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

Shoko (8090 JP) Tender Offer - Showa Denko Sells Too Cheap. Looks Bumpity.

Quiddity Advisors

Event-Driven

Functional chemicals trading house <a href="https://www.smartkarma.com/entities/shoko-co-ltd" target="_blank" data-smartkarma-citation="entities:1167:1" rel="noopener">Shoko Co Ltd (8090 JP)</a> parent <a href="https://www.smartkarma.com/entities/showa-denko-k-k" target="_blank" data-smartkarma-citation="entities:1496:1" rel="noopener">Showa Denko K.K. (4004 JP)</a> announced earlier this month that it was going to support a Tender Offer whereby a third party would launch a tender offer with the aim to buy 85% of the subsidiary.
Showa Denko would retain 15%.
The price came in below the average of the high and the low of the DCF range. The deal is at an EV of 3.3x the 5-year average EBITDA. That masks the fact that the company runs about 4.0x average EBITDA in net receivables (2.5x) and securities holdings (1.5x - not included as assets in the DCF).
Procedural adherence to the METI Fair M&amp;A Guidelines? Minimal at best. 
There is a shareholder agreement in place between the two future shareholders and the deal was that the new buyer would agree to keep all employees on for 3 years. 
For that, Showa Denko is supporting the sale of minorities' shareholdings to the new buyer at a substantial discount to book value. 
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The market so far has not appreciated this and the shares are only in the last couple of days trading down to the Tender Offer level. 
The yuho came out today, which gives us more insight into the shareholder structure as of just before the launch of the Tender Offer. 
More discussion below.

Functional chemicals trading house Shoko Co Ltd (8090 JP) parent Showa Denko K.K. (4004 JP) announced earlier this month that it was going to support a Tender Offer whereby a third party would launch a tender offer with the aim to buy 85% of the subsidiary.
Showa Denko would retain 15%.
The price came in below the average of the high and the low of the DCF range. The deal is at an EV of 3.3x the 5-year average EBITDA. That masks the fact that the company runs about 4.0x average EBITDA in net receivables (2.5x) and securities holdings (1.5x - not included as assets in the DCF).
Procedural adherence to the METI Fair M&amp;A Guidelines? Minimal at best. 
There is a shareholder agreement in place between the two future shareholders and the deal was that the new buyer would agree to keep all employees on for 3 years. 
For that, Showa Denko is supporting the sale of minorities' shareholdings to the new buyer at a substantial discount to book value. 




The market so far has not appreciated this and the shares are only in the last couple of days trading down to the Tender Offer level. 
The yuho came out today, which gives us more insight into the shareholder structure as of just before the launch of the Tender Offer. 
More discussion below.

Shoko (8090 JP) TOB:  Still Looks Bumpity