In today’s briefing:
- Nikkei 225 Index Rebalance: 🚨Ibiden (4062 JP) To Replace Nidec (6594 JP) 🚨
- Mayne Pharma (MYX AU): Court Rules Cosette Cannot Walk
- Chroma Ate (2360 TT): Double Index Inclusion Coming Up with Plenty to Buy
- [Japan M&A] Sumitomo Corp To Buy Out Minorities in SCSK (9719 JP)
- Groww IPO: Growwing Fast; Index Inclusions Will Be Sloww; Small Floww
- NIFTY Bank Index: Methodology Changes to Result in Big Flows
- [Japan M&A] Sumi Elec Buys Out Minorities in Sumitomo Riko (5191 JP) For ¥2,600 – Low Price/Multiple
- [Japan M&A] Daiwa House Buyout of Sumitomo Densetsu (1949 JP) At ¥9,760 – A Good Exit
- Samsung Electronics Placement: Inheritance Tax Paydown by Family, Widely Telegraphed
- [Japan M&A] Fujitsu Buys Out Brainpad (3655) At Near 100% Premium
Nikkei 225 Index Rebalance: 🚨Ibiden (4062 JP) To Replace Nidec (6594 JP) 🚨
- The JPX has designated Nidec Corp (6594 JP) as a ‘Security on Special Alert’ due to a disclaimer of opinion in the annual report (among other issues).
- Nikkei has announced the deletion of Nidec Corp (6594 JP) from the Nikkei 225 (NKY INDEX). Ibiden Co Ltd (4062 JP) will be added to the index.
- Nidec Corp (6594 JP) should also be deleted from the TSE Tokyo Price Index TOPIX (TPX INDEX). Both index deletions should take the stock a lot lower from here.
Mayne Pharma (MYX AU): Court Rules Cosette Cannot Walk
- In a watershed decision, the Supreme Court of NSW ruled Cosette cannot terminate its Scheme for Mayne Pharma (MYX AU).
- The hearings were the first time a material adverse change clause had been considered by an Australian court under such circumstances.
- The transaction still requires FIRB signing off. Concerns linger over whether Cosette intends to close a South Australian plant. Mayne has previously dispelled these concerns.
Chroma Ate (2360 TT): Double Index Inclusion Coming Up with Plenty to Buy
- A massive rally in Chroma Ate Inc (2360 TT) should see the stock added to a global index in November and then to another country ETF in December.
- With one exception, Chroma Ate Inc (2360 TT) has outperformed its peers over the last 6 months. With large buying to come, that could continue in the short-term.
- There is positioning in Chroma Ate Inc (2360 TT) and its peers. With continued momentum in the stock, the path of least resistance is higher.
[Japan M&A] Sumitomo Corp To Buy Out Minorities in SCSK (9719 JP)
- Yesterday after the close, Sumitomo Corp (8053 JP) announced it would buy out minorities in Scsk Corp (9719 JP) at ¥5,700/share.
- As a “parent takes out subsidiary” deal, this was not unexpected at some point in time. The register looks like there may be a number of people who expected that.
- This gets done pretty easily. It is not a bad price.
Groww IPO: Growwing Fast; Index Inclusions Will Be Sloww; Small Floww
- Groww (1573648D IN) is looking to list on the exchanges by selling 663.23m shares via a primary and secondary offering to raise US$752m at a valuation of US$7bn.
- The price band has been set at INR 95-100/share, and the issue is likely to price at the top end of the range.
- The stock will not get Fast Entry to global indices. Inclusion at regular rebalances will commence in June 2026 but flow will be small given the low float.
NIFTY Bank Index: Methodology Changes to Result in Big Flows
- In May, SEBI recommended changes to the minimum number of constituents for non-benchmark indices and the capping for those indices. Then came the market consultation in August.
- SEBI has now confirmed the changes along with the timeline for capping changes to the largest stocks in the index.
- The changes could commence in December and continue till March. The adds will take place in December and weight changes for the largest stocks will take place in 4 tranches.
[Japan M&A] Sumi Elec Buys Out Minorities in Sumitomo Riko (5191 JP) For ¥2,600 – Low Price/Multiple
- Today with the earnings announcement, Sumitomo Electric Industries (5802 JP) announced it would buy out minorities in Sumitomo Riko Company (5191 JP), its rubber products subsidiary.
- The price is low, and especially so when one considers the significant net receivables and inventory number (about 2mos of revenue, but one turn of annual EBITDA).
- Crossholders and insiders, however, own nearly 15% of the company, and that makes blocking this deal difficult, despite its low price, and lack of synergies considered in the price.
[Japan M&A] Daiwa House Buyout of Sumitomo Densetsu (1949 JP) At ¥9,760 – A Good Exit
- Today partway through the day, Daiwa House Industry (1925 JP), Sumitomo Electric Industries (5802 JP), and Sumitomo Densetsu (1949 JP) announced Daiwa House would buy out Sumitomo Densetsu for ¥9,760/share.
- Sumitomo Electric will sell its stake to the company ¥6,877/share. Minorities get 11.9x Mar26 EBITDA. The Bidder is buying at 9.9x.
- At an ATH, and a nice premium, and 3x book, this looks like a pretty good takeout price. Daiwa House has plans for it.
Samsung Electronics Placement: Inheritance Tax Paydown by Family, Widely Telegraphed
- Samsung Electronics (005930 KS) is looking to raise around US$1.2bn from a secondary placement.
- This represents 0.9 days of the stock’s three month ADV, and 0.3% of total shares outstanding.
- In this note, we will talk about the placement and run the deal through our ECM framework.
[Japan M&A] Fujitsu Buys Out Brainpad (3655) At Near 100% Premium
- Today after the close, Fujitsu Ltd (6702 JP), with 110,000 employees, announced a buyout of a small “labour-intensive” AI/ML sysdev business with 200+ data scientists.
- Brainpad Inc (3655 JP) is being bought out from its co-founders and others at a near-100% premium. Not an all-time high, but not a low price.
- Somewhat heavily shorted, this will trade tight, but I expect nobody will come over the top.
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