In today’s briefing:
- Nippon Steal! Again. Parent Takes Out Sanyo Special Steel (5481) At Well Below Book
- Osaka Steel (5449) Large Buyback At a Discount Ruins Fun For Activists
- India: Potential Free Float Changes & Passive Flows in February
- Freebit (3843) Buys Out Minorities in Giga Prize (3830) – Light, But Tough to Block
- Sanyo Special Steel (5481 JP): Nippon Steel (5401 JP)’s Light Tender Offer Begs for Activism
- Giga Prize (3830 JP): FreeBit (3843 JP)’s Tender Offer Is a Done Deal
- FXI ETF: Potential Changes in the Year of the Snake
- Ohayo Japan | Wall Street Falls as New Tariffs Loom
- Quiddity Leaderboard ASX Mar 25: LONGs up ~10% Vs SHORTs in a Month; More to Come
- KRX New Deal Index Rebalance Preview: Smaller Deal Than Usual
Nippon Steal! Again. Parent Takes Out Sanyo Special Steel (5481) At Well Below Book
- 6-7 years ago Sanyo Special Steel (5481 JP) bought out a large foreign specialty steel company, and funded it by getting Nippon Steel to inject capital at below book.
- Now Nippon Steel is buying the rest of Sanyo Special Steel in a Tender Offer at 0.66x book, where most of book is Net Receivables, Inventory, WIP, and Materials.
- This is the second time in a decade where the Board has decided to sell control of itself at far below book value. They should be ashamed of themselves.
Osaka Steel (5449) Large Buyback At a Discount Ruins Fun For Activists
- Osaka Steel (5449 JP) is 65% owned by Nippon Steel Corporation (5401 JP). They make a relatively simple set of steel products used by shipbuilders, construction companies, and warehouse builders.
- Activist Effissimo Capital went over 5% in October 2016 and is still a top holder. Activist Strategic Capital went over 5% in December 2023 and now owns 10+% of votes.
- The “hope” had been that Nippon Steel buy out minorities and Osaka Steel would be rescued from mediocre capital returns. That was not to be. Activists are disappointed.
India: Potential Free Float Changes & Passive Flows in February
- Companies in India have disclosed their shareholding pattern as of end-December in January. There are companies with significant float changes from end-September and/or end-June.
- The changes in free float could be reflected in domestic and global indices over the next few weeks and months resulting in action from passive trackers.
- Depending on the date that the shareholding was published, there could be 13 stocks with passive inflows from global trackers while 4 could see passive outflows in February.
Freebit (3843) Buys Out Minorities in Giga Prize (3830) – Light, But Tough to Block
- Today, Freebit Co Ltd (3843 JP) announced it would launch a Tender Offer next Monday to buy out minorities in 60.9%-owned Giga Prize (3830 JP).
- The multiple is not terribly impressive. It could be better. But they only need 5.8% of the 39.1% they do not own to get this over the hump.
- Synergies are clear. They are expected. They are not priced in the valuation. This is disappointing. Again.
Sanyo Special Steel (5481 JP): Nippon Steel (5401 JP)’s Light Tender Offer Begs for Activism
- Sanyo Special Steel (5481 JP) has recommended Nippon Steel Corporation (5401 JP)’s tender offer at JPY2,750, a 37.4% premium to the last close.
- The offer is light, implying a P/B of 0.67x, below the midpoint of the IFA DCF range, below the Board’s requested price, and unattractive compared to peer multiples.
- The lack of an irrevocable and unattractive offer suggests that satisfying the minimum acceptance condition is likely challenging. This situation requires activism to force a bump.
Giga Prize (3830 JP): FreeBit (3843 JP)’s Tender Offer Is a Done Deal
- Giga Prize (3830 JP) has recommended Freebit Co Ltd (3843 JP)’s tender offer at JPY2,500, a 48.5% premium to the last close.
- While the offer is below the midpoint of the target IFA’s DCF valuation range, it represents an all-time high and aligns with the Board’s requested price.
- The required minority acceptance rate is modest, and tendering by the third-largest shareholder is enough to close the deal.
FXI ETF: Potential Changes in the Year of the Snake
- There could be 1/2 changes to the iShares China Large-Cap (FXI) (FXI US) in March. Then there will be more changes as large Chinese companies list H-shares on the HKEX.
- Fast Entries and regular inclusion of newly listed H-shares will change the characteristics of the FXI and there could be further deviations from the Hang Seng China Enterprises Index (HSCEI INDEX).
- That will provide opportunities for index rebalance traders as well as volatility traders that are active on the iShares China Large-Cap (FXI) (FXI US) options.
Ohayo Japan | Wall Street Falls as New Tariffs Loom
- U.S. stocks declined Friday as the White House announced new tariffs on Mexico, Canada, and China taking effect Saturday
- Japanese markets ended mixed last week, with NEC leading gains, surging 18.4% on a stock split announcement and upward guidance revision. The broader TOPIX gained 1.4% for the week
- Companies reporting strong results included SCREEN Holdings, TDK, Fujitsu, MOL, Sakura Internet, and ZOZO
Quiddity Leaderboard ASX Mar 25: LONGs up ~10% Vs SHORTs in a Month; More to Come
- In this insight, we take a look at the potential index changes for ASX 300, 200, 100, 50, and 20 in the run-up to the March 2025 index rebal event.
- We expect two changes for ASX 50, one change for ASX 100, and seven changes for ASX 200. Separately we see 8 ADDs and 6 DELs for ASX 300.
- The Sigma Healthcare – Chemist Warehouse merger will be completed soon and there will be major inflows for Sigma Healthcare due to float percentage/share count upgrades.
KRX New Deal Index Rebalance Preview: Smaller Deal Than Usual
- The review period for the March rebalance ended on 31 January, changes will be announced first week of March and implemented at the close of trading on 13 March.
- We forecast two changes for the Bio Index and one change for the Internet Index. Plus there will be capping changes for all indices.
- The largest flows will be in Samsung SDI, LG Energy Solution, POSCO Holdings, Alteogen, Naver Corp, Legochem Biosciences, Netmarble and Celltrion Inc.
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