Daily BriefsJapan

Japan: Shinsei Bank, GCA Corporation, Simplex Holdings, Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

  • SBI (8473) Launches a HOSTILE Tender Offer on Shinsei Bank (8303)!
  • Houlihan Lokey Bumps the GCA Offer – A Whopping 1.3%!!!
  • Simplex Holdings IPO – Simply Mediocre
  • Japan’s Governance: Update On “Transitional Measures” For TSE Market Reorganization

SBI (8473) Launches a HOSTILE Tender Offer on Shinsei Bank (8303)!

By Travis Lundy

When in late December 2020 I wrote that Shinsei Bank (8303 JP) was my 2021 High Conviction Trade (at the time) (in 2021 High Conviction – Shinsei Bank), I talked about buybacks, and pressure on the stock, and float, and the government ownership, and value, and business recycling, and other things. 

Over the next three months, the stock was up as much as 50%, helped by both Shinsei Bank buying back stock and SBI Holdings (8473 JP) lifting its position sharply. When I wrote SBI had reported a position of 10.3% months earlier. A couple of days later they reported an uplift and by the end of March had an additional 16.067mm shares, giving them 16.5% of shares out and 19.85% of voting rights. 

As I wrote in 2021 High Conviction Update – Shinsei Bank Float Squeeze to Mitigate Near-Term in mid-March before they got that far, it was likely they needed to pause because someone who wants to own more than 20% of voting rights of a bank has to ask the Ministry of Finance first, before going over.

Shinsei reported results in mid-May, launched another 20mm share ¥20bn buyback, saw a float weight drop by MSCI at end-May, and since mid-May had bought back 5.049mm shares spending ¥7.2bn to do so as banks and other financials in Japan fell with US long rates.

Today SBI Announced A Tender Offer To Go To 48%

Today, SBI announced a Tender Offer to go to 48%. The Tender Offer starts tomorrow and goes for 30 business days. The price is ¥2000/share. 

As of today, the SBIHD Parties have not held prior discussions regarding the Tender Offer with the Target Company and have not confirmed whether the Target Company will support the Tender Offer.

This is a hostile bid.

SBI bought just under 5% in April-August 2019. In September 2019, SBI proposed that SBI buy 33.4-48% of Shinsei and bring the bank under SBI’s wing. Two years have passed since the initial proposal of an alliance, and after what appears to be a lack of progress (and some implied criticism not acted upon), and SBI’s vote against the re-election of four directors at the AGM in June, SBI apparently did not seem to think it fruitful to hold any further discussions on practical matters until they had the ability to do something. This is vaguely reminiscent of Itochu’s lifting of its stake in Descente Ltd (8114 JP) a couple years ago. 

The Financial Instruments & Exchange Act (FIEA) Article 27-2 sets out the rules for Tender Offers, for both would-be acquirers and Target Companies. Shinsei Bank now has 10 days to come up with an Official Opinion (the immediate announcement is “we’ll take a look and get back to you”).

One should expect this to continue on somewhat to highly unfriendly terms.  But there is not much Shinsei can do about it. 

Or is there…?

I’ve got popcorn. 

And lots more discussion below about how to think about this situation…

Houlihan Lokey Bumps the GCA Offer – A Whopping 1.3%!!!

By Travis Lundy

In Houlihan Lokey To Take Out GCA :  Light But Likely Done I suggested that the price for the investment bank/consultant was light, but that the tender offer at ¥1,380/share would most likely get done. 

Today, Houlihan Lokey bumped the Tender Offer Price

By ¥18/share – 1.30435% – from ¥1,380/share to ¥1,398/share.

Don’t spend it all in one place ladies and gents.

It was not clear that Houlihan Lokey needed to bump. The price hadn’t cleared the Tender Offer Price since announcement. 

More below the fold.

Simplex Holdings IPO – Simply Mediocre

By Mio Kato

Simplex aims to relist on TSE1 this month after being taken private by Carlyle Group in 2013 following a period of consistent margin deterioration. While the deal does not appear to be priced particularly egregiously, we feel there are several red flags worth noting.

Japan’s Governance: Update On “Transitional Measures” For TSE Market Reorganization

By Aki Matsumoto

On September 3, 2021, I attended the CFA Society Japan Seminar on “Tokyo Stock Exchange’s New Market Classification.” The 90-minute webinar from a representative of the Tokyo Stock Exchange consisted of a 60-minute presentation at the beginning and a 30-minute Q&A session. The presentation was a detailed explanation along with a compiled material of the TSE’s published materials, but the QA session was meaningful as it allowed us to ask questions individually about content not included in the materials. I also asked some questions that I had been wondering about and got answers to some of them, but not all of them, so it was meaningful that my understanding of this matter was a little more advanced than before. I have summarized the answers to my questions and my impressions and would like to report them here.

Before it’s here, it’s on Smartkarma