Author Topic: 6791.JP - Nippon Columbia  (Read 3776 times)

writser

  • Hero Member
  • *****
  • Posts: 1900
6791.JP - Nippon Columbia
« on: May 02, 2017, 10:38:04 AM »
Faith Inc (4295.JP, 11.7b yen mcap)  is offering to take over Nippon Columbia (6791.JP, 9.3b yen mcap). Faith already owns ~51% of the target and is offering 0.59 shares of its own stock for every share of Nippon Columbia. Both are media companies. No special insights in synergies.

The deal structure makes absolutely no sense. Faith is trading at 0.7x book and has a huge amount of excess cash on the balance sheet (enough to buy out all minory investors in Nippon Columbia). They are giving away their shares cheaply while hoarding cash at the same time. A cash deal would make more sense both for the acquirer and the target and an American activist with 5%+ stakes in both companies is pushing for this. Now, I'd usually be pessimistic about the chances of activists succeeding in Japan but it seems like winds are changing a little bit under Abe. Just a few weeks ago activists succeeded in convincing Panasonic to up their bid for PanaHome (of which they were already a majority owner) from a stock bid to a significantly higher cash bid (I wrote a little bit about it here). A very similar situation.

An interesting tidbit of information is that the CEO of Microsoft Japan is a board member both at PanaSonic and Faith Inc. So presumably he already agreed with an improved bid in a very similar situation just a few weeks ago.

And the best thing: the current spread is ~1% and the deal is scheduled to complete in August so this is a free option. Faith Inc also seems like a value stock itself so I don't mind having exposure to it for a few months. If you are neutral about Faith Inc and handicap a 20% chance of a 20% higher bid your expected IRR is already > 20%. I bought some shares. Curious if anybody has some insights.
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.


Paarslaars

  • Full Member
  • ***
  • Posts: 119
Re: 6791.JP - Nippon Columbia
« Reply #1 on: May 02, 2017, 11:43:12 AM »
So basically they make an even trade based on share price but if they consider their own stock worth at least book value, this implies that they value Nippon at least 43% higher. Should provide some security in case the deal falls through.

I'll take a bite out of it if I can get Degiro to add it. :)

writser

  • Hero Member
  • *****
  • Posts: 1900
Re: 6791.JP - Nippon Columbia
« Reply #2 on: June 02, 2017, 01:44:14 AM »
RMB Capital Proposed Friendly Tender Offer to Nippon Columbia at 790 JPY. They're probably not going to succeed but are upping the pressure. Nippon Columbia up ~10% since opening this topic. We'll see how this works out.
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.

writser

  • Hero Member
  • *****
  • Posts: 1900
Re: 6791.JP - Nippon Columbia
« Reply #3 on: June 08, 2017, 02:38:34 AM »
No reply from Faith Inc yet - not at all sure they will improve their offer. Yesterday Nippon Columbia closed at a slight premium to the original deal consideration. Also, Faith inc is up significantly since opening this topic. Given these factors I took the opportunity to sell half my position for an ~11% gain in a month. I probably should have sold more aggressively when the friendly tender offer was proposed. The day after it was still possible to sell around JPY 775 as opposed to JPY 750 today. But I was too greedy and my offers never got executed.

« Last Edit: June 08, 2017, 02:54:53 AM by writser »
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.

JayGatsby

  • Hero Member
  • *****
  • Posts: 638
Re: 6791.JP - Nippon Columbia
« Reply #4 on: June 11, 2017, 07:08:13 PM »
Small position for me but sold a bit as well. Thanks for pointing this one out.

ccplz

  • Sr. Member
  • ****
  • Posts: 253
Re: 6791.JP - Nippon Columbia
« Reply #5 on: June 12, 2017, 03:01:51 AM »
Interesting. Do you look at Asia a lot Writser?

writser

  • Hero Member
  • *****
  • Posts: 1900
Re: 6791.JP - Nippon Columbia
« Reply #6 on: June 12, 2017, 06:01:50 AM »
Not in particular but if possible I'd like to be diversified around the globe a bit and there are a lot of extremely cheap stocks in Japan. In some cases, especially small caps, cheap enough to more than compensate for mediocre management. That's the way I see it at least. Same for Hong Kong and Singapore. Packer posted some very interested Korean ideas as well but that market is hard to access for me personally.
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.

JayGatsby

  • Hero Member
  • *****
  • Posts: 638
Re: 6791.JP - Nippon Columbia
« Reply #7 on: July 31, 2017, 10:38:51 AM »
Looks like this went through. Tiny position for me, but will probably hold onto Faith for a bit. Seems super cheap and they repurchased shares last year so maybe they'll do it again... need to do some more research on it.

Here's their English financials: http://www.faith-inc.com/ir/pdf/FY2016_Full_Tanshin_Overview_E.pdf