Daily BriefsJapan

Japan: Shinsei Bank, Demae-Can Co., Ltd., Sony Corp, Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

  • Shinsei Looks To A Poison Pill, But Probably Not Really
  • Demae-Can – Structurally Appalling but a Good Trade
  • Sony Part 2: Arms Dealer in an Arms Race
  • Japan’s Governance: Term of Office of Board Directors

Shinsei Looks To A Poison Pill, But Probably Not Really

By Travis Lundy

On Thursday 9 September, SBI Holdings (8473 JP) announced a Tender Offer aimed at lifting its stake in Shinsei Bank (8303 JP) to 48% at a sharp premium (up 46%). It hadn’t warned Shinsei Bank of its intention to do so.

Kana Inagaki and Leo Lewis at the FT had a story early Thursday evening describing the situation – the most concise and accurate take I have seen. I followed up hours later with something wordier in SBI (8473) Launches a HOSTILE Tender Offer on Shinsei Bank (8303)! On Thursday night the ADRs rose to ¥1930/share equivalent. 

On Friday, the stock went limit up, Smartkarma held a Flash Webinar, and Mio Kato added Shinsei Bank – Valuations to the anthology. 

Over the weekend, articles were everywhere in the media, but they didn’t say much. Shinsei hadn’t told them what to say and SBI had already done the talking for its part. 

Trading resumed on Monday and the stock opened above the Tender Offer Price ¥2000/share before closing a bit lower. 

Yesterday saw articles suggesting Shinsei Bank would send SBI a list of questions to answer, would look at what they got back, and then would decide their opinion. 

But TODAY we see the real start of the game. 

The Nikkei reported in a short article a few hours ago that Shinsei’s board would meet this week to approve an “emergency” poison pill defence. 

How that would work might matter, but it might not. 

More below the fold.

Demae-Can – Structurally Appalling but a Good Trade

By Mio Kato

Demae-Can once offered a sound business model in a niche for Japan and generated consistent double-digit growth with mid-teens margins, making it a relatively attractive stock for Japan. Since its push into the delivery business though, margins have collapsed, and cash-burn has reached Wework-ian proportions. Nevertheless, on a short-term basis, this could prove attractive.

Sony Part 2: Arms Dealer in an Arms Race

By Drawbridge Research

This is the second of three research notes covering Sony Group. Part 1 looked at Sony’s semiconductor and electronics businesses and how they have both collaborated to redefine the interchangeable-lens camera market whilst both having their own idiosyncratic growth drivers. This note covers the company’s music business, the incredible behavioural biases currently affecting its perception and the first principles of digital and analog audio that lead to this perception. Secondly, the company’s pictures business is examined with an emphasis on the fact that Sony is the only major Hollywood studio to not have invested in its own streaming service. We show how this strategy to not pursue streaming has resulted in Sony being the sole major Hollywood studio able to supply exclusive content to streaming services, with all other majors unable to due to the fact they are competing with each other in the streaming market themselves. Finally, we look at how walls continue to be broken down between Sony’s business units whilst analysing PlayStation Productions, a collaboration between Sony’s music and gaming business. PlayStation Productions aims to leverage Sony’s extensive catalogue of renowned and maturing gaming IP into Film and TV adaptions, all at a time when exclusive content is commanding a premium price.

Japan’s Governance: Term of Office of Board Directors

By Aki Matsumoto

In this issue, I would like to discuss the term of office of board directors of listed companies in Japan. The term of office for directors used to be two years in the past, but since the Corporate Governance Code came into effect in 2015, more and more companies are changing their term of office from two years to one year every year. Although there is no reference to the term of office of directors in the principles of the Corporate Governance Code, it is assumed that there is a growing trend to shorten the term of office to one year as part of efforts to improve corporate governance practices. Of course, the reason behind this move was probably related to listed companies’ intentions to engage foreign institutional investors, which have increased their presence as shareholders, and to exercise their voting rights.

Before it’s here, it’s on Smartkarma