In today’s briefing:
- Seven & I Holdings (3382 JP): Shares Under Pressure as Rumours Swirl
- Keisei Railway (9009) Gets Bad Advice from Activists, Which Is Good for The Rest of US
- Japan Post Bank US$4bn Placement Updates-Performing Similar to Its Last. Past Large Deals Comparison
- CVC Bump Higher (¥1,275) Than Their Final Price (¥1,250), Get GMO to Roll In Their 12.1%.
- Toyo Seikan (5901) – Big New Buyback Shows The Way To a Breakout of 20yr Range
- Sinfonia Technology (6507): A Strategic Asset in Japan’s Defence Ecosystem
- Dissolution of Parent-Subsidiary Listing Is Just Beginning. Included Affiliates, It’ll Grow Further
- Sapporo’s 2025 Potential Holds Limited Upside After Investor Activism’s 300% Gains
- Macromill (3978 JP): CVC Bumps to JPY1,275 Despite Declaring the Previous Offer Final
Seven & I Holdings (3382 JP): Shares Under Pressure as Rumours Swirl
- Seven & I Holdings (3382 JP) denied a Yomiuri article that the Board has decided not to accept an Alimentation Couche-Tard (ATD CN) bid in favour of the restructuring plan.
- Despite the Board’s assertions that it is still having constructive discussions with Couche-Tard, its actions suggest otherwise.
- Couche-Tard remains interested but faces increasing roadblocks. The valuation is undemanding but the news flow is unlikely to support a rerating in the near-term.
Keisei Railway (9009) Gets Bad Advice from Activists, Which Is Good for The Rest of US
- Activist investors, confusing market price with intrinsic value, have shot themselves in the foot by offering terrible advice to Keisei Railway’s management.
- When Keisei followed advice from the activist, selling just 1% of the shares of Oriental Land, Keisei’s share price collapsed, proving market price has nothing to do with intrinsic value.
- Keisei’s revenue growth and return on investment are stronger than most of its peers, and the crash in its stock price caused by activists might create an opportunity for others.
Japan Post Bank US$4bn Placement Updates-Performing Similar to Its Last. Past Large Deals Comparison
- Japan Post Holdings (6178 JP) (JPH) aims to sell around US$4bn worth of Japan Post Bank (7182 JP) (JPB), trimming its stake to below 50%.
- JPH had last sold around US$9bn worth of JPB shares in Mar 2023. That deal had a similar structure and it didn’t end up performing well.
- We have looked at the deal dynamics in our previous note. In this note, we talk about the updates since then.
CVC Bump Higher (¥1,275) Than Their Final Price (¥1,250), Get GMO to Roll In Their 12.1%.
- Today, the last day of the ¥1,250 “Final Price” CVC Tender Offer for Macromill, Inc (3978 JP), CVC has bumped price to ¥1,275 and extended another two weeks.
- In the process, they got agreement from GMO to tender their 12.1% and GMO gets to reinvest into an 18-19% position in the Bidco.
- Investors are now competing against “activists” who aren’t in public markets. 20.6% of the register don’t like the ¥1,250-1,275 price either. But they aren’t selling. They’re re-buying there. You’re not.
Toyo Seikan (5901) – Big New Buyback Shows The Way To a Breakout of 20yr Range
- Toyo Seikan Group Holdings L (5901 JP) started down the “good governance path” a couple of years ago. The stock ran up. Then it drifted back lower.
- They had promised a decent payout ratio, cross-holding sales, and “buybacks conducted in an agile manner.”
- On Friday 28 Feb, the company announced a large buyback and future share cancellation.
Sinfonia Technology (6507): A Strategic Asset in Japan’s Defence Ecosystem
- Sinfonia Technology is strategically positioned to benefit from Japan’s rising defence and semiconductor investments, leveraging its expertise in precision motion systems and power electronics.
- The company holds a leading market share in aerospace and semiconductor handling, underpinned by robust financial performance and a well-defined strategy for future growth.
- Amid increasing geopolitical tensions, Sinfonia’s integral role in space and defence applications enhances its long-term growth potential, making it a noteworthy player in Japan’s industrial expansion.
Dissolution of Parent-Subsidiary Listing Is Just Beginning. Included Affiliates, It’ll Grow Further
- With the TSE requiring disclosure of rationale regarding parent-subsidiary listings, etc., it is certain that more companies will move to dissolve parent-subsidiary listings.
- The background for the high TOB premium in Japan was that many companies had stock prices considerably lower than their intrinsic value.
- There are total of 1,217 companies: 230 listed subsidiaries and 987 equity method affiliates. In addition to this, industry restructuring is also required; there are still numerous opportunities for TOB.
Sapporo’s 2025 Potential Holds Limited Upside After Investor Activism’s 300% Gains
- Sapporo Holdings (2501 JP)’s beer, food, and soft drinks businesses are now trading near 19.0x our 2025 OP estimate, suggesting some remaining upside, especially if guidance is revised upward.
- We believe the company’s 2025 guidance is overly conservative, as Sapporo stands to benefit the most from Japan’s liquor tax revisions.
- If growth momentum persists, we estimate 2025 OP could reach ¥22.3bn, surpassing the current ¥17.5bn guidance, though the 300% upside driven by investor activism has mostly run its course.
Macromill (3978 JP): CVC Bumps to JPY1,275 Despite Declaring the Previous Offer Final
- Despite declaring the previous JPY1,250 offer final, CVC has bumped its Macromill, Inc (3978 JP) offer by 2.0% to JPY1,275.
- CVC has secured an irrevocable from GMO. The total irrevocable represents a 23.67% ownership ratio. Despite the bump and GMO irrevocable, success still hangs in the balance.
- Securing TriVista’s support remains elusive, and CVC could try to lower the minimum tendering condition. The downside is low, as the backend will have support on a deal break.
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