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

Quiddity Advisors

Event-Driven

Yesterday, 30 October, <a href="https://www.smartkarma.com/entities/12434" target="_blank" data-smartkarma-citation="entities:12434:1">Dentsu Inc (4324 JP)</a> announced a Partial Tender Offer for shares in internet advertising agency <a href="https://www.smartkarma.com/entities/11681" target="_blank" data-smartkarma-citation="entities:11681:1">Septeni Holdings (4293 JP)</a> along with a potential subscription to buy treasury shares held by Septeni, and shares in a Third Party Allotment. The two companies signed a Capital and Business Alliance Agreement on the same day. Details of the Tender Offer and the Capital and Business Alliance Agreement are linked <a href="http://www.dentsu.com/news/release/pdf-cms/2018110-1030en.pdf" target="_blank">here</a>.
Dentsu will buy 26,895,000 shares of Septeni (20.99%) in a Tender Offer. IF Dentsu does not get to 20.99% in the partial tender, Dentsu buy shares in a third party allotment so the post-transaction result is that they own 20.99%. Dentsu has agreed not to go over that number. All shares purchased from the company in a third party allotment (or sale of Treasury Shares) would take place at the same price as the price of the Tender Offer, ¥260/share.
This is a slightly unusual transaction, but it has been seen before (Nippon Steel for Nisshin Steel, etc). It is NOT like the deal <a href="https://www.smartkarma.com/entities/3122" target="_blank" data-smartkarma-citation="entities:3122:1">Adeka Corp (4401 JP)</a> recently did to acquire a large stake in <a href="https://www.smartkarma.com/entities/17345" target="_blank" data-smartkarma-citation="entities:17345:1">Nihon Nohyaku (4997 JP)</a> - a smaller tender offer definitely followed by a capital injection. 
That is a decent offer in many people's minds. In some ways it is a remarkable offer. Net Cash per share prior to this event was ¥118.2/share and Equity outside the Net Cash holdings was ¥6.8/share as of 30 Sep 2018 (lower in each case if counting the dilution included in the Board Incentive Plan). Dentsu is purchasing the non-cash equity for exactly 20x book.
This is effectively an acquihire with a longer-term earnout (because presumably management's exit is an eventual takeout). Investors are invited to play along but I expect this is a good sell at the TOB price. It may, however, be a good buy to own the back end on a residual fair value basis if it trades too wide.

Yesterday, 30 October, Dentsu Inc (4324 JP) announced a Partial Tender Offer for shares in internet advertising agency Septeni Holdings (4293 JP) along with a potential subscription to buy treasury shares held by Septeni, and shares in a Third Party Allotment. The two companies signed a Capital and Business Alliance Agreement on the same day. Details of the Tender Offer and the Capital and Business Alliance Agreement are linked here.
Dentsu will buy 26,895,000 shares of Septeni (20.99%) in a Tender Offer. IF Dentsu does not get to 20.99% in the partial tender, Dentsu buy shares in a third party allotment so the post-transaction result is that they own 20.99%. Dentsu has agreed not to go over that number. All shares purchased from the company in a third party allotment (or sale of Treasury Shares) would take place at the same price as the price of the Tender Offer, ¥260/share.
This is a slightly unusual transaction, but it has been seen before (Nippon Steel for Nisshin Steel, etc). It is NOT like the deal Adeka Corp (4401 JP) recently did to acquire a large stake in Nihon Nohyaku (4997 JP) - a smaller tender offer definitely followed by a capital injection. 
That is a decent offer in many people's minds. In some ways it is a remarkable offer. Net Cash per share prior to this event was ¥118.2/share and Equity outside the Net Cash holdings was ¥6.8/share as of 30 Sep 2018 (lower in each case if counting the dilution included in the Board Incentive Plan). Dentsu is purchasing the non-cash equity for exactly 20x book.
This is effectively an acquihire with a longer-term earnout (because presumably management's exit is an eventual takeout). Investors are invited to play along but I expect this is a good sell at the TOB price. It may, however, be a good buy to own the back end on a residual fair value basis if it trades too wide.

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