Daily Briefs

• The Seven & I Holdings (3382 JP) to rid itself of control of the Ito-Yokado, York Benimaru, Akachan Hompo, and Denny’s Japan businesses in York Holdings proceeds apace.
• The First Round of bids is due tomorrow, apparently, and all manner of bidders have assembled. 
• This leads to the question of a deal for the rest of 7&i. If a TradingCo is a natural co-investor for the Ito family (or ACT), so is Berkshire Hathaway.

• Today, Hulic Co Ltd (3003 JP) announced a large secondary offering where about a quarter of the crossholdings will sell down holdings. Some exit entirely. Some partially. 
• After this selldown, there is a fair bit more to go later, but more of that will be corporate. It’s a BIG offering: 55d of ADV and 55% of MRWF. 
• It is “only” about $800mm and retail gets 80% of it. The high div yield will be a selling point but there is a lot of debt.

• NHK reports that Seven & I Holdings (3382 JP)‘s first bidding round for a YORK Holdings stake ends on 28 November. The sale provides a third-party valuation benchmark for the asset. 
• It is an incremental positive for the founding family MBO as it supports the post-privatisation strategy and assists in securing bank financing.
• This is an incremental negative for Alimentation Couche-Tard (ATD CN) as it shows that the Board believes the restructuring plan will increase shareholder corporate value.  

• CVC Capital is aiming to raise over US$500m, via selling some of its stake in FineToday Holdings Co Ltd (289A JP)in Japan.
• FineToday (FT) is a beauty and personal care company in Asia offering a range of products, including hair care, skin care and body care products.
• In our previous note, we looked at the company’s past performance. In this note, we will undertake a peer comparison.

• Hulic Co Ltd (3003 JP) has announced a secondary offering of up to 85.4 million shares (98.2 million including overallotment), worth around US$800 million (US$920 million including overallotment).
• Unlike the 2021 offer, this is a pure secondary offering. It is smaller in terms of outstanding shares and 1-year ADV. The shares are hovering around all-time highs.
• Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 10 and 12 December (likely 10 December).

• A group of domestic financial institutions are looking to raise US$775m from trimming their stakes in Hulic Co Ltd (3003 JP).
• The deal will be a large one to digest at 48 days of the stock’s three month ADV, representing 11% of its shares outstanding.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• Overnight, Hulic Co Ltd (3003 JP) announced a placement of 85.37m shares to unwind crossholdings and improve corporate value. There is an overallotment option for another 12.8m shares.
• There will be limited passive buying in the short-term and the number of shares offered is a very large percentage of real float of the stock.
• A price drop of 20% or more puts Hulic Co Ltd (3003 JP) at risk of deletion from a global index and could lead to a further price drop.

• Kioxia has been under-investing in Capex (27% of revenue versus competitors 37%) and R&D (5% versus 11%) because Free Cash Flow is low, too low to pay back debt. 
• The Memory cycle peaked in June-24 and NAND prices have been declining since. Memory stocks (Micron, Samsung, SK Hynix) peaked in June. 
• The valuations multiples that reconcile with a US$4.9bn market value are half or one-third that of competitors. A huge discount is applied, reflecting the financial and technological weakness of Kioxia. 

• Gravitation towards businesses with traditional competitive advantages and large reinvestment runways for future outperformance
• Genda’s growth primarily through mergers and acquisitions in the Japanese entertainment industry, taking advantage of the aging population of business owners
• CFO Taiju Watanabe’s background in Goldman Japan Investment Banking and transition to Jinda, highlighting the company’s potential for growth and profitability

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• On Monday, I had the great pleasure to speak to Kaonavi’s (4435 JP – US$131 million) CFO, Kimitaka Hashimoto.
• He provided color on Kaonavi’s second-quarter earnings result, which were released on 13 November and led to a negative reaction from the market.
• In short, Kaonavi is a Japanese developer of talent management software. It helps companies manage their employees by solving staffing problems, designing their organizational structure, performance reviews, surveys, training, internal recruitment, etc.