropriate. Noted activist Yoshiaki MURAKAMI disagreed. He bought nearly 20% of the company in the market, then offered to buy the company 40% higher than the proposed MBO. The board thought that was unreasonable. So the Chairman decided to up his bid by 100% to ¥1,200/share.He did this by a) spending a bit more money, b) taking on a bit more debt, c) NOT receiving more than the MBO market cap in cash and income securities post-MBO.The Board thought that reasonable. MURAKAMI-san bid about 1% more. The Board thought that unreasonable. They accused him of being willing to sell the main assets (which was the stated plan of the chairman's bid) and thought that the only way that MURAKAMI-san could make money at ¥1,210/share was by stripping the assets out and paying himself a giant dividend, then squeezing the rest. Somehow the ¥10/share really was problematic. The Board decided to create a post-facto poison pill, and a ¥300/share special dividend, hoping to make Murakami-san go away. He waited until the Court stopped the poison pill, then bid ¥910 (the same ¥1,210/share less ¥300 dividend). He extended. Newer NewsOn Friday 11 June, the company issued a press release on "progress" of the sales process of the units.  The indicative sale price of the two units is ¥58.5bn. The sale of the assets appears to need to be approved by a Special Resolution of an EGM.The document is long, and includes much detail about ongoing negotiations for the possible aftermath of a Tender Offer by City Index Eleventh. It included efforts by the company to get CIE's implicit approval for the asset sale, and by CIE to make the sale more convenient for tax purposes, and there is a construct proposed whereby the company would conduct a Tender Offer share buyback for its own shares in a region of ¥950-980/share, or up to ¥1,050 if banks are accommodating.On that news, the shares popped on Monday 14 June.Even Newer NewsAnd now today, MURAKAMI-san's bid vehicle City Index Eleventh extended yet again, and raised the bid to ¥960/share. Investors should be VERY aware of the implications of what is in the June 11 press release. They are not telling it to you outright, but this deal is being wrapped up.And not in a way which is as rosy as it looks on paper.

CIE Boosts Its Japan Asia Group (3751) TOB Price - Hidden Implications

David Blennerhassett


For the month of May, 11 new deals were discussed on Smartkarma with an overall announced deal size of ~US$7.3bn.



Clicking on the company name in the table below will take you to the entity page where you can read the initial insight(s) written by Smartkarma contributors on these new deals and follow-up discussions, or simply click on the insight link(s) below the name.







New Deals


Industry


Size (US$bn)


Type


Premium




Australia




APN Property Group (APD AU) 
Property
0.2
Scheme
50%


APN Prop (APD AU): Dexus' Done Deal



Boral Ltd (BLD AU) 
Construction
4.8
Off-market
Nil


Boral Ltd (BLD AU): Seven's Nil Premium



Japara Healthcare (JHC AU) 
Healthcare
0.2
Scheme
30%


Japara Healthcare (JHC AU): Here Comes The Calvary


 



Hong Kong




Chong Hing Bank (1111 HK) 
Banking
0.2
Scheme
51.2%



Chong Hing Bank (1111 HK): Takeover Talk As Shares Pop
Chong Hing Bank (1111 HK): Yue Xiu's Offer Is Light



 



Japan




Aomori Bank (8342 JP) / Michinoku Bank (8350 JP) 
Bank
0.6
Merger



Aomori Bank &amp; Michinoku Bank Merger - Nothing To Write Home About Yet



EPS Holdings (4282 JP) 
Data/software
0.1
Tender Offer
35.5%


Another Too-Cheap MBO as Founder Takes Out EPS


 Locoguide (4497 JP) / Kufu (4399 JP)

Real estate
0.4
Merger



Locoguide (4497 JP) - Kufu (4399 JP): Merger Is a Done Deal



Maruka Machinery (7594 JP) / Furusato Industries (8087 JP) 
Trading
0.4
Merger



A Complex SmallCap Merger in Japan: Maruka (7594) And Furusato (8087)



Secom Joshinetsu (4342 JP) 
Security
0.3
Tender Offer
66.2%


Secom To Finally Buy Out Affiliate Secom Joshinetsu (4342)








Malaysia




Can-One Bhd (CAN MK) 
Manufacturing
0.1
MTO
15.8%


Can-One (CAN MK)? Yeoh Can Lah!



IHH Healthcare (IHH MK) 
Healthcare
N/A
N/A
N/A


IHH Healthcare (IHH MK): More Medicine For Mitsui?


Source: Smartkarma Insights






The above does not include BetMakers Technology Group (BET AU) lobbing a non-binding offer of A$4bn (A$1bn cash, $3bn scrip into BET) for Tabcorp Ltd (TAH AU)'s wagering and media division, and Apollo's prior tilt - Tabcorp (TAH AU): Apollo Shows Its Hand.

Nor does the table include the rumoured merger between  Angang Steel Co Ltd (H) (347 HK) and Bengang Steel (000761 CH) - Amalgamated Steel: Merging Angang &amp; Bengang As, Bs, and Hs.



The average premium for the new deals announced (or first discussed) in May was ~41%, with a year-to-date average of ~31% (78 deals). This compares to the average premium for all deals in 2020 (158 deals) and 2019 (145 deals) of 31% and 31.5% respectively. 




Summary of News in May of Arb Situations On Smartkarma's Radar



(Again, click on the company names to take to you to the insights and/or discussion posts for a more comprehensive read-through on each situation)






Australia


Comments (with links to announcements &amp; insights)




3P Learning (3PL AU) 

No May update




Bingo Industries (BIN AU) 

1-May: Capital Group announced it has sold its entire 9.7% stake in Bingo Industries (BIN AU).




Crown Resorts (CWN AU) 

10-May: Crown Resorts: Blackstone &amp; Star Place Their Bets
17-May: Crown Says Blackstone's Bid Is Light. Undecided On Star
20-May: Crown Resorts Ltd: Blackstone Offer Rejected, Star Offer May Still Not Reflect True Forward Value




Galaxy Resources (GXY AU) 

No May update




Link Administration Holdings (LNK AU) 

27-May: Link Group (LNK AU): KKR Opens The Bidding For PEXA
31-May: Link Admin (LNK AU) Goes IPO Route For PEXA Afterall




Mainstream Group Holdings Ltd (MAI AU) 

2-May: Mainstream (MAI AU): More-Than-Double in Less than 2 Months After Apex Bump
6-May: Mainstream (MAI AU): Bidding War Continues as SS&amp;C Overbids for the 4th Time
14-May: Mainstream (MAI AU): +120% in ~2 Months but Bidding War Continues....




McPherson's Ltd (MCP AU) 

No May update




Mortgage Choice (MOC AU) 

26-Mau FIRB gives its approval



Primewest Group Ltd (PWG AU)

14-May: Target's Statement and Bidder's Statements were published. Primewest Group Ltd (PWG AU)'s Board has unanimously recommended shareholders to accept the Offer. 




Think Childcare (TNK AU) 

12-May: Think Childcare (TNK AU) has agreed to extend the Exclusivity Period with Busy Bees to 31st May 2021 (vs. original deadline of 14th May). This is still a non-binding deal with an expected completion date to be in 1Q CY22. 




Vitalharvest Freehold Trust (VTH AU) 

1-May: And so it goes - MAFM bumps its Offer for Vitalharvest Freehold Trust (VTH AU) to $1.26.
7-May: MAFM exercises a call option and acquires 16.2% of Vitalharvest Freehold Trust (VTH AU).
28-May Roc bumps its Offer for Vitalharvest Freehold Trust (VTH AU) to $1.29/share.  And says it will overbid any MAFM counter! 




Vocus Communications (VOC AU) 

10-May: Vocus Comms (VOC AU): MIRA/Aware's Done Deal
19-May: Vocus Comms (VOC AU): MIRA/​Aware’s Scheme Doc Despatched. EGM On 22 June










Hong Kong


Comments (with links to announcements &amp; insights)




Beijing Digital Telecom (6188 HK) 

1-May: Beijing Digital (6188 HK): Offer Now Open. IFA Says Fair
20-May: Beijing Digital Telecom (6188 HK)'s MGO is now unconditional in all respects. 




China Machinery Engineering (1829 HK) 

28-May: China Machinery Engineering (1829 HK): Movement In The Works?




China Traditional Chinese Medicine (570 HK) 

7-May: In its monthly update regarding a potential Offer, China Traditional Chinese Medicine (570 HK) says there is no update.




China Youzan Limited (8083 HK) 

10-May: China Youzan (8083 HK): Reality Check As Shares Rollover




Kerry Logistics Network (636 HK) 

4-May: Kerry Logistics Network (636 HK) will hold an EGM on the 26 May for shareholders to vote on the sale of the Hong Kong and Taiwan warehouse businesses to Kerry Holdings. 
26-May: At its SGM, Kerry Logistics Network (636 HK) shareholders overwhelmingly approved the sale of its Hong Kong, Taiwan warehouse business to Kerry Holdings.




New Century REIT (1275 HK) 

No May update




Rivera Holdings (281 HK) 

No April update




Sichuan Languang Justbon Service Group (2606 HK) 

3-May: Languang Justbon (2606 HK): Offer Now Open - For Up To Four Months










India


Comments (with links to insights)




Mphasis Ltd (MPHL IN) 

4-May: The Detailed Public Statement on Mphasis Ltd (MPHL IN) has been released. The Open Offer is scheduled tentatively to run from 18 June to 1 July, which means it is running Very Tight and the option is worth a bit less than I expected. But that just means there is more gamma. One could get big at the high Rs 1600s area. 




Vedanta Ltd (VEDL IN) 

4-May: Vedanta Now Caught Up With Peers - A Different Skew Ahead










Japan


Comments (with links to announcements &amp; insights)




BeNEXT Group (2154 JP) 
No May update



Cocokara Fine (3098 JP) 
No May update



Fuji Kosan Company (5009 JP) 
17-May:  Fuji Kosan Company (5009 JP) has responded to Aslead Strategic Value Fund's Tender Offer with its initial Target Opinion Statement which is "Opinion Withheld." This is because Fuji Kosan hasn't actually done anything yet - two weeks in. They have sent questions to Aslead, and Aslead has five business days to respond. This is slow-walking it. This tender offer is likely to be extended because of that.



Hitachi Metals (5486 JP) 

5-May: Hitachi Metals - Should I Stay or Should I Go Now?




Honshu Chemical Industry (4115 JP) 

13-May: Honshu Chemical (4115) Shareholders Perhaps One Day From a Wrong Price Takeover
16-May:: Honshu Chemical Shareholders Get the Short End of the Stick As The Board Is Ex-Gourd




Invesco Office J Reit (3298 JP) 

6-May:  Invesco Office OPPOSES Starwood Hostile Offer and Gets a Distinctly Beige Knight
11-May:  Starwood Bumps Terms, Lowers Threshold on Invesco Office
13-May:  Invesco Office's Terrible, Horrible, No Good Very Bad Day... Changes Things
20-May:  Invesco Office's Beige Knight (Deemed Dirty Gray By Markets) Suddenly Looks Brighter and Whiter
23-May:  Starwood Responds to Invesco Office's White Knight Proposal
24-May: Starwood has extended their Tender Offer on Invesco Office J Reit (3298 JP) from the 24th of May to 15th of June after the close of the 24th. They did not raise the price. This is basically the equivalent of Starwood calling Invesco's bluff. They can extend again if they want but they are going to make Invesco come out. They can change price later if they think it necessary.



Japan Asia (3751 JP)
No May update



Sawada Holdings (8699 JP) 

9-May:  Sawada Selldown Was NOT Done - Shareholder Structure Looks Different Now
23-May: Sawada Is A Different Stock Now
31-May:  Be Careful of Expectations on Sawada (8699)




Toshiba Corp (6502 JP) 

14-May: Toshiba – Shareholder Returns Trump Weak Guidance
17-May: Toshiba Results &amp; Shareholder Return - Possibly Big Impact Buyback Coming











New Zealand


Comments 




Tilt Renewables Ltd (TLT NZ) 

No May update











Singapore


Comments (with links to announcements)




Procurri Corporation (PROC SP) 

3-May: The Partial Offer has not become unconditional in all respects on the Closing Date and has therefore lapsed










Thailand


Comments




Intouch Holdings (INTUCH TB) 

No May update




Vinythai Public Co (VNT TB) 

No May update






<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> made waves in the past week, <a href="https://disclosure.edinet-fsa.go.jp/E01EW/download?uji.verb=W0EZA104CXP001003Action&amp;uji.bean=ee.bean.parent.EECommonSearchBean&amp;PID=W1E63011&amp;SESSIONKEY=1622421759294&amp;lgKbn=2&amp;pkbn=0&amp;skbn=1&amp;dskb=&amp;askb=&amp;dflg=0&amp;iflg=&amp;preId=1&amp;mul=8699&amp;lpr=on&amp;cal=1&amp;era=R&amp;yer=&amp;mon=&amp;pfs=4&amp;row=100&amp;idx=0&amp;str=&amp;kbn=1&amp;flg=&amp;syoruiKanriNo=&amp;s=S100LDOU" target="_blank" rel="noopener">announcing</a> on the 24th it had bought 5.09% 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>, <a href="https://disclosure.edinet-fsa.go.jp/E01EW/download?uji.verb=W0EZA104CXP001003Action&amp;uji.bean=ee.bean.parent.EECommonSearchBean&amp;PID=W1E63011&amp;SESSIONKEY=1622421759294&amp;lgKbn=2&amp;pkbn=0&amp;skbn=1&amp;dskb=&amp;askb=&amp;dflg=0&amp;iflg=&amp;preId=1&amp;mul=8699&amp;lpr=on&amp;cal=1&amp;era=R&amp;yer=&amp;mon=&amp;pfs=4&amp;row=100&amp;idx=0&amp;str=&amp;kbn=1&amp;flg=&amp;syoruiKanriNo=&amp;s=S100LE2B" target="_blank" rel="noopener">announcing</a> on the 26th it had reached 6.12%, and <a href="https://disclosure.edinet-fsa.go.jp/E01EW/download?uji.verb=W0EZA104CXP001003Action&amp;uji.bean=ee.bean.parent.EECommonSearchBean&amp;PID=W1E63011&amp;SESSIONKEY=1622421759294&amp;lgKbn=2&amp;pkbn=0&amp;skbn=1&amp;dskb=&amp;askb=&amp;dflg=0&amp;iflg=&amp;preId=1&amp;mul=8699&amp;lpr=on&amp;cal=1&amp;era=R&amp;yer=&amp;mon=&amp;pfs=4&amp;row=100&amp;idx=0&amp;str=&amp;kbn=1&amp;flg=&amp;syoruiKanriNo=&amp;s=S100LEXW" target="_blank" rel="noopener">announcing</a> on Friday 28 May after the close that it had reached 9.0% with 3.685mm shares (full length urls below in appendix).The shares rallied hard, from ¥940 to ¥1,050+ which was above the Tender Offer Price offered by Meta Capital/Upsilon Investment Partners. What J Trust has told the world in its filings about how and when it bought, and about its reasons for investment may tell you something about what to expect going forward. The possibility of J Trust launching a Tender Offer exists but there are LOTS of hurdles between now and then. More below the fold.

J Trust Co Ltd (8508 JP) made waves in the past week, announcing on the 24th it had bought 5.09% of Sawada Holdings (8699 JP), announcing on the 26th it had reached 6.12%, and announcing on Friday 28 May after the close that it had reached 9.0% with 3.685mm shares (full length urls below in appendix).The shares rallied hard, from ¥940 to ¥1,050+ which was above the Tender Offer Price offered by Meta Capital/Upsilon Investment Partners. What J Trust has told the world in its filings about how and when it bought, and about its reasons for investment may tell you something about what to expect going forward. The possibility of J Trust launching a Tender Offer exists but there are LOTS of hurdles between now and then. More below the fold. 

Be Careful of Expectations on Sawada (8699)

Japan

Japan Asia Group Limited provides consulting services to both the private and public sectors relating to social infrastructure development. The Company also develops green communities as well as renewable energy plants. Japan Asia Group aditionally provides various financial services such as security brokerage.

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Japan Asia (3751 JP)

Infroneer (5076 JP) Tender Offer for Toyo Construction (1890 JP) Could Get Funky

Infroneer Holdings - the former Maeda Corp/Maeda Road grouping - has launched a Tender to take out minorities in Toyo Construction at a 15-year...

Travis Lundy

Katakura Tender Offer Bump Now Looks Off. It Is Take-The-Loss or Hold-On-For-Later

The Katakura MBO looks like it will not get a bump to its too-light price despite a large holder having bought shares 9.3% through terms. That...

Travis Lundy

CIE Boosts Its Japan Asia Group (3751) TOB Price - Hidden Implications

Japan Asia Group (3751) on Friday announced "progress" in its asset sale which leads to a large shareholder return. It asked CIE to bump its TOB...

Travis Lundy

(Mostly) Asia M&A: May 2021 Roundup

The average premium for the new deals announced (or first discussed) in May was ~41%, with a year-to-date average of ~31% (78 deals).

David Blennerhassett

Be Careful of Expectations on Sawada (8699)

J Trust has gone to 9% on Sawada. J Trust has a history in EM Asian financial assets. It even has a small business in Mongolia. But JT being a new...

Travis Lundy

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