Japan is an unattractive equity market for global investors. Its companies are accused of being too conservative with poor corporate governance and low shareholder returns. It is interesting to analyze what happened this week with the takeover bid for Kanematsu Electronics $8096
Kanematsu Corp. ($8020) has just launched a takeover bid for Kanematsu Electronics ($8096). It has always been its controlling shareholder (before the takeover bid, it held 57.84% of Kanematsu electronics. it is worth analyzing the negotiations between the 2 boards of directors
The Company received a proposal from the Tender Offeror (....) toward the implementation of the Transaction on September 28, 2022. On October 3, the Company submitted a letter of consent to begin consideration and discussions toward the Transaction.
The Company Group and the Tender Offeror Group elected Mori Hamada & Matsumoto Law Office as an independent legal advisor, and Daiwa Securities Co.
The bidder elected Mitshubishi UFJ Morgan Stanley.
The bidder elected Mitshubishi UFJ Morgan Stanley.
In order to ensure the fairness of the Transaction, the Company, based on the advice of Mori Hamada & Matsumoto Law Office, they established an Independent Special Committee at the Company consisting of independent outside directors of the Company. $8096 $8020 #JapanDeepValue
Mr. Koji Fujimoto (independent outside director who is an audit & supervisory committee member of the Company), Mr. Tomoyuki Suzuki (independent outside director of the Co.), & Mr. Miho Kuribayashi (auditor of the Co.) are focused to Ensure the Fairness of the Tender Offer
on October 28, 2022, Shibata acted as an independent legal advisor. ·We have decided to appoint Plutus Consulting Co., Ltd. (hereinafter referred to as “Plutus Consulting”) as an independent financial advisor and third-party calculation agency for Suzuki & Nakata Law Office.
In addition, the Company will take measures to ensure the fairness of the Tender Offer and to avoid conflicts of interest. A system for examining, negotiating and making judgments regarding the Transaction has been approved by the Special Committee.
Based on discussions with the Company, the Tender Offeror reconsidered the significance & purpose of the Transaction and changed the details. On December 27, 2022, the Company received an initial proposal from the Tender Offeror to set the Tender Offer Price at 5,400 yen x share.
On January 28, 2023, the Company requested the Tender Offeror to reconsider the Tender Offer Price. We have received a re-proposal from the purchaser to set the Tender Offer Price at 5,700 yen per share. on January 16, 2023, the Company received another proposal......
from the Tender Offeror to set the Tender Offer Price at 5,800 yen per share. In the stock value calculation, the price is extremely close to the lower limit of the range calculated by the DCF method.
We requested an increase in the tender offer price. On the 23rd of the same month, the Company received another proposal from the Tender Offeror to set the Tender Offer Price at 6,000 yen per share.
As a result, on January 25, 2023, the Company received a proposal to set the Tender Offer Price at 6,200 yen per share. The Company responded that it would accept the offer, and reached an agreement with the Tender Offeror
As a fund manager, In Japan Deep Value Fund and Koala Capital Sicav, we bought Kanematsu Electronics shares in summer 2016. 
Japanese companies are accused of low shareholder return when the Topix index average dividend yield is 2,6%. In addition, the buybacks in Japan are higher than those of the Korean stock market or even the European one, if we only include buybacks for shareholders (not managers).
Only in the US stock market, companies share repurchases were a record, although more and more, a large part of the compensation goes to managers instead of shareholders. Just the opposite of Japan.
The final offer (6.200 JPY) has supposed a 32% premium over its all time highs price.
Despite multiplying its price by 3 in just over 6 years, the current valuation is 14 times EV/Free cash Flow & 8 EV/Ebitda, higher than its listed peers, but lower than its peers in Europe & US
Despite multiplying its price by 3 in just over 6 years, the current valuation is 14 times EV/Free cash Flow & 8 EV/Ebitda, higher than its listed peers, but lower than its peers in Europe & US
As GMO Asset management published in his march-21 report, Japan is "An Island of Potential in a Sea of Expensive Assets".
In our opinion, Is undoubtedly the paradise of value investors for the next decade. #Value #JapanDeepvalue
In our opinion, Is undoubtedly the paradise of value investors for the next decade. #Value #JapanDeepvalue
In 2016 we had a similar case in our portfolio, Obayashi group acquired Obayashi Road with a premium of 40% but with a ridiculous valuation that did not defend its shareholders. It seems that things are changing in the Japanese stock market.
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