Event-Driven and Index Rebalance

Weekly Top Ten Event-Driven and Index Rebalance – Mar 31, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. Mar24 Nikkei 225 Rebal: Zozo (3092) And Other ADDs Update

By Travis Lundy, Quiddity Advisors

  • ZOZO Inc (3092 JP) is +10% since the close after the Nikkei 225 inclusion announcement vs Nikkei225 +2%. Fellow upweight Nitori is up too. Disco and Socionext are up less.
  • All three inclusions and one upweight see considerable inclusion demand when compared to active holdings. Some more than others. 
  • Some trades here are more interesting than others, still. Cumulative excess volumes are one guide. Fundamentals, and flow dynamics are another.

2. KDDI Launches Tender To Buy Out Lawson (2651) – Still Far Too Cheap

By Travis Lundy, Quiddity Advisors

  • KDDI has announced the launch tomorrow of its Tender Offer to buy out the minorities in Lawson Inc (2651 JP)
  • It’s still too cheap. It is still a somewhat non-transparent and unfair process as far as I can tell. And it does not adhere to the METI Fair M&A Guidelines. 
  • There SHOULD BE some activist interest to get KDDI to bump but it is not clear that will show up. 

3. Samsonite (1910 HK): Dual-Listing Musings

By David Blennerhassett, Quiddity Advisors

  • It seems like every week, Bloomberg reports a HK-listed company weighing privatisation options. HKBN (1310 HK), ESR (1821 HK), and Samsonite (1910 HK) have all been rumoured of late.
  • Last Friday, Samsonite announced it was focused on pursuing the listing of its shares on a second exchange.
  • No preferred exchange was mentioned. Nor whether the goal is to secure a dual primary listing, or a secondary listing. A buyout, for now, appears to be on the backburner.

4. Roland DG (6789 JP): Taiyo Hoping for the Best as Brother Plays the Waiting Game

By Arun George, Global Equity Research Ltd

  • In response to Roland DG Corp (6789 JP) request, on 22 March, Taiyo said it was considering a revised offer. However, Taiyo has since remained silent. 
  • Despite discussions with Brother Industries (6448 JP), the Board have not been able to eliminate dis-synergies concerns. The Board has left the decision to accept the Taiyo offer to shareholders.
  • While the Board is trying to dissuade Brother, Brother will take its offer directly to shareholders if the Taiyo offer fails. Taiyo’s behaviour suggests a reluctance to bump. 

5. Quiddity Leaderboard TDIV Jun 24: 5 Changes; US$1.2bn One-Way

By Janaghan Jeyakumar, CFA, Quiddity Advisors

  • In this insight, we take look at Quiddity’s expectations for index changes and capping flows for the TDIV Index for the June 2024 index rebal event.
  • I currently see 5 ADDs and 5 DELs but there are several names close to the border and expectations could change before the base date as prices move around.
  • The estimate for one-way flow in June 2024 is US$1.22bn.

6. MMA Offshore: A$2.60/Share Cash Offer From Seraya Partners

By David Blennerhassett, Quiddity Advisors

  • Marine and subsea services provider MMA Offshore (MRM AU) has entered into a Scheme with Singapore’s Cyan Renewables. 
  • Cyan, wholly-owned by Seraya Partners, is offering A$2.60/share in cash, a 11% premium to last close and a 31% premium to the 90-day VWAP. 
  • MMA shareholder approval and FIRB are the key conditions. This Offer will tentatively complete mid-late July. 

7. Koito Mfg (7276) – New Medium Term Plan, BIG Buyback, Even Bigger Shareholder Returns Planned

By Travis Lundy, Quiddity Advisors

  • Koito Manufacturing (7276 JP) is a $4bn marketcap (~$6bn sales) Toyota Group auto parts manufacturer specialising in lighting parts, famous for being a T.Boone Pickens target in the 1980s.
  • As Toyota Group’s leaders restructure their cross-holdings and try to get to 1.0x PBR and a high enough ROE to sustain it, capital efficiency is on the block. 
  • Koito today announced a revised Mid-Term Management Plan, a change in KPIs (higher), a large shareholder return plan, and a large buyback. As always, the fun is in the details.

8. Alteogen: Block Deal Sale of About 3% of Shares

By Douglas Kim

  • On 27 March, Alteogen announced that Jeong Hye-shin, former Alteogen Chief Strategy Officer (CSO), sold 1.6 million shares of Alteogen stock in after-hours trading in block deal sale. 
  • The block deal sale price was 197,770 won. Alteogen’s share price declined by 10.9% today to 195,600 won. Block deal sale amount was about 316 billion won. 
  • This block deal sale combined with the sharp recent, share price increase are likely to result in a near-term consolidation of its share price in the next several months.

9. Merger Arb Mondays (25 Mar) – APM, Genex, C&F Logistics, Roland DG, IntelliCentrics, China TCM

By Arun George, Global Equity Research Ltd

10. SillaJen Rights Offering Worth 34% of Outstanding Shares

By Douglas Kim

  • On 22 March, SillaJen Inc (215600 KS) announced that it will conduct a rights offering worth about 129 billion won for R&D and financials improvement.  
  • The rights offering size is 34.5 million shares, representing 34% of total outstanding shares. The expected rights offering price is 3,750 won which is 26% lower than current price. 
  • We would not subscribe to this rights offering and we remain negative on the company.