Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Early this past week, during the day, the Nikkei and Yomiuri had intraday headlines suggesting that <a href="https://www.smartkarma.com/entities/217" target="_blank" data-smartkarma-citation="entities:217">Sumitomo Mitsui Financial Gr (8316 JP)</a> and <a href="https://www.smartkarma.com/entities/6841" target="_blank" data-smartkarma-citation="entities:6841">Resona Holdings Inc (8308 JP)</a> would seek to merge still-listed SMFG-affiliated regional banks <a href="https://www.smartkarma.com/entities/9407" target="_blank" data-smartkarma-citation="entities:9407">Kansai Urban Banking Corp (8545 JP)</a> of Osaka and <a href="https://www.smartkarma.com/entities/1735" target="_blank" data-smartkarma-citation="entities:1735">Minato Bank Ltd/The (8543 JP)</a> of Hyogo Prefecture with Resona subsidiary Kinki Osaka Bank (of Osaka). Fifteen minutes later and several percent higher, the listed regional banks saw trading halted and shortly after that we got a series of releases from the various banks saying that they had not been the source of the information and what had been reported was not fact.This is not, strictly speaking, "fake news." Under the Japanese standard of announcement and "news", companies would regard "news" as a "fact", not a "possibility." And until a decision by the company's board of directors to the effect that the possibility is indeed an OfficialPossibility, such a possibility is not Fact but Speculation.All that said, after the various denials, and four days lacking new news, Kansai Urban Bank and Minato Bank gave up 80+% of their first-day impulse moves (8-12%) to end the week up 1% and 2% (MB), respectively.But over the weekend we got some NEW news stories. And for those who like to trade events and invest in restructurings, there are some interesting angles. The main points: <ul><li>A basic agreement will likely come in March, perhaps as early as this week.</li><li>The combined bank would become a holding company in April 2018</li><li>The Holdco would remain listed on the TSE1.</li><li>Resona would own more than 50% and consolidate. SMFG would own more than 20% and would treat the new Holdco as an equity method affiliate. The numbers suggest minorities would have a 25-29% stake. </li><li>The combined company would become the largest regional bank in terms of corporate main bank account coverage in the Kansai area, effectively twice the size of current #1 <a href="https://www.smartkarma.com/entities/5248" target="_blank" data-smartkarma-citation="entities:5248">Bank Of Kyoto Ltd/The (8369 JP)</a> (though only 30-40% larger in terms of total assets).</li></ul>If you look at the asset bases of each of the banks, it is not clear how you get to 51% ownership by Resona without considerable contortions.  I expect an interesting game of capital base Twister to be played among the players here. There is a fair bit of wonky detail below so pay attention kiddies.More below the fold.

Early this past week, during the day, the Nikkei and Yomiuri had intraday headlines suggesting that Sumitomo Mitsui Financial Gr (8316 JP) and Resona Holdings Inc (8308 JP) would seek to merge still-listed SMFG-affiliated regional banks Kansai Urban Banking Corp (8545 JP) of Osaka and Minato Bank Ltd/The (8543 JP) of Hyogo Prefecture with Resona subsidiary Kinki Osaka Bank (of Osaka). Fifteen minutes later and several percent higher, the listed regional banks saw trading halted and shortly after that we got a series of releases from the various banks saying that they had not been the source of the information and what had been reported was not fact.This is not, strictly speaking, "fake news." Under the Japanese standard of announcement and "news", companies would regard "news" as a "fact", not a "possibility." And until a decision by the company's board of directors to the effect that the possibility is indeed an OfficialPossibility, such a possibility is not Fact but Speculation.All that said, after the various denials, and four days lacking new news, Kansai Urban Bank and Minato Bank gave up 80+% of their first-day impulse moves (8-12%) to end the week up 1% and 2% (MB), respectively.But over the weekend we got some NEW news stories. And for those who like to trade events and invest in restructurings, there are some interesting angles. The main points: A basic agreement will likely come in March, perhaps as early as this week.The combined bank would become a holding company in April 2018The Holdco would remain listed on the TSE1.Resona would own more than 50% and consolidate. SMFG would own more than 20% and would treat the new Holdco as an equity method affiliate. The numbers suggest minorities would have a 25-29% stake. The combined company would become the largest regional bank in terms of corporate main bank account coverage in the Kansai area, effectively twice the size of current #1 Bank Of Kyoto Ltd/The (8369 JP) (though only 30-40% larger in terms of total assets).If you look at the asset bases of each of the banks, it is not clear how you get to 51% ownership by Resona without considerable contortions.  I expect an interesting game of capital base Twister to be played among the players here. There is a fair bit of wonky detail below so pay attention kiddies.More below the fold.

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

After the close Friday, major Japanese P&amp;C insurer <a href="https://www.smartkarma.com/entities/632" target="_blank" data-smartkarma-citation="entities:632">Sompo Japan</a>  officially announced that it would attempt to take over beleaguered nursing care operations company <a href="https://www.smartkarma.com/entities/10361" target="_blank" data-smartkarma-citation="entities:10361">Message Co Ltd</a>  (2400 JP) in a two-step process, with 34.69% of the shares scheduled to be tendered in Step1 at 2500 yen a share, and a Second Tender Offer to be launched, contingent on the First Tender Offer being successful, at 3500 yen a share. As is often the case in Japanese mergers, the news Sompo Japan would aim at a transaction to obtain 50+% or more of Message was actually noted in Friday morning's Nikkei and the stock was limit up all day long, closing at 2854 yen. Actual details did not emerge until after the close.For those just looking at a longer-dated price chart, this looks like a takeunder which might have trouble getting done. However, Message has had issues recently and the founder and his family have undertaken to tender in the First Tender Offer, which will get Sompo Japan to a holding of ~38%. Then they will need 12+% of the remaining 62% of shares outstanding to get a majority. But they intend to keep the company listed. And if nobody actually tenders in the Second Tender Offer, Sompo Japan has plans to get to 50+% anyway.For Message, this represents a 'rescue' from its recent troubles. For Sompo Japan, it furthers the company's ambitions in the space (it has already invested in a few nursing care operators in the last few years - The Nursing Is Strong In This One!) so Sompo Japan will become the second largest nursing home operator in Japan (in what is a VERY diverse space).The English language document is linked <a href="http://www.sompo-hd.com/~/media/hd/en/files/news/2015/e_20151218_3.pdf" target="_blank">here</a> and is in the list of attachments at right.This is an interesting transaction. It is a somewhat unusual structure, I expect there to be multiple opinions about this company's future, and minorities get a completely free put to sell shares at 48% above the recent trading price.A much more thorough discussion is below the fold...

After the close Friday, major Japanese P&amp;C insurer Sompo Japan  officially announced that it would attempt to take over beleaguered nursing care operations company Message Co Ltd  (2400 JP) in a two-step process, with 34.69% of the shares scheduled to be tendered in Step1 at 2500 yen a share, and a Second Tender Offer to be launched, contingent on the First Tender Offer being successful, at 3500 yen a share. As is often the case in Japanese mergers, the news Sompo Japan would aim at a transaction to obtain 50+% or more of Message was actually noted in Friday morning's Nikkei and the stock was limit up all day long, closing at 2854 yen. Actual details did not emerge until after the close.For those just looking at a longer-dated price chart, this looks like a takeunder which might have trouble getting done. However, Message has had issues recently and the founder and his family have undertaken to tender in the First Tender Offer, which will get Sompo Japan to a holding of ~38%. Then they will need 12+% of the remaining 62% of shares outstanding to get a majority. But they intend to keep the company listed. And if nobody actually tenders in the Second Tender Offer, Sompo Japan has plans to get to 50+% anyway.For Message, this represents a 'rescue' from its recent troubles. For Sompo Japan, it furthers the company's ambitions in the space (it has already invested in a few nursing care operators in the last few years - The Nursing Is Strong In This One!) so Sompo Japan will become the second largest nursing home operator in Japan (in what is a VERY diverse space).The English language document is linked here and is in the list of attachments at right.This is an interesting transaction. It is a somewhat unusual structure, I expect there to be multiple opinions about this company's future, and minorities get a completely free put to sell shares at 48% above the recent trading price.A much more thorough discussion is below the fold...

Sompo Tender for Message: Adding to A Phalanx of Nursing Homes

Japan

Message Co., Ltd. operates primarily nursing facilities called "Amille" for the elderly.  The Company also provides meal services and home care services. Message franchises its operation to provide the services at local communities.

Message Co Ltd (2400 JP)

A Kinki Osaka Ménage à Trois?

Early this past week, during the day, the Nikkei and Yomiuri had intraday headlines suggesting that Sumitomo Mitsui Financial Gr (8316 JP) and...

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

Sompo Tender for Message: Adding to A Phalanx of Nursing Homes

After the close Friday, major Japanese P&C insurer Sompo Japan officially announced that it would attempt to take over beleaguered nursing...

Travis Lundy