Daily BriefsMost Read

Most Read: Toshiba Corp, Tencent Holdings, Frasers Logistics & Industrial Trust and more

In today’s briefing:

  • Toshiba – CVC Capital Partners Bid Highlights Value
  • Toshiba – The CEO Gets His MBO Bidder and Toshiba Will Get Interestinger
  • Tencent Placement – Another Reluctant but Well-Flagged Sell Down, Lifting the US$14.5bn Overhang
  • Straits Times Index Rebalance Preview: FLT Poised to Replace Jardine Strategic
  • TOPIX Upweights: Big April Basket 2021 Pre-Event Is a WIN! Now the Event-Leg!

Toshiba – CVC Capital Partners Bid Highlights Value

By Mio Kato

Nikkei Asia reported today that CVC Capital Partners would propose a privatisation of Toshiba valuing the company at $20.8bn. CVC will discuss the terms of the deal with management and will also need to win approval from the Finance Ministry. The question is whether shareholders would accept such a bid as it looks perhaps a little light.


Toshiba – The CEO Gets His MBO Bidder and Toshiba Will Get Interestinger

By Travis Lundy

This morning in the Nikkei there is an article (English, Japanese is here) headlined…

Toshiba receives offer from CVC to go private in $20bn deal

The accompanying article in Japanese including CEO Kurumatani-san’s comments suggests that the board will meet today to discuss it. The initial response to the press was that it had received the initial proposal yesterday without any previous consultation, so the company would seek more information and consider the proposal carefully.

It’s early days. The headline number of ¥5,000/share is too low, by a fair bit, and there are a lot of hurdles (which are NOT shareholders wanting more) before this could go forward (allowing shareholders to want more).

Exactly one year ago today, I wrote An MBO for Toshiba? Not As Silly As It Sounds after an article in an “investigative” magazine called FACTA (most famous for pre-commenting on the fraud on Olympus nearly a decade ago) put out an article “Toshiba: Kurumatani’s Astonishing MBO Scheme: Will He Be Able to Expel Noisy Shareholders?” (東芝・車谷が「MBO」画策の仰天: 物言う株主「放逐」は叶うか).

The article spent a lot of time talking about Kurumatani-san as a person, the insinuations that he hates shareholders, and about his desire to control his own fate – to “have his own castle” (by getting noisy activists out). The story suggested then that he saw his chance now (early April 2020) as the fall in the share price saw foreigners sell (that analysis was weak; I expect the activists were not the ones selling down hard in an illiquid market in the covid-crash, and I said as much). The article name-dropped PE funds and related parties (one fund, Integral, was led by a former SMBC colleague; and CVC – where Kurumatani-san spent a year as the Japan rep after leaving SMBC when he didn’t get the nod for the top job – was mentioned as another), but I highlighted, 

The “astonishing scheme” about the MBO though is not to be ignored. It serves a LOT of purposes. 

I stand by that conclusion, and it is worth thinking about how this might play out.

Much more below the fold.


Tencent Placement – Another Reluctant but Well-Flagged Sell Down, Lifting the US$14.5bn Overhang

By Sumeet Singh

Prosus NV (PROSY US) aims to raise around US$14.5bn via selling a 2% stake in Tencent Holdings (700 HK).

The deal comes nearly three years, and right after the lock-up expiry, from the previous placement when on 22nd March 2018, Naspers (NPN SJ) reluctantly sold US$10bn worth of Tencent Holdings (700 HK) shares.  We have covered the previous placement in our earlier note, Tencent Placement – Huge Deal in Size, Small in Relative Terms – Succumbing to the HoldCo Discount.

We have been covering the lock-up expiry since Feb 2021 in:

In this note, we will talk about the deal dynamics.


Straits Times Index Rebalance Preview: FLT Poised to Replace Jardine Strategic

By Brian Freitas

On 8 March, Jardine Matheson Holdings (JM SP) announced the acquisition of the 15% of Jardine Strategic Holdings (JS SP) that it did not own for US$33/share in cash. The Special General Meeting of Jardine Strategic Holdings (JS SP) shareholders will be held on 12 April at 8am in Bermuda. The last day of dealing in Jardine Strategic Holdings (JS SP) will be 12 April as well.

Jardine Strategic Holdings (JS SP) will be deleted from the MSCI and FTSE indices at the close of trading on 12 April. Jardine Strategic Holdings (JS SP) will also be deleted from the FTSE Straits Times Index (STI) (STI INDEX) at the close of trading on 12 April.

The replacement for Jardine Strategic Holdings (JS SP) in the FTSE Straits Times Index (STI) (STI INDEX) will be determined based on the closing prices on 8 April. Frasers Logistics & Industrial Trust (FLT SP) has a full market cap that is 10.1% higher than Suntec REIT (SUN SP) and is the most likely inclusion in the index with 2 trading days to go before the replacement is chosen.

The potential deletion of Suntec REIT (SUN SP) from the MSCI Singapore Free Index (SIMSCI INDEX) opens up an interesting trade. Frasers Logistics & Industrial Trust (FLT SP) has outperformed Suntec REIT since the announcement of the Jardine Strategic Holdings (JS SP) acquisition, and there could be more upside in the pair over the next few weeks.


TOPIX Upweights: Big April Basket 2021 Pre-Event Is a WIN! Now the Event-Leg!

By Janaghan Jeyakumar, CFA

The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation. For companies with “low liquidity” the FFW will be multiplied by a fixed liquidity factor (“LF”) of 0.75 to derive the final FFW used for index calculation.

In TOPIX Index Upweights: The Big April Basket 2021, I discussed how the Tokyo Stock Exchange reviews this Liquidity Factor every April and highlighted 50 names (the “Big April Basket 2021”) that could potentially have their liquidity factors removed in this April’s review.

Today after the close, the official review results were announced and 48 out of 50 names in our Big April Basket 2021 were correct translating to a hit ratio of 96%. There were 11 other names added, and two of the names we expected to see the LF lifted did not.

As of today’s close, our Big April Basket (equally-weighted) is up +3.61% against the TOPIX Index in 7 trading days (since the close of the day after the insight) and there could be more to come. 

Below is a discussion on the details of the official review results and what changes are required for our basket strategy during the event-leg which could run until the end of April. 


Before it’s here, it’s on Smartkarma