In today’s briefing:
- Toyota Industries (6201 JP): Vocal Activism Gathering Pace
- Kokusai Electric (6525 JP): Small Index Impact for Now, but Could Lead to Something Bigger
- Treasury Cancellation Bill Latest: 10% Holding Cap for Existing Ones — Targets Screened in Excel
- Chinese RCBs: Two Bailouts. How Many More At Risk?
- OneConnect Financial (6638 HK/OCFT US): Precondition Satisfied for a Below Net Cash Offer
- Meituan Possible US$4bn Selldown – Will End up Being Well-Flagged but Sentiment Isn’t Great
- Brightstar Lottery (fka IGT) Capital Return is Better Than Expected
Toyota Industries (6201 JP): Vocal Activism Gathering Pace
- Toyota Industries (6201 JP)’s preconditional tender offer from Toyota Fudosan is susceptible to a bump if there is enough vocal opposition from minorities.
- In July, two public pieces have sharply criticised the offer – the Asian Corporate Governance Association (ACGA) on 2 July and Sloane Robinson Investment Management on 8 July.
- Some of the criticism has merit, while others do not. Nevertheless, these letters are the first and right step to agitate for terms that are closer to TICO’s intrinsic value.
Kokusai Electric (6525 JP): Small Index Impact for Now, but Could Lead to Something Bigger
- KKR HKE Investment is offering 30m shares (12.86% of shares out) of Kokusai Electric (6525 JP) in a secondary offering that could raise up to JPY 91bn (US$620m).
- Applied Materials (AMAT US) will become the largest shareholder in Kokusai Electric (6525 JP) after the placement.
- There will not be a lot of buying from passive trackers following the placement, but it could ease the way for inclusion of the stock in the Nikkei 225 Index.
Treasury Cancellation Bill Latest: 10% Holding Cap for Existing Ones — Targets Screened in Excel
- Market focus is now on retroactive impact — existing treasury holdings above 10% must be canceled within a year, flipping earlier expectations that they’d be exempt.
- DP’s fast-tracking the bill, targeting a September vote and mid-October go-live, with this Commercial Act tweak topping their legislative priority list.
- Excel below shows 230 stocks above the 10% treasury cap, including 35 large-caps — prime candidates for momentum trades as the mandatory buyback burn bill gains steam.
Chinese RCBs: Two Bailouts. How Many More At Risk?
- Last week, CICC Hong Kong and SOE Jilin Financial Holding Group tabled a rescue offer for Jilin Bank (6122 HK), as discussed in Jilin Bank (6122 HK): Another Hobson’s Choice
- This follows a similar bailout of Bank Of Jinzhou (416 HK) in early 2024, as detailed in Bank of Jinzhou (416 HK) To Be Taken Private.
- Tarring the sector with same brush is potentially oversimplifying the situation. But the issues faced by Jilin Bank and BoJ are unlikely to be isolated. Below I dig deeper.
OneConnect Financial (6638 HK/OCFT US): Precondition Satisfied for a Below Net Cash Offer
- The precondition for Oneconnect Financial Technology (6638 HK)’s scheme offer from Ping An is satisfied. The offer is HK$2.068 per share (US$7.976 per ADS). The offer price is final.
- Ping An Insurance (H) (2318 HK) is hoping that a dire 1Q25 and letters of support will nudge minorities to accept an offer that values OneConnect below net cash.
- The high minority participation rate and protest votes at the recent AGM are warning signs that the vote is far from a done deal. Tread carefully.
Meituan Possible US$4bn Selldown – Will End up Being Well-Flagged but Sentiment Isn’t Great
- As per news reports, Prosus NV (PRX NA) could look to sell some/all of its Meituan (3690 HK) stake, worth around US$4bn
- Prosus has held its stake for a few years, owing to the dividend payout by Tencent, but Meituan appears to be planning to take on one of its subsidiaries.
- In this note, we will talk about the possible selldown and other deal dynamics.
Brightstar Lottery (fka IGT) Capital Return is Better Than Expected
- Brightstar Lottery (fka IGT) announced a better than expected capital return program following the closing of the Apollo transaction.
- Brightstar will pay a $3 special dividend (7/14 ex date) and buy back $500MM of stock.
- Brightstar is in a quiet period, but I would expect it to aggressively buy back stock following its earnings report on July 29, 2025.
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