In early February 2021, the CEO of Sakai Ovex (3408 JP), who owned very few shares, and an activist investor decided to launch an MBO for the company at ¥2,850/share.
The stock had been trading cheap, and the price was “high” but the price was wrong. It needed to be 40% higher – at a minimum – in my opinion. I wrote a detailed breakdown of why I thought so in Sakai Ovex MBO – Wrong Price (And the Bidder Knows It). The management forecasts had been low-balled and I called that out, and the equity affiliate earnings somewhat ignored. Get rid of the financial assets and the Offer Price was at negative enterprise value.
My conclusions on 9 February were as follows:
Not long after that, the bidders offered a very weak bump to ¥3,000/share, discussed in Savai Ovex MBO – A Very Weak Bump. This was not enough. The shares traded above terms and revised terms, only falling below when the Tender Offer went ex-.
In the end, the bid was not successful. They ended up missing by 3% of the shares. BUT…. in the process, they gained an activist in Murakami-san, who did indeed pop in to own 6.9%, through City Index Eleventh, discussed in Sakai Ovex Tender Offer Fails But The Stock Gains an Activistafter the Tender failed. CIE later revised their position to 7.93% which meant they were the fulcrum investor to get this deal over the line the next time, and now they own 8.33% according to today’s document.
The shares have traded at or around ¥3,000/share ± ¥100/share for the past three months, trading in lower-than-pre-announcement volumes.
Earnings were decent when reported in May. And the forecast for the year to March 2022 turned out to be substantially higher (revenues nearly 10% higher than the management forecast included in the Tender Offer documentation, and OP 35% higher).
And today we have new news.
The Bidders are back. And now City Index Eleventh is joining them. It pays to be the fulcrum investor.
And now they are bidding ¥3,810. Which is still cheap.
Much more below the fold.