In today’s briefing:
- Korean Policy Tailwinds: Preferred Shares Rerating Play
- Merger Arb Mondays (28 Jul) – Shibaura, Abacus Storage, Insignia, Mayne, Santos, ENN, Smart Share
- [Japan M&A] Pacific Industrial (7250) MBO Officially Being Done Dirt Cheap
- Bank of Japan’s Rate Decision on 31 July: Market Calm, Watch for Tail Risk
- Ainsworth (AGI AU): A Dicey Scheme Vote Underwritten by an Alternative Takeover Offer
- Weekly Update (AAF, NLOP, KHC)
Korean Policy Tailwinds: Preferred Shares Rerating Play
- Most expect prefs to be in policy crosshairs soon—watch for tighter rules on dividends, discounts, and liquidity, plus likely incentives for redemption or cancellation ahead of commons.
- If Korea rolls out a pref stock overhaul, long-biased rerate plays could pop—focus on liquid, high-yield large-cap prefs trading at 35%+, yield north of 3%, and solid daily turnover.
- Korea Inv, Kumho Petro, CJ Cheil, CJ Corp prefs already screen well; Doosan and Hanwha 3PB could join if dividend hikes materialize on back of strong sub earnings.
Merger Arb Mondays (28 Jul) – Shibaura, Abacus Storage, Insignia, Mayne, Santos, ENN, Smart Share
- I summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Mayne Pharma (MYX AU), Yichang HEC Changjiang Pharma (1558 HK), ENN Energy (2688 HK), Pacific Industrial (7250 JP), Santos Ltd (STO AU), Smart Share Global (EM US).
- Lowest spreads: Bright Smart Securities (1428 HK), Hainan Meilan International Airport (357 HK), Humm Group (HUM AU), New World Resources (NWC AU), Nippon Concept (9386 JP).
[Japan M&A] Pacific Industrial (7250) MBO Officially Being Done Dirt Cheap
- The MBO for Pacific Industrial (7250 JP) starts with the father+son Chairman and CEO, – combined stake 2.92% – putting nothing in to buy this, with help from banks.
- The Takeover Price is priced at 0.7x book, and a Net Debt to EBITDA of 2x (when adjusted for securities+pension assets+DTLs) and 5-6x average 2026-2030 FCF.
- This is being done too cheap: Toyota is the main customer, one third of revenues comes from Japan, and the company is set for a transition to EVs.
Bank of Japan’s Rate Decision on 31 July: Market Calm, Watch for Tail Risk
- Ahead of the Bank of Japan’s 31 July 2025 policy meeting, markets broadly expect rates to remain on hold at 0.5%.
- The new US–Japan trade deal may influence the tone of the upcoming quarterly outlook—if not the rate decision itself.
- With limited precedent for rate changes but a high rate of surprises when they do occur, this Insight combines historical data with option-implied volatility to help investors assess tail risks.
Ainsworth (AGI AU): A Dicey Scheme Vote Underwritten by an Alternative Takeover Offer
- The Ainsworth Game Technology (AGI AU) IE considers Novomatic’s A$1.00 to be fair and reasonable, as it falls within its A$0.93-1.07 valuation range. The vote is on 29 August.
- The offer has drawn opposition from several notable shareholders. There remains at least a 50% chance that the scheme vote fails.
- Novomatic can switch to an alternative takeover offer, which limits the downside risk. At the last close and for a 26 September payment, the gross/annualised spread was 1.5%/8.2%.
Weekly Update (AAF, NLOP, KHC)
- Kraft Heinz (KHC) is currently evaluating a plan to spin off a significant portion of its grocery business into a new, distinct entity. The WSJ reported that this transaction is likely to occur.
The news comes a decade after the infamous merger of two of the biggest names in packaged foods that was orchestrated by Warren Buffett and Brazilian private equity firm 3G Capital Partners.
- This new entity, which can be referred to as “SpinCo,” would encompass many of the traditional Kraft products. The remaining company, or “RemainCo,” would strategically focus its operations on faster-growing segments, specifically sauces, spreads, and condiments.
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