Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

In mid-November 2020, <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui &amp; Co Ltd (8031 JP)</a> and <a href="https://www.smartkarma.com/entities/mitsui-chemicals-inc" target="_blank" data-smartkarma-citation="entities:1703:1" rel="noopener">Mitsui Chemicals (4183 JP)</a> announced a transaction to take out minorities in jointly-held subsidiary <a href="https://www.smartkarma.com/entities/honshu-chemical-industry-co" target="_blank" data-smartkarma-citation="entities:9094:1" rel="noopener">Honshu Chemical Industry Co (4115 JP)</a>. The price was at a 43% premium to then-traded price and a 20-year high. It was also<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/205/873/original/Screenshot+2021-05-13+at+10.55.05+AM.png?1620874520" class="editor-image img-responsive" data-smartkarma-image-id="205873"></figure></section>At the time, in <a href="https://www.smartkarma.com/insights/honshu-chemical-4115-an-embarrassment-of-riches" target="_blank" data-smartkarma-citation="insights:45197" rel="noopener">Honshu Chemical (4115) - An Embarrassment of Riches</a> I said...<blockquote>The result is a governance embarrassment for the two major acquirers, and the target company itself. </blockquote>The two companies, which combined owned 54% of Honshu Chemical, had said <blockquote>the Target has a high potential for growth with its various high-technologies in domains of high-performance monomer[s] related to ICT, Mobility and Healthcare.</blockquote>Then they decided that the "fair" value of the company (the Tender Offer Price) was decided at a 1-year forward EV/EBITDA of 2.7x (where net receivables and inventory was another 1.5x EBITDA), and a 1-year ex-cash PER of 3.7x. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/205/993/original/trump+low+price.gif?1620903117" class="editor-image img-responsive" data-smartkarma-image-id="205993"></figure></section>Three months later the company revised up its forecasts for EBIT and Net Profit for the full year this year by 25% and 33% respectively in February. This company has minimal debt, huge net cash. If you were to pay out the net cash, this 'fuddy-duddy' cyclical trades at 7x earnings, less than book, with a 16% ROE, and near 50% EBITDAROE.And it "has a high potential for growth."The procedures were expected to be completed in May, and then the tender offer would start. The company reports tomorrow 14 May after the close. Since the announcement, the two parent companies' total share return has averaged +30%. Since the original announcement, Honshu Chemical earnings forecasts are up 33% a share. A basket of mostly Chinese peer pure plays has outperformed Shanghai Composite by 13% since the announcement. This was always bumpable. This remains highly bumpable. With apologies to some of my (non-fella) readers...<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/205/925/original/more+cowbell.gif?1620889670" class="editor-image img-responsive" data-smartkarma-image-id="205925"></figure></section>

In mid-November 2020, Mitsui &amp; Co Ltd (8031 JP) and Mitsui Chemicals (4183 JP) announced a transaction to take out minorities in jointly-held subsidiary Honshu Chemical Industry Co (4115 JP). The price was at a 43% premium to then-traded price and a 20-year high. It was alsoAt the time, in Honshu Chemical (4115) - An Embarrassment of Riches I said...The result is a governance embarrassment for the two major acquirers, and the target company itself. The two companies, which combined owned 54% of Honshu Chemical, had said the Target has a high potential for growth with its various high-technologies in domains of high-performance monomer[s] related to ICT, Mobility and Healthcare.Then they decided that the "fair" value of the company (the Tender Offer Price) was decided at a 1-year forward EV/EBITDA of 2.7x (where net receivables and inventory was another 1.5x EBITDA), and a 1-year ex-cash PER of 3.7x. Three months later the company revised up its forecasts for EBIT and Net Profit for the full year this year by 25% and 33% respectively in February. This company has minimal debt, huge net cash. If you were to pay out the net cash, this 'fuddy-duddy' cyclical trades at 7x earnings, less than book, with a 16% ROE, and near 50% EBITDAROE.And it "has a high potential for growth."The procedures were expected to be completed in May, and then the tender offer would start. The company reports tomorrow 14 May after the close. Since the announcement, the two parent companies' total share return has averaged +30%. Since the original announcement, Honshu Chemical earnings forecasts are up 33% a share. A basket of mostly Chinese peer pure plays has outperformed Shanghai Composite by 13% since the announcement. This was always bumpable. This remains highly bumpable. With apologies to some of my (non-fella) readers...

Honshu Chemical (4115) Shareholders Perhaps One Day From a Wrong Price Takeover

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.

On 6 May 2021, Bloomberg reported that <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui &amp; Co Ltd (8031 JP)</a>, the largest shareholder with a 32.90% stake, is currently exploring a proposal to privatise <a href="https://www.smartkarma.com/entities/ihh-healthcare-bhd" target="_blank" data-smartkarma-citation="entities:876:1" rel="noopener">IHH Healthcare (IHH MK)</a>. Mitsui is aiming to partner with private equity firms and has reached out to Khazanah Nasional Berhad, the second-largest shareholder with a 26.02% stake, to acquire its stake, according to Bloomberg. Mitsui and IHH have not formally commented on the report. On the back of the report, the shares have risen 8.8% from the unaffected price of RM5.20 (5 May) to the last close price of RM5.66. IHH is listed on the Main Markets of Bursa Malaysia and the Singapore Stock Exchange. In Malaysia, the threshold for triggering a mandatory general offer (MGO) is the offeror and concert parties owning 33% or more of the voting shares. Mitsui sits just below the threshold and the acquisition of further shares from Khazanah Nasional Berhad would trigger an MGO. <div class="content-highlight">We think that report has some credibility due to Mitsui’s view that IHH is a core asset to fulfil its ambition of expanding in the largest healthcare ecosystem in Asia. Also, Mitsui has a previous working relationship with Khazanah Nasional Berhad and announced the acquisition of a 16% stake in IHH from Khazanah Nasional Berhad in November 2018. Overall, at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (announcement of a formal proposal). </div>

On 6 May 2021, Bloomberg reported that Mitsui &amp; Co Ltd (8031 JP), the largest shareholder with a 32.90% stake, is currently exploring a proposal to privatise IHH Healthcare (IHH MK). Mitsui is aiming to partner with private equity firms and has reached out to Khazanah Nasional Berhad, the second-largest shareholder with a 26.02% stake, to acquire its stake, according to Bloomberg. Mitsui and IHH have not formally commented on the report. On the back of the report, the shares have risen 8.8% from the unaffected price of RM5.20 (5 May) to the last close price of RM5.66. IHH is listed on the Main Markets of Bursa Malaysia and the Singapore Stock Exchange. In Malaysia, the threshold for triggering a mandatory general offer (MGO) is the offeror and concert parties owning 33% or more of the voting shares. Mitsui sits just below the threshold and the acquisition of further shares from Khazanah Nasional Berhad would trigger an MGO. We think that report has some credibility due to Mitsui’s view that IHH is a core asset to fulfil its ambition of expanding in the largest healthcare ecosystem in Asia. Also, Mitsui has a previous working relationship with Khazanah Nasional Berhad and announced the acquisition of a 16% stake in IHH from Khazanah Nasional Berhad in November 2018. Overall, at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (announcement of a formal proposal). 

IHH Healthcare’s Possible Privatisation by Mitsui

David Blennerhassett

On the <a href="https://www.bursamalaysia.com/market_information/announcements/company_announcement?keyword=&amp;cat=&amp;sub_type=&amp;company=5225&amp;mkt=&amp;alph=&amp;sec=&amp;subsec=&amp;dt_ht=02%2F10%2F2018&amp;dt_lt=29%2F12%2F2018%23%2F&amp;page=2#/?category=all" target="_blank" rel="noopener">29 November</a> 2018, Khazanah Nasional sold a 16%, US$2.01bn stake in <a href="https://www.smartkarma.com/entities/ihh-healthcare-bhd" target="_blank" data-smartkarma-citation="entities:876:1" rel="noopener">IHH Healthcare (IHH MK)</a> to <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui &amp; Co Ltd (8031 JP)</a>, elevating Mitsui's long-time mid-teens stake to 32.9% - allowing Mitsui to become IHH's largest shareholder - with Khazanah's holding declining to 26%. Mitsui's stake is a shade below Malaysia's 33% mandatory takeover threshold. 
Reportedly Mitsui is now exploring a deal to take IHH private, and has been sounded out by private equity outfits as to a potential transaction. According to media reports, Khazanah has been approached to sell its stake. 
Shares closed up 7.88% yesterday on the rumours.
More below the fold.

On the 29 November 2018, Khazanah Nasional sold a 16%, US$2.01bn stake in IHH Healthcare (IHH MK) to Mitsui &amp; Co Ltd (8031 JP), elevating Mitsui's long-time mid-teens stake to 32.9% - allowing Mitsui to become IHH's largest shareholder - with Khazanah's holding declining to 26%. Mitsui's stake is a shade below Malaysia's 33% mandatory takeover threshold. 
Reportedly Mitsui is now exploring a deal to take IHH private, and has been sounded out by private equity outfits as to a potential transaction. According to media reports, Khazanah has been approached to sell its stake. 
Shares closed up 7.88% yesterday on the rumours.
More below the fold. 

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

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Equity Bottom-Up

The merger of <a href="https://www.smartkarma.com/entities/matsumotokiyoshi-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:2259:1" rel="noopener">Matsumotokiyoshi Holdings Co., Ltd. (3088 JP)</a> and <a href="https://www.smartkarma.com/entities/cocokara-fine-inc" target="_blank" data-smartkarma-citation="entities:15447:1" rel="noopener">Cocokara Fine (3098 JP)</a> is just one symptom of the growing concentration of market share in the drugstore sector.But the sector's leaders are no longer just battling for dominance in drugstore retailing; increasingly drugstores are evolving far behind this niche sector.Drugstore retailing is growing faster than any sector other than e-commerce because drugstores are positioned to meet customer needs for well-being, health and, nowadays, a broad range of daily necessities including food, and so becoming ever more integrated into consumers’ daily shopping experience.Their eclectic ranges also mean they perform well in the middle of natural disasters and crises of various forms and many chains have seen good results thanks to earthquakes, extreme weather and especially thanks to Covid, but this doesn’t fully explain the sector’s success.Crises may have helped, but Japan’s top drugstores are today some of the country’s best retailers in their own right.The following is a complete, in-depth review of the drugstore sector, including rankings, KPIs, and future trends on the sector and the potential winners.Jun Tsuruha, the current <a href="https://www.smartkarma.com/entities/tsuruha-holdings-inc" target="_blank" data-smartkarma-citation="entities:9536:1" rel="noopener">Tsuruha Holdings (3391 JP)</a> CEO, was widely quoted last year as saying the sector would soon be dominated by just “four or five” major firms. This is far from fantasy, with Tsuruha, <a href="https://www.smartkarma.com/entities/welcia-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20895:1" rel="noopener">Welcia Holdings (3141 JP)</a>, Matsukiyo-Cocokara, <a href="https://www.smartkarma.com/entities/cosmos-pharmaceutical-corp" target="_blank" data-smartkarma-citation="entities:3797:1" rel="noopener">Cosmos Pharmaceutical (3349 JP)</a> and <a href="https://www.smartkarma.com/entities/sugi-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:9255:1" rel="noopener">Sugi Holdings (7649 JP)</a> the most likely contenders.

The merger of Matsumotokiyoshi Holdings Co., Ltd. (3088 JP) and Cocokara Fine (3098 JP) is just one symptom of the growing concentration of market share in the drugstore sector.But the sector's leaders are no longer just battling for dominance in drugstore retailing; increasingly drugstores are evolving far behind this niche sector.Drugstore retailing is growing faster than any sector other than e-commerce because drugstores are positioned to meet customer needs for well-being, health and, nowadays, a broad range of daily necessities including food, and so becoming ever more integrated into consumers’ daily shopping experience.Their eclectic ranges also mean they perform well in the middle of natural disasters and crises of various forms and many chains have seen good results thanks to earthquakes, extreme weather and especially thanks to Covid, but this doesn’t fully explain the sector’s success.Crises may have helped, but Japan’s top drugstores are today some of the country’s best retailers in their own right.The following is a complete, in-depth review of the drugstore sector, including rankings, KPIs, and future trends on the sector and the potential winners.Jun Tsuruha, the current Tsuruha Holdings (3391 JP) CEO, was widely quoted last year as saying the sector would soon be dominated by just “four or five” major firms. This is far from fantasy, with Tsuruha, Welcia Holdings (3141 JP), Matsukiyo-Cocokara, Cosmos Pharmaceutical (3349 JP) and Sugi Holdings (7649 JP) the most likely contenders.

Japan Drugstores: Growing Leadership in Food, Household, Cosmetics – and the Odd Medicine Too

On 11 November 2020, when <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui &amp; Co Ltd (8031 JP)</a> and <a href="https://www.smartkarma.com/entities/mitsui-chemicals-inc" target="_blank" data-smartkarma-citation="entities:1703:1" rel="noopener">Mitsui Chemicals (4183 JP)</a> jointly announced they would launch a Tender Offer for the shares of <a href="https://www.smartkarma.com/entities/honshu-chemical-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:9094:1" rel="noopener">Honshu Chemical Industry (4115 JP)</a> that they did not own, I wrote about it in <a href="https://www.smartkarma.com/insights/honshu-chemical-4115-an-embarrassment-of-riches" target="_blank" data-smartkarma-citation="insights:45197" rel="noopener">Honshu Chemical (4115) - An Embarrassment of Riches</a>.
The deal was announced then, because the decision to launch the Tender Offer in future had been made and the negotiations with the Target Company had been completed, and the Special Committee of Honshu Chemical had decided that it was OK to support the Tender Offer and recommend it to its shareholders to tender. 
However, it was long-dated. The Tender Offer was not expected to start for another 6 months, and the valuation was truly embarrassing. It was a 43% premium, and a 20+ year high price. 
But it was still completely the wrong price. 
It is still worth a look.

On 11 November 2020, when Mitsui &amp; Co Ltd (8031 JP) and Mitsui Chemicals (4183 JP) jointly announced they would launch a Tender Offer for the shares of Honshu Chemical Industry (4115 JP) that they did not own, I wrote about it in Honshu Chemical (4115) - An Embarrassment of Riches.
The deal was announced then, because the decision to launch the Tender Offer in future had been made and the negotiations with the Target Company had been completed, and the Special Committee of Honshu Chemical had decided that it was OK to support the Tender Offer and recommend it to its shareholders to tender. 
However, it was long-dated. The Tender Offer was not expected to start for another 6 months, and the valuation was truly embarrassing. It was a 43% premium, and a 20+ year high price. 
But it was still completely the wrong price. 
It is still worth a look. 

Honshu Chemical - What WAS the Wrong Price Gets Wronger

Japan

MITSUI & CO., LTD. is a general trading company.  The Company has operating groups including Iron and Steel, Non-Ferrous Metals, Machinery, Chemicals, Foods, Energy, Textiles, and General Merchandise.  Mitsui also operates real estate and overseas development projects.

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Mitsui & Co Ltd (8031 JP)

Honshu Chemical (4115) Shareholders Perhaps One Day From a Wrong Price Takeover

Smallcap monomer maker Honshu Chemical is a TOB target. The parents decided in November to take out minorities. At the WRONG price. Directors...

Travis Lundy

IHH Healthcare’s Possible Privatisation by Mitsui

Mitsui, the largest shareholder, is currently exploring a proposal to privatise IHH. Overall, at the last close price, the downside risk is low...

Arun George

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

If Khazanah is onboard with a privatisation, expect the other government-link shareholders to follow suit, which together with Aydınlar's 5.9%...

David Blennerhassett

Japan Drugstores: Growing Leadership in Food, Household, Cosmetics – and the Odd Medicine Too

The Japanese drugstore sector has seen a big merger but there will be more as the sector not only consolidates down to a few leaders but also...

Michael Causton

Honshu Chemical - What WAS the Wrong Price Gets Wronger

The takeout of Honshu Chem minorities by majority co-owners was announced at the wrong price, did not tick the METI Fair M&A Guidelines, and the...

Travis Lundy

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