Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

City Index Eleventh OFFICIALLY Launches Next Japan Asia Group (3751) Hostile Tender Offer

Japan Asia Group (3751) : Defense Against Hostile TOB Is Bad News

Murakami-San Launches New JAG (3751) Tender Offer

Quiddity Advisors

Event-Driven

The long and sordid history of MBO attempts on <a href="https://www.smartkarma.com/entities/japan-asia-group-ltd" target="_blank" data-smartkarma-citation="entities:12428:1" rel="noopener">Japan Asia (3751 JP)</a> is... long and sordid.First, the board recommended a deal whereby the personally indebted chairman would take over the company with the help of a PE Fund at ¥600/share, the PE Fund would buy the two large capital assets in JAG's possession at a price well above that price, and would sell the residual to Tetsuo YAMASHITA at a price which left him owning basically the whole company which would be the residual money-losing assets plus an enormous pile of cash, plus large income-earning stakes in the assets just sold. The board thought that appropriate. Noted activist Yoshiaki MURAKAMI disagreed. He bought nearly 20% of the company in the market, then offered to buy the company 40% higher than the proposed MBO. The board thought that was unreasonable. So the Chairman decided to up his bid by 100% to ¥1,200/share.He did this by a) spending a bit more money, b) taking on a bit more debt, c) NOT receiving more than the MBO market cap in cash and income securities post-MBO.The Board thought that reasonable. MURAKAMI-san bid about 1% more. The Board thought that unreasonable. They accused him of being willing to sell the main assets (which was the stated plan of the chairman's bid) and thought that the only way that MURAKAMI-san could make money at ¥1,210/share was by stripping the assets out and paying himself a giant dividend, then squeezing the rest. Somehow the ¥10/share really was problematic. The Board decided to create a post-facto poison pill, and a ¥300/share special dividend, hoping to make Murakami-san go away. He waited until the Court stopped the poison pill, then bid ¥910 (the same ¥1,210/share less ¥300 dividend). He extended. <h3>Newer News</h3>On Friday 11 June, the company issued a <a href="https://www.japanasiagroup.jp/wordpress/wp-content/uploads/2021-6-11.pdf" target="_blank" rel="noopener">press release</a> on "progress" of the sales process of the units.  The indicative sale price of the two units is ¥58.5bn. The sale of the assets appears to need to be approved by a Special Resolution of an EGM.The document is long, and includes much detail about ongoing negotiations for the possible aftermath of a Tender Offer by City Index Eleventh. It included efforts by the company to get CIE's implicit approval for the asset sale, and by CIE to make the sale more convenient for tax purposes, and there is a construct proposed whereby the company would conduct a Tender Offer share buyback for its own shares in a region of ¥950-980/share, or up to ¥1,050 if banks are accommodating.On that news, the shares popped on Monday 14 June.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/213/211/original/Screenshot+2021-06-15+at+8.22.09+PM.png?1623760171" class="editor-image img-responsive" data-smartkarma-image-id="213211"></figure></section><h3>Even Newer News</h3>And now today, MURAKAMI-san's bid vehicle City Index Eleventh extended yet again, and <a href="https://www.japanasiagroup.jp/wordpress/wp-content/uploads/2021-6-15.pdf" target="_blank" rel="noopener">raised the bid to ¥960/share</a>. Investors should be VERY aware of the implications of what is in the June 11 press release. They are not telling it to you outright, but this deal is being wrapped up.And not in a way which is as rosy as it looks on paper.

The long and sordid history of MBO attempts on Japan Asia (3751 JP) is... long and sordid.First, the board recommended a deal whereby the personally indebted chairman would take over the company with the help of a PE Fund at ¥600/share, the PE Fund would buy the two large capital assets in JAG's possession at a price well above that price, and would sell the residual to Tetsuo YAMASHITA at a price which left him owning basically the whole company which would be the residual money-losing assets plus an enormous pile of cash, plus large income-earning stakes in the assets just sold. The board thought that appropriate. Noted activist Yoshiaki MURAKAMI disagreed. He bought nearly 20% of the company in the market, then offered to buy the company 40% higher than the proposed MBO. The board thought that was unreasonable. So the Chairman decided to up his bid by 100% to ¥1,200/share.He did this by a) spending a bit more money, b) taking on a bit more debt, c) NOT receiving more than the MBO market cap in cash and income securities post-MBO.The Board thought that reasonable. MURAKAMI-san bid about 1% more. The Board thought that unreasonable. They accused him of being willing to sell the main assets (which was the stated plan of the chairman's bid) and thought that the only way that MURAKAMI-san could make money at ¥1,210/share was by stripping the assets out and paying himself a giant dividend, then squeezing the rest. Somehow the ¥10/share really was problematic. The Board decided to create a post-facto poison pill, and a ¥300/share special dividend, hoping to make Murakami-san go away. He waited until the Court stopped the poison pill, then bid ¥910 (the same ¥1,210/share less ¥300 dividend). He extended. Newer NewsOn Friday 11 June, the company issued a press release on "progress" of the sales process of the units.  The indicative sale price of the two units is ¥58.5bn. The sale of the assets appears to need to be approved by a Special Resolution of an EGM.The document is long, and includes much detail about ongoing negotiations for the possible aftermath of a Tender Offer by City Index Eleventh. It included efforts by the company to get CIE's implicit approval for the asset sale, and by CIE to make the sale more convenient for tax purposes, and there is a construct proposed whereby the company would conduct a Tender Offer share buyback for its own shares in a region of ¥950-980/share, or up to ¥1,050 if banks are accommodating.On that news, the shares popped on Monday 14 June.Even Newer NewsAnd now today, MURAKAMI-san's bid vehicle City Index Eleventh extended yet again, and raised the bid to ¥960/share. Investors should be VERY aware of the implications of what is in the June 11 press release. They are not telling it to you outright, but this deal is being wrapped up.And not in a way which is as rosy as it looks on paper.

CIE Boosts Its Japan Asia Group (3751) TOB Price - Hidden Implications