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
- Daiichi Sankyo Placement – Momentum Is Weak but the Deal Is Small
- Takasago Thermal Engineering Offering (1969) – Small Start to Larger Unwind
- Piolax (5988 JP) – Murakami-San Gets BIG Buyback Tender Offer
- Kaonavi (4435 JP): Carlyle’s JPY4,380 Tender Offer (121% Premium)
- Takasago Thermal Engineering Placement – Share Buyback Should Aid Deal Performance
- Companies with More Cash on Hand Are Expected to Use Cross-Shareholdings to Repurchase Shares
- Sun* (4053 JP): Full-year FY12/24 flash update
- Ichiken Co Ltd (1847 JP): Q3 FY03/25 flash update and reivision of full-year earnings forecasts
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.
Daiichi Sankyo Placement – Momentum Is Weak but the Deal Is Small
- Mizuho Bank is looking to raise US$151m from selling some of its stake in Daiichi Sankyo (4568 JP).
- While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
- In this note, we will talk about the placement and run the deal through our ECM framework.
Takasago Thermal Engineering Offering (1969) – Small Start to Larger Unwind
- Takasago Thermal Engineering (1969 JP) reported Q3 earnings today. Revs up tiny yoy over 9m. OP +13%, Net +18.2%. Progression a bit behind guidance for full-year (but guidance unchanged)
- Orders received and carried forward a record high. Margins up. DX/etc investments up. Crossholdings down but still HUGE outbound/in-bound. Goal is to shrink from 20% of net assets to 15%.
- Today the company announced some crossholders would sell ~5% of shares out, and the company would launch a buyback for half that. Meh…
Piolax (5988 JP) – Murakami-San Gets BIG Buyback Tender Offer
- Piolax Inc (5988 JP) is a small, low ROE, over-capitalised autoparts maker mostly making low-moat parts, but they sell A LOT of them. About a gajillion.
- They started 100% div payout ratios 3yrs ago, and last year started a new MTMP to pay out 100% and then buy back a lot of stock. Murakami bought 10%.
- In November they launched a big buyback. Now they are launching a 23.78% Tender Offer Buyback where Murakami-san will sell. Big accretion on forward expectations downgrades. Hmmm… 🤨
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).
Takasago Thermal Engineering Placement – Share Buyback Should Aid Deal Performance
- A group of shareholders are looking to raise US$118m from selling their respective stakes in Takasago Thermal Engineering (1969 JP) .
- While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
- In this note, we will talk about the placement and run the deal through our ECM framework.
Companies with More Cash on Hand Are Expected to Use Cross-Shareholdings to Repurchase Shares
- Stock sale allows brokers to pass on to the company the attraction of being able to diversify its shareholders, and the cross-shareholding sales scheme allows them to obtain higher commissions.
- One of the solutions that companies have come up with in the absence of improved return on capital is to reduce their policy shareholdings.
- The use of share repurchases to buy back cross-shareholdings is a very good way to improve return on capital because it also reduces the amount of cash on hand.
Sun* (4053 JP): Full-year FY12/24 flash update
- Revenue reached JPY13.6bn (+8.4% YoY) with operating profit at JPY1.4bn (-18.6% YoY) and recurring profit at JPY1.5bn (-36.2% YoY).
- Number of recurring revenue customers totaled 131 (+8.3% YoY), with enterprise customers at 53 (+29.3% YoY) and SMB customers at 78 (-2.5% YoY).
- Creative & Engineering service line revenue was JPY11.6bn (+6.9% YoY), while Talent Platform service line revenue was JPY2.0bn (+18.2% YoY).
Ichiken Co Ltd (1847 JP): Q3 FY03/25 flash update and reivision of full-year earnings forecasts
- Ichiken’s cumulative Q3 FY03/25 revenue was JPY78.2bn, operating profit JPY5.4bn, and net income JPY3.6bn, with YoY increases.
- Orders in the construction business decreased 1.6% YoY to JPY75.8bn, with private sector orders at JPY75.6bn.
- Ichiken projects FY03/25 revenue of JPY98.0bn and plans a dividend of JPY140 per share, including a commemorative dividend.
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