Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

The Nikkei Asia <a href="https://asia.nikkei.com/Business/Business-deals/1bn-bid-for-Tokyo-Dome-planned-by-developer-Mitsui-Fudosan" target="_blank" rel="noopener">reported</a> this morning (Japanese article link <a href="https://www.nikkei.com/article/DGXMZO66704090X21C20A1MM8000" target="_blank" rel="noopener">here</a>) that <a href="https://www.smartkarma.com/entities/mitsui-fudosan-co-ltd" target="_blank" data-smartkarma-citation="entities:565:1" rel="noopener">Mitsui Fudosan (8801 JP)</a> intended to partner with someone to launch a Tender Offer to take private <a href="https://www.smartkarma.com/entities/tokyo-dome-corp" target="_blank" data-smartkarma-citation="entities:6421:1" rel="noopener">Tokyo Dome Corp (9681 JP)</a>, spending "more than ¥100bn" (vs the ¥85.9bn of yesterday's close) based on the idea that there would be a premium to market price. The Tender Offer could start before 2020 ends.The bigger story here, of course, is that hedge fund Oasis Management has been on the case, urging Tokyo Dome management to do more to improve value for shareholders. Oasis said earlier this month they had been trying to engage with Tokyo Dome since 2018. They went over 5% in December 2019 and according to filings lifted their stake to 9.71% in January 2020. Covid-19 later hit Japan and as a result, the number of events and therefore visitor count at the various features and venues within Tokyo Dome have slowed, and the company is on its back foot. Early this year, Oasis set up a website with a fair bit of material for their case at <a href="https://www.abettertokyodome.com/" target="_blank" rel="noopener">abettertokyodome.com</a>. There main presentation is linked <a href="https://static1.squarespace.com/static/5dd62b05f226644911c6d4e1/t/5efabd9b2d98f71482b79156/1593490878125/OASIS+-+A+Better+Tokyo+Dome+Presentation.pdf" target="_blank" rel="noopener">here</a>. The claims are clear, and frankly, anyone who has been to Tokyo Dome recently will know exactly what Oasis is pointing at in terms of efforts which could make Tokyo Dome a better place to visit and a better company. Among the proposals by Oasis, there are substantially improved digital signage to improve ad revenue, a naming rights agreement like seen at other major Japan venues which could bring in ¥500mm a year or more, overhauled technology to match other world-class venues, substantially improved F&amp;B strategy, etc.  The deck was really an informative read when presented in January of this year and the opportunity seemed clear to me. The onset of covid-19 was a highly unfortunate development in the timeline, and this has disrupted what might have been a much more lively activist discussion. As it is, in October, Oasis called for a shareholder meeting for Tokyo Dome, asking to replace three directors including President Tsutomu Nagaoka. On 10 November, Tokyo Dome held a press conference which saw some floundering, and Oasis <a href="https://www.businesswire.com/news/home/20201111005501/en/Oasis-Key-Messages-for-Tokyo-Dome-Shareholders-Regarding-the-EGM-on-December-17-2020" target="_blank" rel="noopener">responded</a> the day after. The shareholder meeting is now set for 17 December. It is somehow not surprising that Corporate Japan is circling the wagons. Tokyo Dome is indicated limit up at ¥1047 now. The past 15+ years looks like the below.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/563/original/Screenshot%202020-11-27%20at%2010.27.27%20AM.png?1606444069" class="editor-image img-responsive" data-smartkarma-image-id="174563"></figure></section>As a reminder, the stock traded at ¥5000+ in the 1990s.The companies (<a href="https://www.mitsuifudosan.co.jp/corporate/ir/library/news/2020/pdf/news_201127.pdf" target="_blank" rel="noopener">Mitsui Fudosan</a>, <a href="https://contents.xj-storage.jp/xcontents/AS01950/1667e514/ffcc/4644/b6a6/6313ea0899ad/140120201127428865.pdf" target="_blank" rel="noopener">Tokyo Dome</a>) have both responded to the article first thing this morning saying that they will be holding board meetings to discuss this situation later today and will announce anything which needs to be announced as soon as possible thereafter.The old saying goes "Where there is smoke there is fire" but the question is whether it will be hot enough. As a pure tear-down project, the real estate and history of location/brand would likely be worth well more than ¥100bn. Word in the local press is that Mitsui's partner will be Yomiuri Shinbun, which is taking subsidiary/affiliate <a href="https://www.smartkarma.com/entities/yomiuri-land-co-ltd" target="_blank" data-smartkarma-citation="entities:12813:1" rel="noopener">Yomiuri Land (9671 JP)</a> private as discussed in <a href="https://www.smartkarma.com/insights/yomiuri-land-9671-takeover-probably-the-wrong-price-but-whaddya-gonna-do" target="_blank" data-smartkarma-citation="insights:45025" rel="noopener">Yomiuri Land (9671) Takeover - Probably The Wrong Price But Whaddya Gonna Do?</a>. Yomiuri Land is a cross-holder in Tokyo Dome.I expect I will be writing another episode of <a href="https://www.smartkarma.com/insights/japan-needs-more-cowbell" target="_blank" data-smartkarma-citation="insights:41191" rel="noopener">Japan Needs More Cowbell</a> shortly. It is depressing to me that one needs to write it so often, but needs, I expect, must.More on the situation and the potential valuation methodology/constraints below the fold.

The Nikkei Asia reported this morning (Japanese article link here) that Mitsui Fudosan (8801 JP) intended to partner with someone to launch a Tender Offer to take private Tokyo Dome Corp (9681 JP), spending "more than ¥100bn" (vs the ¥85.9bn of yesterday's close) based on the idea that there would be a premium to market price. The Tender Offer could start before 2020 ends.The bigger story here, of course, is that hedge fund Oasis Management has been on the case, urging Tokyo Dome management to do more to improve value for shareholders. Oasis said earlier this month they had been trying to engage with Tokyo Dome since 2018. They went over 5% in December 2019 and according to filings lifted their stake to 9.71% in January 2020. Covid-19 later hit Japan and as a result, the number of events and therefore visitor count at the various features and venues within Tokyo Dome have slowed, and the company is on its back foot. Early this year, Oasis set up a website with a fair bit of material for their case at abettertokyodome.com. There main presentation is linked here. The claims are clear, and frankly, anyone who has been to Tokyo Dome recently will know exactly what Oasis is pointing at in terms of efforts which could make Tokyo Dome a better place to visit and a better company. Among the proposals by Oasis, there are substantially improved digital signage to improve ad revenue, a naming rights agreement like seen at other major Japan venues which could bring in ¥500mm a year or more, overhauled technology to match other world-class venues, substantially improved F&amp;B strategy, etc.  The deck was really an informative read when presented in January of this year and the opportunity seemed clear to me. The onset of covid-19 was a highly unfortunate development in the timeline, and this has disrupted what might have been a much more lively activist discussion. As it is, in October, Oasis called for a shareholder meeting for Tokyo Dome, asking to replace three directors including President Tsutomu Nagaoka. On 10 November, Tokyo Dome held a press conference which saw some floundering, and Oasis responded the day after. The shareholder meeting is now set for 17 December. It is somehow not surprising that Corporate Japan is circling the wagons. Tokyo Dome is indicated limit up at ¥1047 now. The past 15+ years looks like the below.As a reminder, the stock traded at ¥5000+ in the 1990s.The companies (Mitsui Fudosan, Tokyo Dome) have both responded to the article first thing this morning saying that they will be holding board meetings to discuss this situation later today and will announce anything which needs to be announced as soon as possible thereafter.The old saying goes "Where there is smoke there is fire" but the question is whether it will be hot enough. As a pure tear-down project, the real estate and history of location/brand would likely be worth well more than ¥100bn. Word in the local press is that Mitsui's partner will be Yomiuri Shinbun, which is taking subsidiary/affiliate Yomiuri Land (9671 JP) private as discussed in Yomiuri Land (9671) Takeover - Probably The Wrong Price But Whaddya Gonna Do?. Yomiuri Land is a cross-holder in Tokyo Dome.I expect I will be writing another episode of Japan Needs More Cowbell shortly. It is depressing to me that one needs to write it so often, but needs, I expect, must.More on the situation and the potential valuation methodology/constraints below the fold.

Mitsui Fudosan Tender For Tokyo Dome (9681) Mooted

On Friday after the close, the Yomiuri Shinbun (Yomiuri Newspaper) Group announced that it would buy out minorities in <a href="https://www.smartkarma.com/entities/yomiuri-land-co-ltd" target="_blank" data-smartkarma-citation="entities:12813:1" rel="noopener">Yomiuri Land (9671 JP)</a> in a Tender Offer at ¥6,050/share - a 26% premium to the close. Yomiuri Land runs the eponymous Yomiuri Land theme park, four golf clubs, a "public sports" (sports where the business is associated with betting and is quasi-government-run) facilities business including two horse-racing tracks and a tarmac track used for organized betting races for keirin and "auto-race" (very light motorcycles around a tight track), other leisure facilities and sports-related real estate leased to group companies (minor league baseball and practice facilities leased to the Yomiuri Giants, soccer practice facilities used by the Tokyo Verde (Yomiuri-affiliated soccer team) and NTV Beleza (the Nippon TV-affiliated soccer team (NTV is a Yomiuri affiliate as well as a Yomiuri Land shareholder))).This was not difficult to see. It is a well-known asset, reasonably closely-held (Yomiuri Group and subsidiaries own 34% and corporate and financial crossholders another 25+% of voting rights). It is illiquid-ish, and has properties which are suffering from covid-19 effects. It is difficult to see this not getting through. It should be easy.

On Friday after the close, the Yomiuri Shinbun (Yomiuri Newspaper) Group announced that it would buy out minorities in Yomiuri Land (9671 JP) in a Tender Offer at ¥6,050/share - a 26% premium to the close. Yomiuri Land runs the eponymous Yomiuri Land theme park, four golf clubs, a "public sports" (sports where the business is associated with betting and is quasi-government-run) facilities business including two horse-racing tracks and a tarmac track used for organized betting races for keirin and "auto-race" (very light motorcycles around a tight track), other leisure facilities and sports-related real estate leased to group companies (minor league baseball and practice facilities leased to the Yomiuri Giants, soccer practice facilities used by the Tokyo Verde (Yomiuri-affiliated soccer team) and NTV Beleza (the Nippon TV-affiliated soccer team (NTV is a Yomiuri affiliate as well as a Yomiuri Land shareholder))).This was not difficult to see. It is a well-known asset, reasonably closely-held (Yomiuri Group and subsidiaries own 34% and corporate and financial crossholders another 25+% of voting rights). It is illiquid-ish, and has properties which are suffering from covid-19 effects. It is difficult to see this not getting through. It should be easy. 

Yomiuri Land (9671) Takeover - Probably The Wrong Price But Whaddya Gonna Do?

David Blennerhassett

This week in StubWorld ...
<ul>
<li>
<a href="https://www.smartkarma.com/entities/758" target="_blank" data-smartkarma-citation="entities:758:1">Great Eagle Holdings (41 HK)</a> is cheap, at an all-time low (outside the GFC) versus <a href="https://www.smartkarma.com/entities/759" target="_blank" data-smartkarma-citation="entities:759:1">Champion REIT (2778 HK)</a>, and should benefit from the 3Q19 pre-sale of a luxury development in Tai Po. Liquidity, or lack of it, is not helping. Nor is the family feud.</li>
</ul>
Preceding my comments on Great Eagle and other stubs are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.

This week in StubWorld ...


Great Eagle Holdings (41 HK) is cheap, at an all-time low (outside the GFC) versus Champion REIT (2778 HK), and should benefit from the 3Q19 pre-sale of a luxury development in Tai Po. Liquidity, or lack of it, is not helping. Nor is the family feud.

Preceding my comments on Great Eagle and other stubs are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.

StubWorld: Great Eagle Tests Post-GFC Lows

Japan

YOMIURI LAND CO., LTD. leases Funabashi and Kawasaki horse racing tracks, and Funabashi auto racing track.  The Company also operates amusement parks, golf courses, and real estate/construction businesses.

Yomiuri Land (9671 JP)

Mitsui Fudosan Tender For Tokyo Dome (9681) Mooted

It appears Mitsui Fudosan and Yomiuri Land will be bidding for Tokyo Dome in order to fend off the activism of 9.7% holder Oasis. That's a pity....

Travis Lundy

Yomiuri Land (9671) Takeover - Probably The Wrong Price But Whaddya Gonna Do?

Yomiuri Shinbun announces a buyout of real estate and theme park facilities operator Yomiuri Land (9671) at the wrong price but YL has a poison...

Travis Lundy

StubWorld: Great Eagle Tests Post-GFC Lows

This week in StubWorld ... Great Eagle Holdings (41 HK) is cheap, at an all-time low (outside the GFC) versus Champion REIT (2778 HK), and should...

David Blennerhassett