In today’s briefing:
- [Japan M&A] NTT (9432) Overpays To Buy Out NTT Data (9613) Minorities
- [Japan M&A] MitCorp (8058) Buys Out Subsidiary Mitsubishi Shokuhin (7451) – Bad Process, Bad Price
- [Japan M&A] YAGEO Overbids Minebea’s Overbid of YAGEO’s Overbid of Minebea’s Overbid – The Endgame
- NTT DATA (9613 JP): NTT (9432 JP) Tender Offer at JPY4,000
- Shibaura Electronics (6957 JP): End Game Nears as Yageo Launches Its Hostile Tender at JPY6,200
- Mitsubishi Shokuhin (7451 JP): MitCorp (8058 JP) Light Tender Offer at JPY6,340
- [Japan Activism] ISS Comes Out Supporting Orbis Against Tsuruha/Welcia Merger Ratio
- Toyota (7203 JP) Post-Earnings Outlook Amid ¥180B Estimated U.S. Tariff Cost
- Japanese Big Cap Banks – Focusing on Strategic Equity Holdings as BoJ Likely to Defer Rate Hikes
- Common Attitudes Toward IPOs Are Found in Parent-Subsidiary Listings
[Japan M&A] NTT (9432) Overpays To Buy Out NTT Data (9613) Minorities
- Pre-Open, we got a Nikkei article which suggested four different prices possible. We got something in the middle. I think NTT is probably overpaying here.
- There is a fair bit of transparency in the documents and valuation. That is encouraging. There are no synergies counted in the fair calculations. That is discouraging.
- This will not trade like a “normal” Japan risk arb situation. There will be nuances.
[Japan M&A] MitCorp (8058) Buys Out Subsidiary Mitsubishi Shokuhin (7451) – Bad Process, Bad Price
- Mitsubishi Shokuhin (7451 JP) was supposed to announce earnings at 2pm JST. They didn’t. Someone (or people) decided that meant there might be a takeover. There was.
- The stock popped nearly 15% to ¥6,200, paused, was flat for an hour, then popped again, closing at ¥6,150/share. Post-close, we get a deal at ¥6,340/share.
- A disappointing process. At ¥6,240, the Special Committee said it was “far from a standard that takes into account the interests of TargetCo’s minority shareholders.” At ¥6,340, they dealt. Aaaargh.
[Japan M&A] YAGEO Overbids Minebea’s Overbid of YAGEO’s Overbid of Minebea’s Overbid – The Endgame
- Yageo Corporation (2327 TT) has now strongly overbid Minebea’s weak overbid of Yageo’s strong overbid of Minebea’s weak overbid of Yageo’s initial hostile offer for Shibaura Electronics (6957 JP).
- We are now 40% higher than the initial bid and the best bid is approaching the top end of Valuation Agent’s top-of-DCF-range prices. There may be a bit more. Maybe.
- The question now is only whether Minebea responds. If it does, there is a little juice left, but if not, that’s it. It should get done.
NTT DATA (9613 JP): NTT (9432 JP) Tender Offer at JPY4,000
- NTT Data Corp (9613 JP) has recommended a tender offer from NTT (Nippon Telegraph & Telephone) (9432 JP) at JPY4,000 per share, a 33.7% premium to the last close.
- The Nikkei earlier reported on the offer. The offer represents an all-time high and is attractive compared to historical trading ranges, peer multiples and precedent transactions.
- The offer could be considered light as it is below the midpoint of the target IFA’s DCF valuation range. However, the shareholder structure suggests a done deal.
Shibaura Electronics (6957 JP): End Game Nears as Yageo Launches Its Hostile Tender at JPY6,200
- Yageo Corporation (2327 TT) has revised its tender offer for Shibaura Electronics (6957 JP) to JPY6,200 per share, a 12.7% premium to Minebea Mitsumi (6479 JP)’s JPY5,500 offer.
- There are factors supporting Minebea again outbidding Yageo and Minebea withdrawing its offer. Minebea is in a predicament as Yageo has established that it wants Shibaura at any cost.
- The most likely scenario is that Minebea withdraws its tender and the Board switches to a neutral opinion due to its ongoing non-price-related concerns.
Mitsubishi Shokuhin (7451 JP): MitCorp (8058 JP) Light Tender Offer at JPY6,340
- Mitsubishi Shokuhin (7451 JP) has recommended a tender offer from Mitsubishi Corp (8058 JP) at JPY6,340 per share, a 17.2% premium to the undisturbed price.
- While the offer represents an all-time high, it is materially below the midpoint of the IFA DCF valuation range.
- The light offer resulted from an unusually long process, with twelve rounds of proposals. However, the shareholder structure suggests a done deal.
[Japan Activism] ISS Comes Out Supporting Orbis Against Tsuruha/Welcia Merger Ratio
- Large Tsuruha Holdings (3391 JP) investor Orbis Investments last month said they were against the Tsuruha/Welcia merger ratio. They wanted a cash takeover above Aeon’s Oasis buy price from 2024.
- Influential shareholder proxy advisor ISS has apparently come out recommending shareholders vote against. That’s a start, but the hard work needs to be Orbis talking to domestic passive managers.
- Getting 90% of foreign active managers as of end-February would make it a very close-run thing, but Orbis really needs some more to show up against the ratio.
Toyota (7203 JP) Post-Earnings Outlook Amid ¥180B Estimated U.S. Tariff Cost
- Toyota Motor (7203 JP) expects U.S. tariffs, material costs and a weak(er) dollar to dent profits. The automaker estimated the levies directly costing it 180 billion yen in April/May.
- The stock fell after the company reported its fiscal-fourth-quarter results on Thursday. Guidance for the coming year came in lower than expected, with tariffs taking a bite out of profits.
- In a previous insight we flagged the stock as overbought; those model targets remain valid. Here, we analyze updated support to gauge the pullback’s potential depth.
Japanese Big Cap Banks – Focusing on Strategic Equity Holdings as BoJ Likely to Defer Rate Hikes
- BoJ’s lower GDP growth forecasts add weight to the rate hike deferral; we focus on big-cap banks that have more in the tank than high gearing to rising benchmark rates
- An increasingly important factor, in our view, is the share of strategic equity holdings relative to market capitalization; Kyoto is top on this metric, followed by Shizuoka, Resona and Mizuho
- With the lack of the rate hike catalyst in the near term, we remove SMFG from the buy list and would look to lighten holdings selectively in other Japanese banks
Common Attitudes Toward IPOs Are Found in Parent-Subsidiary Listings
- The reason for slower reforming Growth Market seems to weigh on consideration for companies undergoing IPO review and coordination with stakeholders in IPO business. The investor’s perspective is missing here.
- Growth market listed companies that do not receive overseas investor engagement have more difficulty than prime market companies in raising their market capitalization to meet listing retention criteria.
- Behind the failure to grow after IPOs are many managers who view IPO as place to cash in their equity rather than place to obtain the capital needed for growth.
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