Brief Japan: Nuflare Is a Done Deal; Here Comes the Aftermath and more

In this briefing:

  1. Nuflare Is a Done Deal; Here Comes the Aftermath
  2. Sumitomo Mitsui Financial Group – Best House In a Bad Neighborhood

1. Nuflare Is a Done Deal; Here Comes the Aftermath

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Very late last night Tokyo time (22:45), Toshiba Machine (6104 JP) released an announcement (hyperlink here, url in Appendix) that the company’s board had met and resolved to tender its shares in Nuflare Technology (6256 JP) to the Tender Offer being conducted by Toshiba Corp (6502 JP) subsidiary Toshiba Device & Storage.

As discussed in the first insight on this (Toshiba Tender for Nuflare Technology (6256) – Lightish to Too Light), if Toshiba Machine decided to tender, it was all over. Toshiba Device & Storage owns 50.01% and Toshiba Machine 15.08% getting them to 65.09%, which is not enough to clear the hurdle of 66.7%. Toshiba Machine’s 1,808,900 shares handily clears the 1,633,700 share minimum. 

So it’s all done but the shouting. The question then is how many people will hold their shares back to vote no at the shareholder meeting to extend the “fun.”

There is, as discussed in Murakami, Nuflare, and Toshiba Machine – The OTHER Toshiba Machine Angle, another interesting trade to come in Toshiba Machine. 

The history of insights in the runup to and about the deal is below:

Recent Insights on Toshiba Restructuring and Buyout of Subs

16 Oct 2019Toshiba Toshiba Buyback Ending: The Next Catalyst Is Restructuring 
24 Oct 2019Toshiba Tec Toshiba Restructuring Coming – Toshiba Tec Is STILL the Right Horse. 
12 Nov 2019Toshiba Plant Toshiba Restructuring – It’s Coming, Subs Are Up, Wording Is Important 
13 Nov 2019Toshiba Plant Toshiba Tender for Toshiba Plant (1983) – Lighter Than It Should Be 
13 Nov 2019Nishishiba Elec Toshiba Tender for Nishishiba Electric (6591) – Also Cheap 
13 Nov 2019Nuflare Toshiba Tender for Nuflare Technology (6256) – Lightish to Too Light 
3 Dec 2019Nuflare Activist Murakami-San Going After Toshiba Sub Nuflare? 
3 Dec 2019Nuflare Nuflare – Shift to Multibeam Is the Risk but Will Being Part of Toshiba Really Help? 
9 Dec 2019Nuflare Murakami Raises Stake in Nuflare – The Toshiba Machine Angle 
10 Dec 2019Toshiba M, Nuflare Murakami, Nuflare, and Toshiba Machine – The OTHER Angle 
13 Dec 2019Hoya, Nuflare HOYA Overbid for Toshiba Sub Nuflare (6256) 
13 Dec 2019Hoya, Nuflare Nuflare – The Hoya Perspective 
20 Dec 2019Toshiba, etc Toshiba Clearly Demonstrates Parent-Sub Governance Conflict of Interest Problem 
24 Dec 2019Nuflare, Hoya Nuflare – Toshiba Synergies Unclear but There Is a Toshiba Machine Complication for Hoya 

More below the fold.

2. Sumitomo Mitsui Financial Group – Best House In a Bad Neighborhood

  • A Progressive Bank For Japan: SMFG has adopted some progressive strategies – digital; the growth potential of Asian operations; control efforts; and buoyed capital position. 
  • Returns on SME Loans Have Troughed: In FY 1H19, returns on loans to SMEs stopped declining  as spreads on new loans returned to positive growth. 
  • Fee-based Business Accelerating: Due to SMFG’s expansion of non-deposit/loan operations, its fee-based business has grown rapidly. 
  • Overhead Levels Being Addressed:Management expects to reduce costs by ¥ 50 bn over the next three years and then by another ¥ 50 bn over the medium term. 
  • Capital Strength: SMFG has achieved its capital adequacy ratio target, and growth investments and shareholder returns are now increasing. 
  • Areas of Growth:Priority areas of growth for SMFG include: commercial banking in Asia; high-margin business in Europe and the U.S.; and asset management. 

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