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

Familymart Tilts at Don Quijote II: The Arb Grids

Don Quijote: The Future Aldi of Japan Fomenting a Revolution in Japanese Food Retailing

FamilyMart Tender for Don Quijote - Elmer vs Mr. Partridge?

Don Quijote Holdings (7532) Long Term Growth Story

Don Quijote (7532) To Buy All of Uny - Very Positive Move.

Quiddity Advisors

Event-Driven

Pan Pacific International Holdings / Event-Driven

Pan Pacific International Holdings (7532 JP)

<p>Today, an hour before the open, <a href="https://www.smartkarma.com/entities/320" target="_blank" data-smartkarma-citation="entities:320:1">Familymart Uny Holdings (8028 JP)</a> <a href="http://www.fu-hd.com/english/ir/release/20181011e_release.pdf" target="_blank">announced</a> that it had held a board meeting and resolved to commence a Tender Offer for 20% of <a href="https://www.smartkarma.com/entities/13475" target="_blank" data-smartkarma-citation="entities:13475:1">Don Quijote Holdings (7532 JP)</a> after conditions were met. The Tender Offer would be launched at ¥6600 - a 9.09% premium to yesterday's close. The Tender Offer would, as of now, be scheduled to commence in early November 2018 and would go for 20-30 days. There is expected to be no minimum so all shares would be accepted unless more than 32,108,700 shares are tendered, in which case only 32,108,700 shares would be purchased, and they would be purchased from all holders on a pro-rata basis.</p>
<p>This deal is the logical outcome of a deal <a href="http://www.fu-hd.com/english/news_release/170824Press%20Release.pdf" target="_blank">announced</a> in August 2017 whereby Don Quijote and FamilyMart UNY entered into a "Capital and Business Alliance" and Don Quijote agreed to purchase 40% of UNY - the main "GMS Business" subsidiary of FamilyMart UNY Holdings - to Don Quijote. That deal was <a href="http://www.fu-hd.com/english/news_release/171121_release1ENhp.pdf" target="_blank">consummated</a> in November 2017.</p>
<p>The deal here for Familymart to take a 20% stake in Don Quijote is part of a <em>new</em> deal whereby Familymart UNY Holdings will sell the other 60% of UNY to Don Quijote, and will ensure Familymart's ongoing ability to profit from the "earn-out" of that transaction through ownership in Don Quijote. It is also a relatively common way in Japan for the parent/seller of a corporate asset to assure the employees of the asset being sold that it is still watching over those employees, and not leaving them to dangle in the wind. </p>
<p>This is not intended as a control transaction, and there will be no possibility of delisting. </p>
<table class="table table-striped">
<tbody>
<tr>
<td colspan="2">
<h2>Planned Tender Offer Details</h2>
</td>
</tr>
<tr>
<td><strong>Detail</strong></td>
<td><strong>Data in the Detail</strong></td>
</tr>
<tr>
<td>Tender Offer Target</td>
<td><a href="https://www.smartkarma.com/entities/13475" target="_blank" data-smartkarma-citation="entities:13475:1">Don Quijote Holdings (7532 JP)</a></td>
</tr>
<tr>
<td>MAXIMUM Don Quijote Shares FamilyMart will buy in the Tender</td>
<td>32,108,700 (planned) (20.17%)</td>
</tr>
<tr>
<td>MINIMUM Don Quijote Shares FamilyMart will buy in the Tender</td>
<td>0</td>
</tr>
<tr>
<td>Tender Offer Price</td>
<td>¥6600/share</td>
</tr>
</tbody>
</table>
<table class="table table-striped">
<tbody>
<tr>
<td colspan="2">
<h2> Tentative Schedule of Tender Offer </h2>
</td>
</tr>
<tr>
<td>
<p><strong> Event </strong></p>
</td>
<td>
<p><strong>Date</strong></p>
</td>
</tr>
<tr>
<td>
<p> Announcement Date of Deal</p>
</td>
<td>
<p>11 October 2018</p>
</td>
</tr>
<tr>
<td>
<p> Expected Start Date of Tender</p>
</td>
<td>
<p>"early November"</p>
</td>
</tr>
<tr>
<td>
<p> Closing Date </p>
</td>
<td>
<p>20-30 days later (I expect 30 days)</p>
</td>
</tr>
<tr>
<td>
<p> Payment Date </p>
</td>
<td>
<p>6-7 business days after close of tender</p>
</td>
</tr>
</tbody>
</table>
<p>There have been a number of recent insights on Smartkarma related to <a href="https://www.smartkarma.com/entities/13475" target="_blank" data-smartkarma-citation="entities:13475:1">Don Quijote Holdings (7532 JP)</a>.</p>
<table class="table table-striped">
<tbody>
<tr>
<td colspan="3">
<h2>Recent Insights on Don Quijote (7532 JP)</h2>
</td>
</tr>
<tr>
<td><strong>Date</strong></td>
<td><strong>Author</strong></td>
<td><strong>Title</strong></td>
</tr>
<tr>
<td>9 May</td>
<td><a href="https://www.smartkarma.com/companies/909" target="_blank" data-smartkarma-citation="companies:909">LightStream Research</a></td>
<td><a href="https://www.smartkarma.com/insights/tourism-and-new-stores-drive-donki-s-revenue-in-3q" target="_blank" data-smartkarma-citation="insights:20141">Tourism and New Stores Drive Donki's Revenue in 3Q</a></td>
</tr>
<tr>
<td>20 Jun</td>
<td><a href="https://www.smartkarma.com/companies/425" target="_blank" data-smartkarma-citation="companies:425">Pearl Hill Advisors</a></td>
<td><a href="https://www.smartkarma.com/insights/don-quijote-7532-remains-a-great-long-term-winner-in-japan-s-retail-space" target="_blank" data-smartkarma-citation="insights:21462">Don Quijote (7532) Remains a Great Long Term Winner in Japan's Retail Space.</a></td>
</tr>
<tr>
<td>12 Aug</td>
<td><a href="https://www.smartkarma.com/companies/146" target="_blank" data-smartkarma-citation="companies:146">Morningstar</a></td>
<td><a href="https://www.smartkarma.com/reports/donki-meeting-guidance-as-expected-20-more-joint-brand-stores-with-uny-on-the-way" target="_blank">Donki Meeting Guidance As Expected; 20 More Joint UNY Stores Coming</a></td>
</tr>
<tr>
<td>14 Aug</td>
<td><a href="https://www.smartkarma.com/companies/909" target="_blank" data-smartkarma-citation="companies:909">LightStream Research</a></td>
<td><a href="https://www.smartkarma.com/insights/don-quijote-uny-partnership-and-growing-inbound-sales-support-donki-s-trillion-yen-sales-forecast" target="_blank" data-smartkarma-citation="insights:23043">Don Quijote: Uny Partnership, Growing Inbound Support Donki's ¥1t F/cast</a></td>
</tr>
<tr>
<td>19 Sep </td>
<td><a href="https://www.smartkarma.com/profiles/2415" target="_blank" data-smartkarma-citation="accounts:2415">Michael Causton</a></td>
<td><a href="https://www.smartkarma.com/insights/donki-s-magic-touch" target="_blank" data-smartkarma-citation="insights:24212">Donki’s Magic Touch</a></td>
</tr>
<tr>
<td>9 Oct</td>
<td><a href="https://www.smartkarma.com/companies/425" target="_blank" data-smartkarma-citation="companies:425">Pearl Hill Advisors</a></td>
<td><a href="https://www.smartkarma.com/insights/don-quijote-holdings-7532-long-term-growth-story" target="_blank" data-smartkarma-citation="insights:24866">Don Quijote Holdings (7532) Long Term Growth Story</a></td>
</tr>
<tr>
<td>10 Oct</td>
<td><a href="https://www.smartkarma.com/companies/425" target="_blank" data-smartkarma-citation="companies:425">Pearl Hill Advisors</a></td>
<td><a href="https://www.smartkarma.com/insights/don-quijote-7532-to-buy-all-of-uny-very-positive-move" target="_blank" data-smartkarma-citation="insights:24923">Don Quijote (7532) To Buy All of Uny - Very Positive Move.</a></td>
</tr>
</tbody>
</table>
<p>More discussion below, and Arb Grids presented in a separate insight.</p>

Today, an hour before the open, Familymart Uny Holdings (8028 JP) announced that it had held a board meeting and resolved to commence a Tender Offer for 20% of Don Quijote Holdings (7532 JP) after conditions were met. The Tender Offer would be launched at ¥6600 - a 9.09% premium to yesterday's close. The Tender Offer would, as of now, be scheduled to commence in early November 2018 and would go for 20-30 days. There is expected to be no minimum so all shares would be accepted unless more than 32,108,700 shares are tendered, in which case only 32,108,700 shares would be purchased, and they would be purchased from all holders on a pro-rata basis.
This deal is the logical outcome of a deal announced in August 2017 whereby Don Quijote and FamilyMart UNY entered into a "Capital and Business Alliance" and Don Quijote agreed to purchase 40% of UNY - the main "GMS Business" subsidiary of FamilyMart UNY Holdings - to Don Quijote. That deal was consummated in November 2017.
The deal here for Familymart to take a 20% stake in Don Quijote is part of a new deal whereby Familymart UNY Holdings will sell the other 60% of UNY to Don Quijote, and will ensure Familymart's ongoing ability to profit from the "earn-out" of that transaction through ownership in Don Quijote. It is also a relatively common way in Japan for the parent/seller of a corporate asset to assure the employees of the asset being sold that it is still watching over those employees, and not leaving them to dangle in the wind. 
This is not intended as a control transaction, and there will be no possibility of delisting. 




Planned Tender Offer Details



Detail
Data in the Detail


Tender Offer Target
Don Quijote Holdings (7532 JP)


MAXIMUM Don Quijote Shares FamilyMart will buy in the Tender
32,108,700 (planned) (20.17%)


MINIMUM Don Quijote Shares FamilyMart will buy in the Tender
0


Tender Offer Price
¥6600/share







 Tentative Schedule of Tender Offer 




 Event 


Date




 Announcement Date of Deal


11 October 2018




 Expected Start Date of Tender


"early November"




 Closing Date 


20-30 days later (I expect 30 days)




 Payment Date 


6-7 business days after close of tender




There have been a number of recent insights on Smartkarma related to Don Quijote Holdings (7532 JP).




Recent Insights on Don Quijote (7532 JP)



Date
Author
Title


9 May
LightStream Research
Tourism and New Stores Drive Donki's Revenue in 3Q


20 Jun
Pearl Hill Advisors
Don Quijote (7532) Remains a Great Long Term Winner in Japan's Retail Space.


12 Aug
Morningstar
Donki Meeting Guidance As Expected; 20 More Joint UNY Stores Coming


14 Aug
LightStream Research
Don Quijote: Uny Partnership, Growing Inbound Support Donki's ¥1t F/cast


19 Sep 
Michael Causton
Donki’s Magic Touch


9 Oct
Pearl Hill Advisors
Don Quijote Holdings (7532) Long Term Growth Story


10 Oct
Pearl Hill Advisors
Don Quijote (7532) To Buy All of Uny - Very Positive Move.



More discussion below, and Arb Grids presented in a separate insight.

ファミリーマート、ドン・キホーテに挑む I : Squeezitudinosity