Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Today post-close, <a href="https://www.smartkarma.com/entities/ryoyo-electro-corp" target="_blank" data-smartkarma-citation="entities:16757:1" rel="noopener">Ryoyo Electro (8068 JP)</a> and larger equity affiliate (20.1%) <a href="https://www.smartkarma.com/entities/ryosan-co-ltd" target="_blank" data-smartkarma-citation="entities:7795:1" rel="noopener">Ryosan Co Ltd (8140 JP)</a> announced their final Management Integration Plan (merger by holdco) after signalling a deal May23.</li>
<li>Activist-Ish-Y Silchester sold their stake in Ryosan to Ryoyo in February at a 20% premium. Activist Murakami-san had a top10 Ryosan stake end-March, went substantial 27 June, now owns 10%.</li>
<li>Both low-margin/ROE electronics traders have been subject to activist campaigns over the years. Both "survived". Now they are banding together to be a bigger independent low-margin electronics trader.</li>
</ul>


Today post-close, Ryoyo Electro (8068 JP) and larger equity affiliate (20.1%) Ryosan Co Ltd (8140 JP) announced their final Management Integration Plan (merger by holdco) after signalling a deal May23.
Activist-Ish-Y Silchester sold their stake in Ryosan to Ryoyo in February at a 20% premium. Activist Murakami-san had a top10 Ryosan stake end-March, went substantial 27 June, now owns 10%.
Both low-margin/ROE electronics traders have been subject to activist campaigns over the years. Both "survived". Now they are banding together to be a bigger independent low-margin electronics trader.


Ryoyo (8068) - Ryosan (8140): Recent and Former Activist Targets To Merge

David Blennerhassett

Shinko Electric Industries / Event-Driven

<ul>
<li>If <a href="https://www.smartkarma.com/entities/descente-ltd" target="_blank" data-smartkarma-citation="entities:8225:1" rel="noopener">Descente Ltd (8114 JP)</a> earnings disappoints, buy the dip. <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" data-smartkarma-citation="entities:18448:1" rel="noopener">Itochu Corp (8001 JP)</a> is buying for the long-term.</li>
<li>
<a href="https://www.smartkarma.com/entities/mgm-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:472:1" rel="noopener">MGM China Holdings (2282 HK)</a> has gained market share in mass table market, VIP, and total revenue. Yet MGM's FY24E EV/EBITDA is ~40% below its two-year forward average EV/EBITDA pre-Covid.</li>
<li>If you had a J-REIT portfolio, <a href="https://www.smartkarma.com/entities/sankei-real-estate-inc" target="_blank" data-smartkarma-citation="entities:35239:1" rel="noopener">Sankei Real Estate (2972 JP)</a> would go in and push something else out or smaller. I think one gets beta-plus, which is usually called alpha.</li>
</ul>


If Descente Ltd (8114 JP) earnings disappoints, buy the dip. Itochu Corp (8001 JP) is buying for the long-term.

MGM China Holdings (2282 HK) has gained market share in mass table market, VIP, and total revenue. Yet MGM's FY24E EV/EBITDA is ~40% below its two-year forward average EV/EBITDA pre-Covid.
If you had a J-REIT portfolio, Sankei Real Estate (2972 JP) would go in and push something else out or smaller. I think one gets beta-plus, which is usually called alpha.


Last Week In Event SPACE: Shinko Electric Industries, MGM China, Decente, Sankei Real Estate,

15 months ago, an electronics trading company called <a href="https://www.smartkarma.com/entities/ukc-holdings-corp" target="_blank" data-smartkarma-citation="entities:5466:1" rel="noopener">Restar Holdings Corporation (3156 JP)</a> (formerly UKC, which itself had been a target of well-known Japanese activist Murakami-san) made a <a href="http://www.kabupro.jp/edp/20190520/S100FSQA.pdf" target="_blank" rel="noopener">Large Shareholder Release</a> to the effect that it had purchased a 20.00% stake (a bit higher in terms of voting rights) in another semiconductor and electronics trading house <a href="https://www.smartkarma.com/entities/ryoyo-electro-corp" target="_blank" data-smartkarma-citation="entities:16757:1" rel="noopener">Ryoyo Electro (8068 JP)</a>"because we believe that by expanding our business area (especially system businesses), we can strengthen our lineup and customer strategy, and we expect synergies and innovative business."Ryoyo appears to have been caught <a href="https://www.ryoyo.co.jp/info/ir/7460/" target="_blank" rel="noopener">unaware</a> on the 13th when Restar announced that its board had decided to purchase shares and did so the same day. It made it clear the attention was unsolicited and this was a hostile acquisition. In March of last year, Ryoyo Electro upped its shareholder return policy, and this year it upped it further. Now it is going a step further.  <h2>The NEW News</h2>The new news is that <a href="https://www.smartkarma.com/entities/ryoyo-electro-corp" target="_blank" data-smartkarma-citation="entities:16757:1" rel="noopener">Ryoyo Electro (8068 JP)</a> will conduct a Tender Offer to buy back its shares and Restar has agreed to sell. This was announced yesterday along with <a href="https://www.ryoyo.co.jp/en/wenp/wp-content/uploads/2020/08/2020Q2_Financial-Review.pdf" target="_blank" rel="noopener">Q2 results</a>. The <a href="https://www.ryoyo.co.jp/wryyp/wp-content/uploads/2020/08/ir301.pdf" target="_blank" rel="noopener">Tender Offer</a> (Japanese-only) is set at ¥2,990 which means Restar has made serious coin on its position of a year and change. The Tender Offer quantity is set at a maximum of 7,357,900 shares which is 5% more than the quantity Restar has agreed to sell. The purchase amount is ¥22 billion. There are some who would call this greenmail. Others, I am sure, will be kinder. There is a trade here. Lots more below the fold. <div></div>

15 months ago, an electronics trading company called Restar Holdings Corporation (3156 JP) (formerly UKC, which itself had been a target of well-known Japanese activist Murakami-san) made a Large Shareholder Release to the effect that it had purchased a 20.00% stake (a bit higher in terms of voting rights) in another semiconductor and electronics trading house Ryoyo Electro (8068 JP)"because we believe that by expanding our business area (especially system businesses), we can strengthen our lineup and customer strategy, and we expect synergies and innovative business."Ryoyo appears to have been caught unaware on the 13th when Restar announced that its board had decided to purchase shares and did so the same day. It made it clear the attention was unsolicited and this was a hostile acquisition. In March of last year, Ryoyo Electro upped its shareholder return policy, and this year it upped it further. Now it is going a step further.  The NEW NewsThe new news is that Ryoyo Electro (8068 JP) will conduct a Tender Offer to buy back its shares and Restar has agreed to sell. This was announced yesterday along with Q2 results. The Tender Offer (Japanese-only) is set at ¥2,990 which means Restar has made serious coin on its position of a year and change. The Tender Offer quantity is set at a maximum of 7,357,900 shares which is 5% more than the quantity Restar has agreed to sell. The purchase amount is ¥22 billion. There are some who would call this greenmail. Others, I am sure, will be kinder. There is a trade here. Lots more below the fold. 

Ryoyo Electro Corporate Activism Ends in Buyout

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

Hostile takeovers can occur in the Japanese stock market, but these tend to be between small companies; and usually there’s either some family rivalry, or a boardroom dispute, at the heart of it. However, while in the case of the <a href="https://www.smartkarma.com/entities/1493" target="_blank" data-smartkarma-citation="entities:1493:1">Solekia (9867 JP)</a> takeover battle, <a href="https://www.smartkarma.com/entities/1493" target="_blank" data-smartkarma-citation="entities:1493:1">Solekia</a> itself is tiny (current market cap of $47.8mil) and the bidder is not even a company (it is an individual, Beji Sasaki, who is the Chairman of <a href="https://www.smartkarma.com/entities/16610" target="_blank" data-smartkarma-citation="entities:16610:1">Giken Kogyo (9764 JP)</a>), the third party is <a href="https://www.smartkarma.com/entities/16968" target="_blank" data-smartkarma-citation="entities:16968:1">Fujitsu (6702 JP)</a> (with a current market…

Hostile takeovers can occur in the Japanese stock market, but these tend to be between small companies; and usually there’s either some family rivalry, or a boardroom dispute, at the heart of it. However, while in the case of the Solekia (9867 JP) takeover battle, Solekia itself is tiny (current market cap of $47.8mil) and the bidder is not even a company (it is an individual, Beji Sasaki, who is the Chairman of Giken Kogyo (9764 JP)), the third party is Fujitsu (6702 JP) (with a current market…

Fujitsu (6702)– Caught in a Bidding War

Japan

RYOYO ELECTRO CORPORATION is a wholesaler of electronic components including semiconductors.  The Company sells workstations, personal computers, and printers.  Ryoyo Electro operates offices in Singapore and Hong Kong. The Company trades large amount of semiconductors from Mitsubishi Electric.

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Ryoyo Electro (8068 JP)

Ryoyo (8068) - Ryosan (8140): Recent and Former Activist Targets To Merge

City Index Eleventh has issued a press release (link in Discussions) stating it believes the Ryoyo/Ryosan merger ratio disadvantages Ryosan...

Travis Lundy

Last Week In Event SPACE: Shinko Electric Industries, MGM China, Decente, Sankei Real Estate,

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Ryoyo Electro Corporate Activism Ends in Buyout

A Partial Tender Offer Stock Buyback. Japan treatment is special. Don't assume you would participate. It's technical.

Travis Lundy

Fujitsu (6702)– Caught in a Bidding War

Hostile takeovers can occur in the Japanese stock market, but these tend to be between small companies; and usually there’s either some family...

Pelham Smithers Associates

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