In today’s briefing:
- Kaonavi (4435 JP) – Small HR Software Co Gets 121% Premium LBO from Carlyle
- Trend Micro (4704 JP): Rumoured Buyout Interest Starting to Take Shape
- Samsung Life’s Official Move to Make Fire a Subsidiary: A Value-Up Play for Samsung’s Big Three
- Kaonavi (4435 JP): Carlyle’s JPY4,380 Tender Offer (121% Premium)
- StubWorld: Melco Is Trading Too Tight
- Macquarie/Renewi: Agreed Offer
- Pesa/Talgo: Talgo Takeover Blocked by Spanish Government
- EQD | Westpac Banking (WBC AU) – Expected Move on Profit Announcement and Option Insights
- Nektar Therapeutics: Potential Blockbuster Drug and Mispricing Amidst Re-Analyzed Data and Legal Dispute with Lilly
- Magnera: Investment Case is On Track
Kaonavi (4435 JP) – Small HR Software Co Gets 121% Premium LBO from Carlyle
- Another Japanese smallcap takeover at a huge premium. Must be a day ending in “y.” It is a thing recently.
- Interestingly, this is NOT an MBO. It is an LBO. Carlyle is buying out Kaonavi Inc (4435 JP) at ¥4,380/share which is 19x book and 89x EBIT. Nice price.
- I expect this gets done easily because the co-CEO with 28.7% and Recruit with 20.6% are putting in. There’s another easy 9.7%. One more holder and this is done.
Trend Micro (4704 JP): Rumoured Buyout Interest Starting to Take Shape
- Trend Micro Inc. (4704 JP) shares have hit their daily trade limit, following a Reuters report that Bain, Advent, KKR, and EQT AB are potential bidders.
- The lack of a controlling shareholder and increased cybersecurity M&A activity support the buyout interest. In 4Q2024, cybersecurity M&A reached the highest quarterly volume in the past three years.
- The valuation is undemanding. If it trades in line with its median peers’ CY2024 EV/Sales and EV/EBITDA multiple, it implies JPY11,500-15,000, a 6%- 38% premium to the current price.
Samsung Life’s Official Move to Make Fire a Subsidiary: A Value-Up Play for Samsung’s Big Three
- The FSS will review the subsidiary approval, with final approval expected from the FSC by early April. Market signals suggest a near-100% chance of Samsung Life getting the green light.
- Samsung’s moves post-Lee Jae-yong’s Feb 3rd ruling signal a major pivot, setting up aggressive value-up plays across Samsung Life, Samsung Electronics, and Samsung C&T.
- Shoring up Samsung Life’s finances triggers a domino effect, positioning Samsung Electronics and Samsung C&T to follow with their own shareholder-friendly moves.
Kaonavi (4435 JP): Carlyle’s JPY4,380 Tender Offer (121% Premium)
- Kaonavi Inc (4435 JP) has recommended a tender offer from Carlyle Group / (CG US) at JPY4,380, a 121.2% premium to the last close.
- The offer is attractive due to the high takeover premium, being materially above the midpoint of the target IFA’s DCF valuation range and representing a four-year high.
- This is a done deal, as the required minority acceptance rate is not onerous. The tender offer is from 14 February to 31 March (30 business days).
StubWorld: Melco Is Trading Too Tight
- At an 8% discount to NAV, Melco International Development (200 HK) is trading too tight for what is a simple holding company structure.
- Preceding my comments on Melco are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Macquarie/Renewi: Agreed Offer
- Macquarie’s Bid for Renewi: Macquarie-led consortium offers 870p per share, valuing Renewi at £707 million, a 57% premium to the pre-offer price, with the deal structured as a scheme of arrangement.
- Regulatory and Shareholder Support: 21.1% of Renewi shareholders, including major investors and directors, have given irrevocable undertakings to support the deal, pending approvals from EU, Belgian, and Chinese regulators.
- Investment Outlook: At 853p, the gross spread is 2.0%, with an annualized return of ~5.5% if completed by Q2 2025. Market implies a 94.3% probability of success (break price 554p).
Pesa/Talgo: Talgo Takeover Blocked by Spanish Government
- Government-Backed Takeover: The Spanish Government blocked Pesa’s €5 per share bid, clearing the way for Sidenor’s lower €4.8 per share offer, aligning with Basque industrial and political interests.
- Political Motivations: The intervention is driven by the Spanish Government’s need for Basque nationalist party support in Congress, favoring a regional industrial consolidation over foreign investment.
- Recommendation Downgrade: With the removal of competitive bidding, Talgo’s valuation should revert to sector multiples, leading to a SELL recommendation and an estimated fair value of €2.50 per share.
EQD | Westpac Banking (WBC AU) – Expected Move on Profit Announcement and Option Insights
- Westpac Banking (WBC AU) is set to announce its 2025 First Quarter Trading Update on 17 February.
- Options expiring 20 February can provide an indication of the size of the move expected on the day, as well as directional bias.
- The options market expects a 2.1% to 2.6% move in either direction until 20 February, in-line with historic moves. Peers have so far performed positively on reporting days this month.
Nektar Therapeutics: Potential Blockbuster Drug and Mispricing Amidst Re-Analyzed Data and Legal Dispute with Lilly
- Nektar Therapeutics trades at 50% of its cash, with potential upside from its atopic dermatitis treatment and Dapirolizumab royalties.
- Rezpegaldesleukin’s re-analyzed EASI75 delta is 21%, potentially increasing to 43% due to data anomalies.
- NKTR’s litigation against Eli Lilly for data misanalysis could result in substantial compensation if settled.
Magnera: Investment Case is On Track
- When I originally recommended Magnera (MAGN) in November, my investment thesis could be summarized as follows: “trough valuation on trough earnings.”
- And after the company reported earnings, that thesis remains intact.
- In its most recent quarter Magnera reported y/y sales and EBITDA growth, suggesting that results have troughed.
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