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. [Japan M&A] EQT Launches TOB on Kakaku.Com (2371) But This Isn’t A Done Deal
- Just under 3 weeks ago, Reuters carried an article saying EQT was considering making a bid for Kakaku.com Inc (2371 JP). The stock popped, then drifted higher.
- Today, that bid was launched. Kakaku.com agreed, supports, and recommends at ¥3,000 which is about 10x Adjusted EV/EBITDA for March 2028. Not super rich with such high growth.
- Digital Garage+KDDI own 38% between them. Oasis owns 19%. There are fiduciary out clauses and the docs note that Bain+LY Corp brought in a last minute bid. This isn’t done.
2. Kakaku.com (2371 JP): Pass the Popcorn as EQT Launches a Tender Offer
- Kakaku.com Inc (2371 JP) has recommended a tender offer from EQT (EQT SS) at JPY3,000, a 2.6% premium to the last close and a 41.4% premium to the undisturbed price of JPY2,121.
- At first glance, the offer is attractive compared to historical trading ranges and IFA peer multiples, and it is above the midpoint of the IFA DCF valuation range.
- The conspicuous lack of Oasis’s support, the absence of an auction despite a Bain/LY bid, reliance on passives’ vote and irrevocables with competing offer clauses suggest a bump is probable.
3. [Japan M&A] Nisshin Shoji “MBO” Is An Exercise in Offensively Bad Board Negligence
- Today post-close, Nissin Shoji (7490 JP) – gasoline retailer and energy company affiliated with ENEOS Holdings (5020 JP) – announced the Tsutsui family would conduct an MBO at ¥2,210.
- That’s a 60% premium, which looks nice, but book value is 185% higher than today’s close. Most of the Adjusted EV is receivables and inventory.
- The remaining assets are about ¥10-14bn worth of market value of real estate. All told, this is probably worth ¥3,500+ to the right person.
4. [Japan M&A] Medipal (7459) Takes Out OTC Drugs Wholesaler Sub PALTAC (8283) At ATH – Not Bad
- Today after the close, Medipal Holdings (7459 JP) announced it would take out minorities in its Paltac Corporation (8283 JP) subsidiary which wholesales OTC drugs, personal care, etc.
- Paltac is a high-turnover low margin product jockey. Medipal is the parent with too much cash. This works. And it gets minorities out of low-beta “quality” at a 43% premium.
- This looks like it gets done. ¥100bn+ of Max Real World Float for arbs to buy.
5. Paltac (8283 JP): MediPal (7459 JP)’s Attractive Tender Offer
- Paltac Corporation (8283 JP) has recommended a tender offer from Medipal Holdings (7459 JP) at JPY6,650, a 43.2% premium to the last close.
- The offer is attractive as it represents an all-time high and is above the midpoint of the special committee and target IFA’s DCF valuation range.
- The required tendering rate is achievable due to an attractive offer. This is a done deal. The first closing date is 7 July, with payment commencing 14 July.
6. Kakaku.com (2371 JP): How High Can It Go as Bain/LY Ups the Ante?
- On 13 May, Bain/LY (4689 JP) sent Kakaku.com Inc (2371 JP) a revised non-binding offer at JPY3,232, a 7.7% premium to EQT’s JPY3,000 offer but 4.9% below the last close.
- While remaining non-binding, the Board will be forced to engage under its fiduciary-out clause and Digital Garage (4819 JP) and KDDI Corp (9433 JP)’s competing-offer clauses.
- Bain/LY’s second offer, belatedly and publicly, sets in motion an auction process. My analysis suggests that a competing bidding war could result in an offer of at least JPY3,500.
7. Baoye (2355 HK): Unusual Activism Which Could Be a Template for Dealing with Cash Hoards
- On 8 May, Baoye Group (2355 HK) received a resolution for a special dividend of HK$5.50, which was proposed by a shareholder (representing 1.02% of the outstanding shares).
- The special dividend represents a 40.7% premium to the undisturbed price. The management opposes the resolution and has the votes to block the resolution at the 18 June AGM.
- The proposal shines a light on the Board’s poor capital allocation of the HK$12.58 net cash. Near-term, it also increases the odds of a privatisation proposal from the Chairman.
8. Scenario Development for the Samsung Union Situation
- OPI capped at 50 percent, DS only pool up to 12 percent of operating profit, conditional on top rank in revenue and EBIT, non guaranteed funding pool structure.
- Even if injunction fails, government likely triggers emergency arbitration to block strike. Samsung rejects fixed OP based bonus; focuses on time buying and maintaining flexible cyclical compensation structure.
- Expect drawn out process with incremental engagement, union fragmentation pressure, and no clean positive catalyst for stock. Overhang remains sticky. Base case is 21st strike avoided, supporting downside.
9. Merger Arb Mondays (11 May) – Altas, European Lithium, Atlantic Lithium, Vault, Emmerson, Shengmu
- I summarise the latest spreads and newsflow for the merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, the Philippines, Thailand, and Chinese ADRs.
- Highest spreads: Skyworth (751 HK), Qoria (QOR AU), European Lithium (EUR AU), ENN Energy (2688 HK), Changhong Jiahua (3991 HK), Humm Group (HUM AU), oOh!Media Ltd (OML AU).
- Lowest spreads: Australian Strategic Materials (ASM AU), Taiyo Holdings (4626 JP), Sankei Real Estate (2972 JP), Toho Titanium (5727 JP), E’grand Co Ltd (3294 JP), Global Ltd/The (3271 JP).
10. Digital Garage (4819 JP) Is Cheap As LY & EQT Jostle For Kakaku (2371 JP)’s Control
- On the 12th May, Kakaku.com Inc (2371 JP) recommended EQT’s Offer at ¥3,000/share. The docs flagged Bain+ LY (4689 JP) had also brought in a last minute bid
- On the 14th May (today), LY announced it had submitted an initial bid at ¥3,232/share, contingent on due diligence being granted and passed.
- Kakaku is potentially worth ~¥ 3,700/share, and is currently trading at ~¥ 3,400. Still some gas in the tank. Separately, I’d also run a ruler over Digital Garage (4819 JP).
