Carrots and sticks redux

We recently participated in a panel discussing corporate reform focusing on Japan and South Korea. As evidenced by the strong turn-out, interest in this topic is very high. In general, the panel was optimistic on the prospect of Korea corporate reform eventually replicating the success of Japan. While the Korean market naturally has its own long-standing and wellknown structural challenges – deriving mainly from the dominance of founding families – the significant rise in retail ownership in recent years should continue to incentivise politicians to push ahead with reforms even when faced with fierce resistance from entrenched interests. ... more

Japanese MBOs and parent-subsidiary listings

It is proving to be a very busy year for Asia-Pacific M&A, with the number of deals on track to exceed 300, comfortably exceeding the previous peak of 242 (figure below). Hong Kong, Singapore and Japan have shown the greatest leaps in activity, with run rates of 3.5x, 3.0x and 2.1x the post-2009 average, respectively. ... more

Looking ahead

Event-driven outlook

We begin 2025 with a survey of current opportunities in Metrica’s core strategies.

Firstly, in the event-driven (hard catalyst) strategy, one of the key performance drivers is the liquidity of the target universe, as it correlates with the frequency and depth of trading opportunities. ... more

Naming and shaming

November brought seven management buyout (MBO) announcements in Japan – the most in twelve years (figure 1). We last wrote about Japanese tender offers (including MBOs) in our January newsletter (Vigilance is Required, 3 February 2023). At the time, we identified two medium-term catalysts behind the trend:

A regulatory development in Japan

Japan’s Financial Services Agency is examining a long-standing loophole in the tender offer rules. Currently, an acquirer can buy any amount of shares in a company on-market without having to tender for the whole company.

A tender offer is only required when a 33% or more stake is bought off-market. This contrasts with jurisdictions such as the UK, where an acquirer must make a full tender offer upon reaching a certain threshold, irrespective of how the shares were acquired. ... more

Vigilance is required

The start of the year has already brought five $100 million-plus Japanese takeovers, representing a decade-plus high for the month of January. It contrasts with a 36% year-on-year slowdown in global M&A. What is behind the uptick? ... more

Pockets of value

We have been writing about the recovery in the performance of the Value factor since November 2020, and have since highlighted a few corners of the market which fall squarely within the Value category but which have been slow to join the trend.

Another example is the Japanese regional bank sector, which has only just started to move off its lows. ... more

Engagement and activism may rebound

We looked at the Factset SharkWatch database, which tracks global activism campaigns for the last ten years. The dataset initially covered only US campaigns but in recent years has improved its non-US coverage to the extent that we believe it now provides meaningful statistics for Asia-Pacific.

The primary observation is that, while global activism has already started to rebound from the depths of the pandemic – rising 5.2% since 2020 – this growth has all been driven by campaigns outside Asia-Pacific. Figure 1 shows how Asia-Pacific activism (which accounts for around 17% of the total) is still down by 37% compared to 2020, even as the rest of the world has risen 13.7% (note that we considered only campaigns announced in January to May of each year, to make the results comparable across years). ... more

Record Q1 for M&A

M&A activity in Asia-Pacific is trending at a post-GFC record:

Several drivers exist in our view: ... more

LINE must postpone the squeeze-out EGM

Mr. LEE Hae-Jin Chairman of the Board LINE Corporation JR Shinjuku Miraina Tower 23F 4-1-6 Shinjuku Shinjuku-ku Tokyo 160-0022 Japan

Dear Mr. Lee,

Metrica Partners Pte. Ltd. (“Metrica”) is the manager of, and adviser to multiple funds that own shares in LINE Corp. (“LINE”).

We refer to yesterday’s announcement by LINE, showing that a majority of independent shareholders joined Metrica in refusing to tender their shares into the Joint Tender Offer by SoftBank and NAVER. ... more