AVI Japan gets boost from Daibiru bid – Today, after market close in Japan, Mitsui OSK Lines announced a takeover bid for its listed subsidiary real estate business Daibiru at a share price of ¥2,200, a 50% premium to the undisturbed closing price. Daibiru accounted for 5.3% of AVI Japan Opportunities’ NAV ahead of this news; valuing it at the tender price would add 2.7% to the NAV.
AVI Japan Opportunities has been a shareholder in Daibiru since September 2020. The managers have been engaging with Daibiru’s board and Mitsui OSK Lines, on ways in which it could improve its corporate governance and valuation. They had suggested the idea of a takeover by Mitsui OSK Lines. They also pointed out that they thought the conflicts of interest with minority shareholders were responsible for the shares trading at about a 50% discount to AVI’s estimate of fair value – i.e. they thought there was scope for Daibiru’s valuation to double.
On that basis then, AVI says that the ¥2,200 bid significantly undervalues Daibiru. The managers say that there were flaws in the procedures for calculating the offer price that conflict with Japan’s Ministry of Economy, Trade and Industry’s Fair M&A Guidelines. AVI plans to engage with both Daibiru and Mitsui OSK Lines over the coming weeks with the aim of securing a higher offer closer to their estimate of fair value.
This sort of scenario – take-outs of listed subsidiaries on the back of improvements in corporate governance – is a key theme within the trust’s portfolio. The Daibiru tender offer follows similar successes with Secom Joshinetsu earlier in the year, and two of Toshiba’s listed subsidiaries in November 2019. Another 10% of the portfolio is invested in similar situations.
AJOT : AVI Japan gets boost from Daibiru bid