Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Maeda Road Construction Co / Event-Driven

<p>13 months ago, <a href="https://www.smartkarma.com/entities/maeda-corp" target="_blank" data-smartkarma-citation="entities:6781:1" rel="noopener">Maeda Corp (1824 JP)</a> launched a hostile Tender Offer on its 25%-owned but largely independent affiliate <a href="https://www.smartkarma.com/entities/maeda-road-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:2168:1" rel="noopener">Maeda Road Construction Co (1883 JP)</a>. Maeda Corp wanted to get to 51% because the Maeda Road business of infrastructure concessions looked like a great business they wanted to own more of. They left themselves an out whereby they could withdraw the Tender Offer if Maeda Road set a special dividend larger than a certain specified amount. Maeda Road did so after not being able to find a White Knight. Maeda Road, for its part, got very upset, calling on Maeda Corp to dissolve all capital ties and sell its shares in Maeda Road back to the company. </p>
<p>Strangely, after much kerfuffle and speculation, 11 months ago Maeda Corp let the Tender Offer it launched settle without extension or withdrawal, allowing the other 75% of shareholders to get an extra dividend and still sell a number of their shares into the Tender Offer at original terms.</p>
<p>That meant post-Tender the value of Maeda Road to both Maeda Corp and remaining shareholders was relatively lower than the undisturbed price prior to the hostile TOB launch. </p>
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<p>This event was discussed in a series of insights which discussed the interest, the backdrop of the industry, and the event itself. </p>
<table class="table table-striped">
<tbody>
<tr>
<td colspan="2" style="width: 723.636px;">
<h2>Insights on Maeda Corp - Maeda Road Situation in Q1 2020</h2>
</td>
</tr>
<tr>
<td style="width: 80px;">20 Jan 2020</td>
<td style="width: 622.727px;">
<a href="https://www.smartkarma.com/insights/not-all-parent-sub-situations-are-friendly-maeda-corp-goes-hostile-on-affiliate-maeda-road" target="_blank" data-smartkarma-citation="insights:35945" rel="noopener">Not All "Parent-Sub" Situations Are Friendly: Maeda Corp Goes Hostile On Affiliate Maeda Road</a> </td>
</tr>
<tr>
<td style="width: 80px;">20 Jan 2020</td>
<td style="width: 622.727px;">
<a href="https://www.smartkarma.com/insights/maeda-corp-tender-for-maeda-road-arb-grids-front-end-pricing" target="_blank" data-smartkarma-citation="insights:35955" rel="noopener">Maeda Corp Tender for Maeda Road - Arb Grids &amp; Front End Pricing</a> </td>
</tr>
<tr>
<td style="width: 80px;">9 Feb 2020</td>
<td style="width: 622.727px;">
<a href="https://www.smartkarma.com/insights/maeda-road-needs-a-rabbit-from-the-hat-what-rabbit-s-possible-what-rabbit-s-likely" target="_blank" data-smartkarma-citation="insights:36440" rel="noopener">Maeda Road Needs A Rabbit From The Hat - What Rabbit's Possible? What Rabbit's Likely?</a> </td>
</tr>
<tr>
<td style="width: 80px;">20 Feb 2020</td>
<td style="width: 622.727px;">
<a href="https://www.smartkarma.com/insights/maeda-road-53bn-rabbit-special-div-appears" target="_blank" data-smartkarma-citation="insights:36792" rel="noopener">Maeda Road - ¥53bn Rabbit (Special Div) Appears</a> </td>
</tr>
<tr>
<td style="width: 80px;">28 Feb 2020</td>
<td style="width: 622.727px;">
<a href="https://www.smartkarma.com/insights/maeda-road-starts-talks-with-nippo-1881-as-a-white-knight-not-a-winner-yet" target="_blank" data-smartkarma-citation="insights:36998" rel="noopener">Maeda Road Starts Talks With Nippo (1881) As a White Knight. Not a Winner Yet.</a> </td>
</tr>
<tr>
<td style="width: 80px;">5 Mar 2020</td>
<td style="width: 622.727px;">
<a href="https://www.smartkarma.com/insights/maeda-road-s-monty-hall-problem" target="_blank" data-smartkarma-citation="insights:37201" rel="noopener">Maeda Road's 'Monty Hall Problem'</a> </td>
</tr>
<tr>
<td style="width: 80px;">11 Mar 2020</td>
<td style="width: 622.727px;">
<a href="https://www.smartkarma.com/insights/maeda-corp-has-maeda-road-options-so-do-you" target="_blank" data-smartkarma-citation="insights:37392" rel="noopener">Maeda Corp Has Maeda Road Options... So Do You...</a> </td>
</tr>
<tr>
<td style="width: 80px;">13 Mar 2020</td>
<td style="width: 622.727px;">
<a href="https://www.smartkarma.com/insights/maeda-road-post-tender-where-do-we-stand" target="_blank" data-smartkarma-citation="insights:37428" rel="noopener">Maeda Road Post-Tender - Where Do We Stand?</a> </td>
</tr>
</tbody>
</table>
<h2>The NEW News</h2>
<p>Today after the close, Maeda Corp (1824), Maeda Road (1883), and <a href="https://www.smartkarma.com/entities/maeda-seisakusho-co-ltd" target="_blank" data-smartkarma-citation="entities:13999:1" rel="noopener">Maeda Seisakusho (6281 JP)</a> made an <a href="https://www.maeda.co.jp/news/blog_assets/attachments/1025/20210224_2.pdf" target="_blank" rel="noopener">announcement</a> they would merge their economic interests in the formation of a Holding Company to be effective on October 1st. The stated purpose is to combine to better take on the headwinds in the construction industry which result from ageing demographics and weaker local and national budgets by unifying the group, improving the liquidity and allocation of management resources made scarce in future by a declining working population, and to speed up management decision-making. </p>
<p>There is a template for this kind of deal, and it <em>always</em> includes better allocation of management resources and speeding up decision-making. It almost never includes description of improvement/efficiency of a practical nature (<em>"we will sell all our cross-holdings and securities and instead use those assets to invest in the equity tranche of public-private initiatives on a high non-recourse leverage basis, improving ROE substantially"</em>). To be clear, that last thing in parentheses is quite clearly something the companies did NOT say but which would be welcome. </p>
<p>This is a relatively easy three-way scrip deal. It looks a done deal. Then there is getting comfortable with the back end.</p>

13 months ago, Maeda Corp (1824 JP) launched a hostile Tender Offer on its 25%-owned but largely independent affiliate Maeda Road Construction Co (1883 JP). Maeda Corp wanted to get to 51% because the Maeda Road business of infrastructure concessions looked like a great business they wanted to own more of. They left themselves an out whereby they could withdraw the Tender Offer if Maeda Road set a special dividend larger than a certain specified amount. Maeda Road did so after not being able to find a White Knight. Maeda Road, for its part, got very upset, calling on Maeda Corp to dissolve all capital ties and sell its shares in Maeda Road back to the company. 
Strangely, after much kerfuffle and speculation, 11 months ago Maeda Corp let the Tender Offer it launched settle without extension or withdrawal, allowing the other 75% of shareholders to get an extra dividend and still sell a number of their shares into the Tender Offer at original terms.
That meant post-Tender the value of Maeda Road to both Maeda Corp and remaining shareholders was relatively lower than the undisturbed price prior to the hostile TOB launch. 



This event was discussed in a series of insights which discussed the interest, the backdrop of the industry, and the event itself. 




Insights on Maeda Corp - Maeda Road Situation in Q1 2020



20 Jan 2020

Not All "Parent-Sub" Situations Are Friendly: Maeda Corp Goes Hostile On Affiliate Maeda Road 


20 Jan 2020

Maeda Corp Tender for Maeda Road - Arb Grids &amp; Front End Pricing 


9 Feb 2020

Maeda Road Needs A Rabbit From The Hat - What Rabbit's Possible? What Rabbit's Likely? 


20 Feb 2020

Maeda Road - ¥53bn Rabbit (Special Div) Appears 


28 Feb 2020

Maeda Road Starts Talks With Nippo (1881) As a White Knight. Not a Winner Yet. 


5 Mar 2020

Maeda Road's 'Monty Hall Problem' 


11 Mar 2020

Maeda Corp Has Maeda Road Options... So Do You... 


13 Mar 2020

Maeda Road Post-Tender - Where Do We Stand? 



The NEW News
Today after the close, Maeda Corp (1824), Maeda Road (1883), and Maeda Seisakusho (6281 JP) made an announcement they would merge their economic interests in the formation of a Holding Company to be effective on October 1st. The stated purpose is to combine to better take on the headwinds in the construction industry which result from ageing demographics and weaker local and national budgets by unifying the group, improving the liquidity and allocation of management resources made scarce in future by a declining working population, and to speed up management decision-making. 
There is a template for this kind of deal, and it always includes better allocation of management resources and speeding up decision-making. It almost never includes description of improvement/efficiency of a practical nature ("we will sell all our cross-holdings and securities and instead use those assets to invest in the equity tranche of public-private initiatives on a high non-recourse leverage basis, improving ROE substantially"). To be clear, that last thing in parentheses is quite clearly something the companies did NOT say but which would be welcome. 
This is a relatively easy three-way scrip deal. It looks a done deal. Then there is getting comfortable with the back end.

Maeda Corp/Road/Seisakusho - 3-Way Merger 1 Year After Hostile Takeover

Equity Bottom-Up

Maeda Road Construction Co / Equity Bottom-Up

<p>Last night there were media reports from the Sankei and Nikkei that the Tender Offer launched by <a href="https://www.smartkarma.com/entities/maeda-corp" target="_blank" data-smartkarma-citation="entities:6781:1" rel="noopener">Maeda Corp (1824 JP)</a> to lift its stake in <a href="https://www.smartkarma.com/entities/maeda-road-construction-co" target="_blank" data-smartkarma-citation="entities:2168:1" rel="noopener">Maeda Road Construction Co (1883 JP)</a> to 51% has closed, with neither an extension nor a withdrawal. </p><p>This will surprise a number of people. It honestly surprised me. </p><p>That leaves us with a weird and somewhat unknowable situation. The tender is over. The possibility is you get a chance to vote for a special dividend, or you do not. But for people looking at the stock now, it won't matter for a while.</p>

Last night there were media reports from the Sankei and Nikkei that the Tender Offer launched by Maeda Corp (1824 JP) to lift its stake in Maeda Road Construction Co (1883 JP) to 51% has closed, with neither an extension nor a withdrawal. This will surprise a number of people. It honestly surprised me. That leaves us with a weird and somewhat unknowable situation. The tender is over. The possibility is you get a chance to vote for a special dividend, or you do not. But for people looking at the stock now, it won't matter for a while.

Maeda Road Post-Tender - Where Do We Stand?

<p>Maeda Road shares went ex- the potential but not certain Special Dividend today with shares falling almost ¥630 on the open against the possibility of a ¥650/share special dividend to be voted on at an EGM in mid-April 2020. </p><p>For the next four-plus weeks, the shares will trade without the special dividend, but with the rights to tender if Maeda Corp does not withdraw its tender offer. </p><p>It still may withdraw. It has the right to do so under the special withdrawal terms stipulated in the original announcement (which are related to the rules for withdrawal codified in the Article 14, paragraph 1, item 1(s) of the Cabinet Order of Enforcement of the Financial Instruments and Exchange Act. It has put any such withdrawal on hold for now, but...</p><p>Assuming Maeda Corp still has designs on Maeda Road, perhaps at a lower price post-special div, the question becomes how investors should vote. Doing the math may surprise many people. </p><p><em>Maeda Road has a Monty Hall Problem. </em></p>

Maeda Road shares went ex- the potential but not certain Special Dividend today with shares falling almost ¥630 on the open against the possibility of a ¥650/share special dividend to be voted on at an EGM in mid-April 2020. For the next four-plus weeks, the shares will trade without the special dividend, but with the rights to tender if Maeda Corp does not withdraw its tender offer. It still may withdraw. It has the right to do so under the special withdrawal terms stipulated in the original announcement (which are related to the rules for withdrawal codified in the Article 14, paragraph 1, item 1(s) of the Cabinet Order of Enforcement of the Financial Instruments and Exchange Act. It has put any such withdrawal on hold for now, but...Assuming Maeda Corp still has designs on Maeda Road, perhaps at a lower price post-special div, the question becomes how investors should vote. Doing the math may surprise many people. Maeda Road has a Monty Hall Problem. 

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<p>The next stage of the Maeda vs. Maeda drama has unfolded as Maeda Road announced on 27 Feb that it was in discussions with Nippo to engage in a capital tie up that would lead to the companies taking stakes of roughly 5% in each other. Travis Lundy has covered the history of antitrust penalties against the road construction companies and the options that Maeda Corp has available to it in <a href="https://www.smartkarma.com/insights/maeda-road-starts-talks-with-nippo-1881-as-a-white-knight-not-a-winner-yet" target="_blank" rel="noopener">Maeda Road Starts Talks With Nippo (1881) As a White Knight. Not a Winner Yet</a>. Here we examine some of the fundamental issues worth considering in assessing a potential tie-up with Nippo.</p>

The next stage of the Maeda vs. Maeda drama has unfolded as Maeda Road announced on 27 Feb that it was in discussions with Nippo to engage in a capital tie up that would lead to the companies taking stakes of roughly 5% in each other. Travis Lundy has covered the history of antitrust penalties against the road construction companies and the options that Maeda Corp has available to it in Maeda Road Starts Talks With Nippo (1881) As a White Knight. Not a Winner Yet. Here we examine some of the fundamental issues worth considering in assessing a potential tie-up with Nippo.

Maeda Road – Is a Nippo Alliance Realistic?

<p><a href="https://www.smartkarma.com/entities/maeda-road-construction-co" target="_blank" data-smartkarma-citation="entities:2168:1" rel="noopener">Maeda Road Construction Co (1883 JP)</a> today announced the start of talks with <a href="https://www.smartkarma.com/entities/nippo-corp" target="_blank" data-smartkarma-citation="entities:2583:1" rel="noopener">Nippo Corp (1881 JP)</a> as a measure to counter <a href="https://www.smartkarma.com/entities/maeda-corp" target="_blank" data-smartkarma-citation="entities:6781:1" rel="noopener">Maeda Corp (1824 JP)</a>'s Tender Offer. </p><p>It is a very hand-wave-y <a href="http://www.maedaroad.co.jp/ir/2020/info_20200227-02_EN.pdf" target="_blank" rel="noopener">announcement</a> with comments about cost pull, resource allocation, efficiencies, working towards the public good by constant improvement of social infrastructure, and then at the very end...</p><blockquote><p>The two companies will proceed with the discussions on the specific terms of the alliance while complying with the antimonopoly law and other relevant laws and regulations.</p></blockquote><p>The history here - the reason why that last line is needed - tells you something about what this announcement means. </p>

Maeda Road Construction Co (1883 JP) today announced the start of talks with Nippo Corp (1881 JP) as a measure to counter Maeda Corp (1824 JP)'s Tender Offer. It is a very hand-wave-y announcement with comments about cost pull, resource allocation, efficiencies, working towards the public good by constant improvement of social infrastructure, and then at the very end...The two companies will proceed with the discussions on the specific terms of the alliance while complying with the antimonopoly law and other relevant laws and regulations.The history here - the reason why that last line is needed - tells you something about what this announcement means. 

Maeda Road Starts Talks With Nippo (1881) As a White Knight. Not a Winner Yet.

Japan

NIPPO CORPORATION paves a variety of roads.  The Company manufactures and sells asphalt paving mixture.  Nippo also builds commercial residential, and institutional buildings such as sports facilities and condominiums.  The Company operates real estate and resort businesses such as hotels and golf country clubs.

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Nippo Corp (1881 JP)

Maeda Corp/Road/Seisakusho - 3-Way Merger 1 Year After Hostile Takeover

A year ago, Maeda Corp did a hostile takeover of the board of Maeda Road. Now they are doing a scrip deal to get the rest. It's too cheap for Maeda...

Travis Lundy

Maeda Road Post-Tender - Where Do We Stand?

Last night there were media reports from the Sankei and Nikkei that the Tender Offer launched by Maeda Corp (1824 JP) to lift its stake in Maeda...

Travis Lundy

Maeda Road's 'Monty Hall Problem'

Maeda Road shares went ex- the potential but not certain Special Dividend today with shares falling almost ¥630 on the open against the possibility...

Travis Lundy

Maeda Road – Is a Nippo Alliance Realistic?

The next stage of the Maeda vs. Maeda drama has unfolded as Maeda Road announced on 27 Feb that it was in discussions with Nippo to engage in a...

Mio Kato

Maeda Road Starts Talks With Nippo (1881) As a White Knight. Not a Winner Yet.

Maeda Road Construction Co (1883 JP) today announced the start of talks with Nippo Corp (1881 JP) as a measure to counter Maeda Corp (1824 JP)'s...

Travis Lundy

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