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>
<a href="https://www.nikkei.com/article/DGXZQOUB1619K0W6A710C2000000/" target="_blank" rel="noopener">Nikkei</a> reported that EQT/<a href="https://www.smartkarma.com/entities/digital-garage-inc" target="_blank" data-smartkarma-citation="entities:13747:1" rel="noopener">Digital Garage (4819 JP)</a> has increased its offer for <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a> to the mid-JPY3,400, while Bloomberg reported that EQT/DG is now offering JPY3,440-3,460 per share.</li>
<li>The latest EQT/DG offer is designed to game the competing-offer clauses to retain the Board's and KDDI’s support and potentially secure Oasis's allegiance.</li>
<li>The bidding battle is not done yet. By increasing its offer by 1% from JPY3,384 to JPY3,419 (from JPY3,500 to JPY3,535 on an equivalent basis), Bain/LY can regain the advantage.</li>
</ul>



Nikkei reported that EQT/Digital Garage (4819 JP) has increased its offer for Kakaku.com Inc (2371 JP) to the mid-JPY3,400, while Bloomberg reported that EQT/DG is now offering JPY3,440-3,460 per share.
The latest EQT/DG offer is designed to game the competing-offer clauses to retain the Board's and KDDI’s support and potentially secure Oasis's allegiance.
The bidding battle is not done yet. By increasing its offer by 1% from JPY3,384 to JPY3,419 (from JPY3,500 to JPY3,535 on an equivalent basis), Bain/LY can regain the advantage.


<ul>
<li>
<a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a>’s shares have been trading above Bain/<a href="https://www.smartkarma.com/entities/ly-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">LY (4689 JP)</a>’s preconditional binding offer of JPY3,384 (if KDDI agrees to a share buyback, the offer is at JPY3,500).</li>
<li>I previously opined that the probability of a bidding war is low. However, disclosure on 2 July showed that EQT increased its offer to JPY3,300 on 22 June.</li>
<li>EQT can match Bain/LY’s JPY3,500 offer with a modest 2.4% increase to the effective cost of its 22 June offer. If it matches Bain/LY's effective cost, EQT can offer JPY3,643.</li>
</ul>



Kakaku.com Inc (2371 JP)’s shares have been trading above Bain/LY (4689 JP)’s preconditional binding offer of JPY3,384 (if KDDI agrees to a share buyback, the offer is at JPY3,500).
I previously opined that the probability of a bidding war is low. However, disclosure on 2 July showed that EQT increased its offer to JPY3,300 on 22 June.
EQT can match Bain/LY’s JPY3,500 offer with a modest 2.4% increase to the effective cost of its 22 June offer. If it matches Bain/LY's effective cost, EQT can offer JPY3,643.


Kakaku.com (2371 JP): Rethinking the Arb Trade

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>Stay long <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a>. Don't sell yet. And definitely stay long <a href="https://www.smartkarma.com/entities/digital-garage-inc" target="_blank" data-smartkarma-citation="entities:13747:1" rel="noopener">Digital Garage (4819 JP)</a>.</li>
<li>The <a href="https://www.smartkarma.com/entities/yamada-corp" target="_blank" data-smartkarma-citation="entities:16273:1" rel="noopener">Yamada Corp (6392 JP)</a>/<a href="https://www.smartkarma.com/entities/edion-corp" target="_blank" data-smartkarma-citation="entities:14358:1" rel="noopener">Edion Corp (2730 JP)</a> combination gives both a platform. What they do with it is the question that the initial announcement left entirely unanswered.</li>
<li>At a multi-year low implied stub; and an all-time low simple ratio (<a href="https://www.smartkarma.com/entities/ytl-corp-bhd" target="_blank" data-smartkarma-citation="entities:8553:1" rel="noopener">YTL (YTL MK)</a>/<a href="https://www.smartkarma.com/entities/ytl-power-international-bhd" target="_blank" data-smartkarma-citation="entities:1239:1" rel="noopener">YTL Power (YTLP MK)</a>), if you can set up the stub here cleanly, do so.</li>
</ul>


Stay long Kakaku.com Inc (2371 JP). Don't sell yet. And definitely stay long Digital Garage (4819 JP).
The Yamada Corp (6392 JP)/Edion Corp (2730 JP) combination gives both a platform. What they do with it is the question that the initial announcement left entirely unanswered.
At a multi-year low implied stub; and an all-time low simple ratio (YTL (YTL MK)/YTL Power (YTLP MK)), if you can set up the stub here cleanly, do so.


Last Week In Event SPACE: Digital Garage/Kakaku.com, Yamada Corp/Edion Corp, YTL/YTL Power, Strategy

Travis Lundy

<ul>
<li>I wrote about Bain/LY having shown their cards on <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a> on 2 July. Just before I published (but after it went to compliance), Kakaku responded. </li>
<li>Kakaku's response was an exercise in good governance. It was an anti-FujiSoft situation. It was very welcome. Investors should appreciate this and learn from it.</li>
<li>EQT+DG Consortium has bid ¥3,300 unofficially but that's about ¥3,415 equivalent. My bet is they will go higher. And Bain+LY will too (theirs is equivalent ¥3,640 if DG gives up).</li>
</ul>


I wrote about Bain/LY having shown their cards on Kakaku.com Inc (2371 JP) on 2 July. Just before I published (but after it went to compliance), Kakaku responded. 
Kakaku's response was an exercise in good governance. It was an anti-FujiSoft situation. It was very welcome. Investors should appreciate this and learn from it.
EQT+DG Consortium has bid ¥3,300 unofficially but that's about ¥3,415 equivalent. My bet is they will go higher. And Bain+LY will too (theirs is equivalent ¥3,640 if DG gives up).


[Japan M&A] Kakaku Governance A Shining Example; Bain+LY and EQT+DG May Fight Longer

<ul>
<li>Back on the 12th May, <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com (2371 JP)</a> recommended EQT's Offer at ¥3,000/share. On the 14th May, <a href="https://www.smartkarma.com/entities/ly-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">LY (4689 JP)</a> submitted an initial bid at ¥3,232/share, contingent on due diligence.</li>
<li>The Nikkei flagged yesterday <a href="https://www.smartkarma.com/entities/digital-garage-inc" target="_blank" data-smartkarma-citation="entities:13747:1" rel="noopener">Digital Garage (4819 JP)</a>, 20.68% shareholder of Kakaku, will not accept LY's bid for what appears spurious reasons. </li>
<li>Kakaku's share price is holding; whereas DG's are down 29% since the middle of last month. The discount to NAV has widened to 65%. The implied stub has cratered. </li>
</ul>


Back on the 12th May, Kakaku.com (2371 JP) recommended EQT's Offer at ¥3,000/share. On the 14th May, LY (4689 JP) submitted an initial bid at ¥3,232/share, contingent on due diligence.
The Nikkei flagged yesterday Digital Garage (4819 JP), 20.68% shareholder of Kakaku, will not accept LY's bid for what appears spurious reasons. 
Kakaku's share price is holding; whereas DG's are down 29% since the middle of last month. The discount to NAV has widened to 65%. The implied stub has cratered. 


Digital Garage Is The Wrong Price As It (Reportedly) Dings LY's Tilt

Japan

Kakaku.com, Inc provides price comparison services and products information through its website.  The Company also provides Internet advertising services.

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Kakaku.com Inc (2371 JP)

Kakaku.com (2371 JP): Sheer Gamesmanship

In line with yesterday’s media articles, EQT/DG have increased its offer to JPY3,450, a 4.5% premium to its JPY3,300 offer (22 June). The closing...

Arun George

Kakaku.com (2371 JP): Rethinking the Arb Trade

The EQT offer is a structurally lower-cost proposal than Bain/LY’s on a like-for-like basis. EQT bid JPY3,300 on 22 June and can match Bain/LY’s...

Arun George

Last Week In Event SPACE: Digital Garage/Kakaku.com, Yamada Corp/Edion Corp, YTL/YTL Power, Strategy

It’s Sunday! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed during the...

David Blennerhassett

[Japan M&A] Kakaku Governance A Shining Example; Bain+LY and EQT+DG May Fight Longer

Kakaku has reached ¥3,650 which was my last target. I think given the nuances of who is bidding how much and how means we should think this goes...

Travis Lundy

Digital Garage Is The Wrong Price As It (Reportedly) Dings LY's Tilt

Whether EQT steps up to match LY and/or EQT/LY jostle for control, Digital Garage (4819 JP) appears bombed out here. EQT's buyback tender Offer is...

David Blennerhassett

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