In today’s briefing:
- [Japan M&A] Makino Milling (6135) – MBK as White Knight Appears To Have Made a Binding Bid
- Makino Milling Machine (6135 JP): Relief as a White Knight Bidder Surfaces
- StubWorld: First Pacific (142 HK) Looking Stretched
- ORIX JREIT (8954) Sponsor To Buy Units – Looks Minor, It’s Bigger
- Seven & I Holdings (3382 JP): Wait and Hope
- HYBE to Sell Its 9.4% Stake in SM Entertainment to Tencent Music in a Block Deal Sale
[Japan M&A] Makino Milling (6135) – MBK as White Knight Appears To Have Made a Binding Bid
- In December, Nidec Corp (6594 JP) made an unsolicited bid for Makino Milling Machine Co (6135 JP). Makino wanted more time. Nidec wanted to squeeze. Makino proposed a poison pill.
- Makino appeared to act slowly but white knight bidders were mooted in the media. Nidec launched, but apparently approvals may have been hard. They withdrew. Makino cancelled the poison pill.
- Shares fell sharply. Yesterday, they rose because it appears Effissimo owns 3%. Today, we got news post-close that MBK may be close to making an ¥11,000+ bid.
Makino Milling Machine (6135 JP): Relief as a White Knight Bidder Surfaces
- In response to a Nikkei article, Makino Milling Machine Co (6135 JP) confirmed it had received a legally binding acquisition proposal from MBK Partners.
- The price is expected to exceed Nidec Corp (6594 JP) JPY11,000 hostile offer. On 8 May, Nidec withdrew its offer due to the Board’s proposed countermeasures.
- My analysis suggests that MBK’s white knight bid could be JPY11,677 per share, 13.7% higher than the last close price of JPY10,270.
StubWorld: First Pacific (142 HK) Looking Stretched
- Via 49.9%-held MPIC, First Pacific Co (142 HK) is spinning off Maynilad, a provider of water and wastewater services in the Greater Manila Area, on the Philippine Stock Exchange
- Maynilad will tentatively have a market cap of US$2.7bn. Other key investors include DMCI Holdings (DMC PM) and Marubeni Corp (8002 JP). Listing is expected in July.
- I see First Pac’s discount to NAV at ~30%, around its narrowest level in a decade.
ORIX JREIT (8954) Sponsor To Buy Units – Looks Minor, It’s Bigger
- It has been a sport of the J-REITs the past 18-24mos to buy back their units at well under PNAV 1.0x and to have sponsor entities up their stakes.
- The goal? Get valuation to PNAV1+ so they can, in good faith, get the REIT to buy assets with an equity raise. Below PNAV1 would work with a rights offering.
- Now the Orix JREIT Inc (8954 JP) has announced it will triple its small holding. Meaningful portion of ADV, more meaningful portion of MRWF.
Seven & I Holdings (3382 JP): Wait and Hope
- The Seven & I Holdings (3382 JP) AGM was a vote of confidence in the Board’s strategy of pursuing two parallel paths to generate value.
- The Board’s management initiatives are steadily being implemented, but have yet to deliver shareholder value. Since they were announced, the share price has modestly outperformed the Nikkei 225.
- 7&I and Couche Tard signed an NDA but a viable divestiture plan to gain US regulatory approval remains in doubt, particularly as PE has emerged as the likely bidder.
HYBE to Sell Its 9.4% Stake in SM Entertainment to Tencent Music in a Block Deal Sale
- On 27 May, HYBE announced that it will sell its 9.4% in S.M.Entertainment (2.21 million shares) for about 243 billion won (US$145 million) to Tencent Music Entertainment.
- HYBE’s sale of its stake in SM Entertainment is expected to take place on Friday (30 May) after the market close through an after hours block deal trade.
- The block deal sale of SM Entertainment by HYBE to Tencent is likely to have a negative impact on SM Entertainment’s shares mainly due to large share price discount (15.3%).
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