Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Thematic (Sector/Industry)

<ul>
<li>This is part of a series of M&amp;A guides that our Quiddity* <a href="https://www.smartkarma.com/companies/quiddity-advisors/team" target="_blank" rel="noopener">team</a> is publishing to aid investors in understanding the rules, parameters, possibilities, and processes in M&amp;A. </li>
<li>They are designed to contain links to all the relevant rules, oversight entities, and provide details as to how M&amp;A is conducted and what rules apply.</li>
<li>In many of the insights on deals in specific markets and countries, these insights will be used as points of reference. </li>
</ul>


This is part of a series of M&amp;A guides that our Quiddity* team is publishing to aid investors in understanding the rules, parameters, possibilities, and processes in M&amp;A. 
They are designed to contain links to all the relevant rules, oversight entities, and provide details as to how M&amp;A is conducted and what rules apply.
In many of the insights on deals in specific markets and countries, these insights will be used as points of reference. 


Equity Analyst, Event-driven, Quiddity Advisors

Janaghan Jeyakumar, CFA

Equity Analyst, Event-driven

Event-Driven

<ul>
<li>JPX-Nikkei 400 is composed of common stocks listed in the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents. </li>
<li>A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. </li>
<li>Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022 based on trading data as of end-November 2021.</li>
</ul>


JPX-Nikkei 400 is composed of common stocks listed in the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents. 
A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. 
Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022 based on trading data as of end-November 2021.


JPX-Nikkei 400 Rebalance 2022: Leaderboard End-Nov 2021

<div><p>JPX-Nikkei 400 is composed of common stocks whose main market is the TSE1, TSE2, JASDAQ, and Mothers sections (which will become the Prime Market, Standard Market, or Growth Market next April) of the Tokyo Stock Exchange. This is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents selected based on several factors including market capitalization, trading value, operating profits, and ROE.</p></div><div><p>A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. This review is conducted using the final business day of June as the base date. </p></div><div><p>Quiddity provides quantitative research on pre-event basket strategies surrounding this Index Rebalance event and others. Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022 based on trading data as of end-October 2021.</p></div>

JPX-Nikkei 400 is composed of common stocks whose main market is the TSE1, TSE2, JASDAQ, and Mothers sections (which will become the Prime Market, Standard Market, or Growth Market next April) of the Tokyo Stock Exchange. This is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents selected based on several factors including market capitalization, trading value, operating profits, and ROE.A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. This review is conducted using the final business day of June as the base date. Quiddity provides quantitative research on pre-event basket strategies surrounding this Index Rebalance event and others. Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022 based on trading data as of end-October 2021.

JPX-Nikkei 400 Rebalance 2022: Leader Board End-Oct 2021

Equity Bottom-Up

Nishimatsu Construction Co / Equity Bottom-Up

<p>One month ago, <a href="https://www.smartkarma.com/entities/nishimatsu-construction-co" target="_blank" data-smartkarma-citation="entities:9945:1" rel="noopener">Nishimatsu Construction Co (1820 JP)</a> launched a Tender Offer to buy back 27.42% of shares out in an Own Share Tender Offer. </p>
<p>The primary goal, of course - as it often seems to be in own share tender offers in Japan which are conducted around market price - was to have the company rid itself of the Murakami-related shareholders while "returning capital to shareholders and raising ROE."</p>
<p>They were aiming to buy back 15 million shares. They got offers to buy back 21.1 million shares. </p>
<p>I discussed the situation in <a href="https://www.smartkarma.com/insights/nishimatsu-construction-1820-about-to-do-its-last-buyback-for-a-while-and-you-can-t-participate" target="_blank" data-smartkarma-citation="insights:57918" rel="noopener">Nishimatsu Construction (1820) About to Do Its Last Buyback for a While, and You Can't Participate!</a> when it was announced. </p>
<p>The deal was announced at a relatively high price - near a 20yr high - and the shares stayed in place during the deal. </p>
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<p>The results announced yesterday after the close were interesting. </p>
<p>I had suggested that as many as 20.5mm shares could tender against the 15mm share buy. It turns out to have been 21.11mm shares tendered, which means that pro-ration was only 71%. </p>
<p>The Deemed Dividend, which made this entire situation quasi un-investable for foreign shareholders, came out at ¥2,856.63 I am told (I had my ballpark guesstimate at ¥2,786-2,846 which is close enough for horseshoes and hand grenades and Deemed Dividend guesstimates).</p>
<p>And the results tell you some interesting things. More below.</p>

One month ago, Nishimatsu Construction Co (1820 JP) launched a Tender Offer to buy back 27.42% of shares out in an Own Share Tender Offer. 
The primary goal, of course - as it often seems to be in own share tender offers in Japan which are conducted around market price - was to have the company rid itself of the Murakami-related shareholders while "returning capital to shareholders and raising ROE."
They were aiming to buy back 15 million shares. They got offers to buy back 21.1 million shares. 
I discussed the situation in Nishimatsu Construction (1820) About to Do Its Last Buyback for a While, and You Can't Participate! when it was announced. 
The deal was announced at a relatively high price - near a 20yr high - and the shares stayed in place during the deal. 






The results announced yesterday after the close were interesting. 
I had suggested that as many as 20.5mm shares could tender against the 15mm share buy. It turns out to have been 21.11mm shares tendered, which means that pro-ration was only 71%. 
The Deemed Dividend, which made this entire situation quasi un-investable for foreign shareholders, came out at ¥2,856.63 I am told (I had my ballpark guesstimate at ¥2,786-2,846 which is close enough for horseshoes and hand grenades and Deemed Dividend guesstimates).
And the results tell you some interesting things. More below.

Nishimatsu Construction - Tender Completed, Overhang Commences

Nishimatsu Construction Co / Event-Driven

<p>Back in June, <a href="https://www.smartkarma.com/entities/sanshin-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:5711:1" rel="noopener">Sanshin Electronics (8150 JP)</a> announced a buyback for 28.8% of the company. It came after a long buying campaign by one specific investor. Normally this would be "good news." Those who want to get out could sell a significant portion of their holding without friction and others could look at the situation and see significant improvement to capital allocation and huge accretion. My piece was called <em><a href="https://www.smartkarma.com/insights/sanshin-electronics-8150-jp-big-buyback-tender-not-designed-for-you" target="_blank" data-smartkarma-citation="insights:53380" rel="noopener">Sanshin Electronics (8150 JP) BIG Buyback Tender - Not Designed For You</a> </em></p><p>Today, <a href="https://www.smartkarma.com/entities/nishimatsu-construction-co" target="_blank" data-smartkarma-citation="entities:9945:1" rel="noopener">Nishimatsu Construction Co (1820 JP)</a> announced a similar transaction. The stock has done somewhat well over as of recent, hitting a 20+yr high in the past few weeks.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/231/065/original/Screenshot+2021-09-21+at+9.35.08+PM.png?1632231356" class="editor-image img-responsive" data-smartkarma-image-id="231065"></figure><p></p></section><p>The company has announced it will buy up to 15,000,000 shares for up to ¥54.447bn. That is 26.98% of shares outstanding. The share buyback transaction will be undertaken as a Tender Offer, running from 22 September to 20 October, with the buyback price ¥3,626/share, which is a small premium to the close - Yay!</p><p>And once again...</p><p>...it is not for you. </p>

Back in June, Sanshin Electronics (8150 JP) announced a buyback for 28.8% of the company. It came after a long buying campaign by one specific investor. Normally this would be "good news." Those who want to get out could sell a significant portion of their holding without friction and others could look at the situation and see significant improvement to capital allocation and huge accretion. My piece was called Sanshin Electronics (8150 JP) BIG Buyback Tender - Not Designed For You Today, Nishimatsu Construction Co (1820 JP) announced a similar transaction. The stock has done somewhat well over as of recent, hitting a 20+yr high in the past few weeks.The company has announced it will buy up to 15,000,000 shares for up to ¥54.447bn. That is 26.98% of shares outstanding. The share buyback transaction will be undertaken as a Tender Offer, running from 22 September to 20 October, with the buyback price ¥3,626/share, which is a small premium to the close - Yay!And once again......it is not for you. 

Nishimatsu Construction (1820) About to Do Its Last Buyback for a While, and You Can't Participate!

Japan

Nishimatsu Construction Co., Ltd. is a general contractor operating nationwide and overseas.  The Company constructs dams, roads, airports, and railroads for large-scale civil engineering projects.  Nishimatsu also builds residential, commercial, institutional, and industrial buildings.  In addition, the Company operates real estate businesses.

Nishimatsu Construction Co (1820 JP)

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Nishimatsu Construction - Tender Completed, Overhang Commences

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Nishimatsu Construction (1820) About to Do Its Last Buyback for a While, and You Can't Participate!

Nishimatsu Construction has been bought up (25%) by Murakami affiliated cos and people. Now NC will do a Tender Offer Buyback, which is Murakami...

Travis Lundy