Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

On Friday 31 July 2020, after the close, <a href="https://www.smartkarma.com/entities/sumitomo-bakelite-co-ltd" target="_blank" data-smartkarma-citation="entities:7902:1" rel="noopener">Sumitomo Bakelite (4203 JP)</a> announced a Tender Offer to buy out minorities in medical device manufacturer <a href="https://www.smartkarma.com/entities/kawasumi-laboratories-inc" target="_blank" data-smartkarma-citation="entities:11993:1" rel="noopener">Kawasumi Laboratories (7703 JP)</a>.This deal comes at a knockout premium of 116.8% or ¥1700/share, which is a 20+yr high. But it is not that much of a knockout price. Most of the market cap at takeover price is in net cash and securities, and net receivables. Using those terms, the Adjusted EV/EBITDA of this deal is under 4x the 20yr low EBITDA. Get some synergies in place and it's cheaper. It is hard to say how much the Special Committee's presence is theater or how much it helped. The first bid at ¥1250/share was a 10+yr high price, but it was still came out to be a negative Adjusted EV. At ¥1700, if the PP&amp;E were sold and leased back, the takeover price is still negative Adjusted EV. But the price was marched upward, even if the Special Committee had no advisors, no fairness opinion, no market check, and the conflicted advisors provided little in the way of transparency of calculation except for the transparency that the "fair value" did not include synergies, despite METI Fair M&amp;A Guidelines suggesting is due general shareholders (or at least an "appropriate portion" is). There IS a majority of minority, but that is simply mechanical as the Sumi in Kawasumi Labs has less than one third currently. But with crossholding likely to tender into Sumitomo Bakelite's bid, ex-crossholders the deal does NOT require a majority of minority. However, it will likely get done anyway. More below the fold.

On Friday 31 July 2020, after the close, Sumitomo Bakelite (4203 JP) announced a Tender Offer to buy out minorities in medical device manufacturer Kawasumi Laboratories (7703 JP).This deal comes at a knockout premium of 116.8% or ¥1700/share, which is a 20+yr high. But it is not that much of a knockout price. Most of the market cap at takeover price is in net cash and securities, and net receivables. Using those terms, the Adjusted EV/EBITDA of this deal is under 4x the 20yr low EBITDA. Get some synergies in place and it's cheaper. It is hard to say how much the Special Committee's presence is theater or how much it helped. The first bid at ¥1250/share was a 10+yr high price, but it was still came out to be a negative Adjusted EV. At ¥1700, if the PP&amp;E were sold and leased back, the takeover price is still negative Adjusted EV. But the price was marched upward, even if the Special Committee had no advisors, no fairness opinion, no market check, and the conflicted advisors provided little in the way of transparency of calculation except for the transparency that the "fair value" did not include synergies, despite METI Fair M&amp;A Guidelines suggesting is due general shareholders (or at least an "appropriate portion" is). There IS a majority of minority, but that is simply mechanical as the Sumi in Kawasumi Labs has less than one third currently. But with crossholding likely to tender into Sumitomo Bakelite's bid, ex-crossholders the deal does NOT require a majority of minority. However, it will likely get done anyway. More below the fold. 

Kawasumi Labs Takeout Tender Offer - Big Premium Is Not Too Big

Japan TMT Analyst

Pelham Smithers

Market Intel on Asian Tech with a Japan focus

Pelham Smithers Associates

Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods. 

Research is provided by the following:
Pelham Smithers: Macro, consumer electronics, telecoms & pharma
Joel Scheiman: Electronics materials / components
Julie Boote: Autos
Will Nestuk: Capital goods, machinery & transportation equipment parts
Thao Nguyen: eCommerce, internet content, marketing & advertising

Thematic (Sector/Industry)

The suggestion of government orchestration against <a href="https://www.smartkarma.com/entities/8979" target="_blank" data-smartkarma-citation="entities:8979:1">Ono</a>’s immunotherapy treatment Opdivo (nivolumab) has moved a stage further with a report in the Nikkei that the Japanese Health Ministry is considering setting rules on new drug usage during this fiscal year, starting with <a href="https://www.smartkarma.com/entities/8979" target="_blank" data-smartkarma-citation="entities:8979:1">Ono</a>’s Opdivo and <a href="https://www.smartkarma.com/entities/6091" target="_blank" data-smartkarma-citation="entities:6091">Astellas</a>’s Repatha. Patients may be limited to those who can see certain impact from the treatment, which in turn would mean the drug could only be prescribed at those institutions with the facilities to check…

The suggestion of government orchestration against Ono’s immunotherapy treatment Opdivo (nivolumab) has moved a stage further with a report in the Nikkei that the Japanese Health Ministry is considering setting rules on new drug usage during this fiscal year, starting with Ono’s Opdivo and Astellas’s Repatha. Patients may be limited to those who can see certain impact from the treatment, which in turn would mean the drug could only be prescribed at those institutions with the facilities to check…

Opdivo Singled Out in Government Rule Change

Japan

Kawasumi Laboratories, Incorporated develops and sells medical tools and equipment and pharmaceutical products.  The Company's products include artificial organs, extracorporeal lines, and blood transfusion kits.

Kawasumi Laboratories (7703 JP)

Kawasumi Labs Takeout Tender Offer - Big Premium Is Not Too Big

On Friday 31 July 2020, after the close, Sumitomo Bakelite (4203 JP) announced a Tender Offer to buy out minorities in medical device manufacturer...

Travis Lundy

Opdivo Singled Out in Government Rule Change

The suggestion of government orchestration against Ono’s immunotherapy treatment Opdivo (nivolumab) has moved a stage further with a report in the...

Pelham Smithers Associates