In today’s briefing:
- Toyota Industries (6201) – SURPRISE! It’s a TOYODA Takeover Proposal (Good Governance May Not Win)
- TIP Customized Taiwan Select High Div Index Rebal Preview: Methodology Change Leads to US$9bn Trade
- [Japan Activism] Pasona Group (2168 JP) – Three New Things Of Mixed Importance
- Toyota Industries (6201 JP): After a High, Comes the Low of a Takeunder
- [Japan M&A] Toyota Inds (6201) Proposed Takeover – It Looks Bad, and It’s Worse Than It Looks
- HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$8.1bn of Flows Post Capping (June 2025)
- CNI Semiconductor Chips Index Rebalance: One Change with Big Impact
- ChiNext/ChiNext 50 Index Rebalance: US$1.3bn Round-Trip Trade
- NWD (17 HK): Markets Pricing In A Bust
- Makino Milling Machine (6135 JP): MBK’s Preconditional Offer Is Not the Likely Endgame
Toyota Industries (6201) – SURPRISE! It’s a TOYODA Takeover Proposal (Good Governance May Not Win)
- On Friday after the close, media reports surfaced that Toyota Motor (7203 JP) Group chairman and founding family member had put forth a take-private proposal to Toyota Industries (6201 JP).
- The number quoted was ¥6trln market cap (most) or EV (FT), financed by personal funds, 3 megabanks, and reportedly some group companies.
- ¥6trln market cap would be +50%. ¥6trln EV +16%. Simultaneously shocking but somehow not surprising. Opportunistic, and surprisingly elegant as a family/group/cultural solution. More below.
TIP Customized Taiwan Select High Div Index Rebal Preview: Methodology Change Leads to US$9bn Trade
- The TIP Taiwan Select High Dividend ETF (00919 TW) tracks the TIP Customized Taiwan Select High Dividend Index and has an AUM of TWD 363bn (US$12.1bn).
- Following a change in methodology, there could be 16 adds and 6 deletes in June with an estimated one-way turnover of 39% and a round-trip trade of US$9bn.
- We expect the adds to outperform the deletes over the next few days, following which reversion could set in.
[Japan Activism] Pasona Group (2168 JP) – Three New Things Of Mixed Importance
- Pasona Group (2168 JP) is a “value stock.” It has loads of cash (but less than you think) and significant ongoing governance issues, but they are doing a TINY buyback.
- Several weeks ago we got an announcement which was odd. Not completely odd, just odd. Now in the past week we have market activity/announcements which make one wonder.
- This piece attempts to interpret some of the recent data/info points. One is odd. Another is odd but meaningful (but different than people think). A third is just technical.
Toyota Industries (6201 JP): After a High, Comes the Low of a Takeunder
- Toyota Industries (6201 JP) disclosed a preconditional tender offer from Toyota Fudosan at JPY16,300, a 23.3% premium to the undisturbed price but a 11.4% discount to last close.
- While representing a pre-rumour all-time high, the offer is below the midpoint of the special committee IFA DCF valuation range. The Board has a neutral recommendation.
- The offer undermines minorities as it lacks split pricing for the Toyota Motor (7203 JP) and its affiliates’ shareholding and likely undervalues the significant real estate holdings.
[Japan M&A] Toyota Inds (6201) Proposed Takeover – It Looks Bad, and It’s Worse Than It Looks
- 2wks ago I said “a deal could be announced near-term.” 2wks later we have a deal. But it is a bad deal for TICO minorities. Low price. Minimal transparency. Awful.
- But if you dig through deal structure and economics, it is worse than it looks. It takes digging to understand how bad, and they could tell you, but they won’t.
- The deal will take time. Things will be in limbo til then. And Toyota Group governance and capital allocation is conditional on this deal getting done, which is also bad.
HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$8.1bn of Flows Post Capping (June 2025)
- The June rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This leads to large flows.
- The net round-trip trade across all stocks across the four indices is estimated at HK$63.55bn (US$8.1bn). There are 12 stocks with over 2x ADV to trade from passive trackers.
- The trade size is much bigger than usual due to the inclusion of BYD in the HSTECH Index and due to a change in the FAF methodology for Secondary Listings.
CNI Semiconductor Chips Index Rebalance: One Change with Big Impact
- There is 1 change for the CNI Semiconductor Chips Index that will be implemented at the close on 13 June.
- Passive trackers are estimated to buy 2.7x ADV in Nexchip Semiconductor (688249 CH) and sell 1.5x ADV in Amlogic Shanghai (688099 CH).
- The delete has outperformed the inclusion this year. With 8 days left to implementation of the changes and decent impact, there could be a short-term reversal.
ChiNext/ChiNext 50 Index Rebalance: US$1.3bn Round-Trip Trade
- There are 8 changes for the ChiNext Index (SZ399006 INDEX EQUITY) and 5 changes for the ChiNext 50 Index at the June rebalance.
- We correctly forecast 7/8 and 8/8 for the Chinext Index adds/deletes and were 4/5 and 5/5 for the Chinext50 Index adds/deletes.
- Based on the estimated passive tracking AUM, the round-trip trade across both indices is estimated to be CNY 9.55bn (US$1.33bn).
NWD (17 HK): Markets Pricing In A Bust
- 0.052x P/B! That’s New World Development (17 HK)‘s current trailing P/B ratio; roughly a quarter of the next comparable real estate peer.
- What’s new? The latest decline followed an announcement on the 30th May that it would defer payments on its perpetual bonds.
- NWD’s 6.15% and 4.8% perpetuals fell to 23 cents and 15.5 cents on the dollar on 2nd June, suggesting the market is pricing in the possibility of a bust.
Makino Milling Machine (6135 JP): MBK’s Preconditional Offer Is Not the Likely Endgame
- Makino Milling Machine Co (6135 JP) announced a preconditional tender offer from MBK Partners at JPY11,751, a 4.8% premium to last close and a 6.8% premium to Nidec’s withdrawn JPY11,000 offer.
- The offer is broadly in line with the midpoint of the IFA DCF valuation range. The tender offer is expected to commence in early December.
- Despite the offer resulting from an auction, there remains a medium probability that Nidec Corp (6594 JP) or a spurned white knight bidder (Candidate A) emerges with a higher offer.
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