Metrica Partners will not tender into the LINE Joint Tender Offer and urges other shareholders to consider following

Metrica Partners Pte. Ltd. (“Metrica”) is the manager of, and adviser to multiple funds (the “Metrica funds”) that own shares in LINE Corp. (“LINE”, Securities Code: 3938). LINE is currently the subject of a tender offer (“the Joint Tender Offer”) by SoftBank Corp. (“SoftBank”, Securities Code: 9434) and NAVER Corporation (‘NAVER”, Securities Code: 035420), which is to be followed by a business integration with Z Holdings (Securities Code: 4689) (the “Business Integration”).

Metrica will not be tendering the shares held by the Metrica Funds into the Joint Tender Offer, and furthermore, it intends to dissent to the subsequent Share Consolidation and exercise its appraisal rights:

  • Metrica considers that the procedures leading up to the LINE Board’s decision to recommend the Joint Tender Offer fall short of the required standard of fairness.
    • The Special Committee has not demonstrated a sufficient degree of independence from the transaction.
    • One of the acquirers ultimately ends up with much higher value from the Business Integration than the price offered to minority shareholders of LINE. The excess value is a tangential benefit deriving more from financial engineering rather than from synergies related to the Business Integration, in Metrica’s view.
    • The other acquirer is a major client of the financial advisor, which may affect the perceived independence of its valuation of the target company.
    • The deal is missing a minimum acceptance condition, depriving shareholders of an important opportunity to exercise their rights.
  • Metrica believes that the Joint Tender Offer price of JPY 5,380 is inadequate.
    • It represents a very low premium when compared with historical precedents.
    • It is below the mid-point of the financial advisor’s DCF valuation, which does not incorporate any projected synergies.
    • The valuation has not been updated to reflect the pandemic’s favourable impact on LINE’s business, nor the substantial increase in comparable company valuation multiples.
    • The joint acquirers are privatising the company just before the point at which it turns profitable on an operating basis, according to management’s own forecasts.

Metrica’s reasoning behind the above conclusions is as follows: (more…)

By |2020-08-25T09:14:58+08:0024 August 2020|Open letters|

Engagement update

We have two situations which are public. The first is NBI Industrial Finance in India, a company which owns shares of a major listed cement company worth almost five times its market cap and which carries on almost no other business.

This month, we sent an open letter to the board which we also released to the press and uploaded to a dedicated website (link).

The letter was structured as a list of questions, in line with our policy of first seeking explanations for corporate behaviour before making our own suggestions.

In the first instance, we are asking: (more…)

By |2020-08-12T14:52:09+08:005 August 2020|Newsletter|

Metrica Partners sends letter to board of NBI Industrial Finance

https://www.businesswire.com/news/home/20200719005001/en/Metrica-Partners-Sends-Letter-Board-NBI-Industrial

  • Requesting explanation for zero dividend payout despite extremely strong balance sheet
  • Asking why company persists with a structure that causes double taxation for shareholders
  • Seeking to understand purpose of listing with almost 95% of assets in Shree Cement shares

SINGAPORE–(BUSINESS WIRE)–Metrica Partners Pte. Ltd. (“Metrica”) manages investment funds that are among the largest minority shareholders of NBI Industrial Finance Co. Ltd. (“NBI”, NSE: NBIFIN, Bloomberg: NBI IN).

NBI is a Shree Cement (“Shree”, NSE: SHREECEM, Bloomberg: SRCM IN) group company and shares its headquarters with Shree. According to Metrica’s research, almost 95% of NBI’s assets are represented by its holding in Shree and NBI has no debt. (more…)

By |2020-07-20T11:18:14+08:0020 July 2020|Open letters|

Deal activity still resilient in Asia-Pacific

Recent headlines such as “With M&A Hit, Wall Street Bankers Keep Busy With Stock Sales” (Bloomberg, 28 May), “Bankers fear sustained M&A slump: ‘It’s impossible without face-to-face meetings’” (Financial News, 8 June) and “Pandemic fears grip M&A as deal making slumps to 23-year low in Europe” (MarketWatch, 30 June) suggest a very depressed market for corporate transactions this year.

However, the numbers in Asia-Pacific tell a different story: (more…)

By |2020-07-17T15:42:19+08:006 July 2020|Newsletter|

Metrica Partners AUM reaches a new high

Metrica Partners is pleased to announce that assets under management have today risen to a record high, equivalent to more than thirteen times the level at which Metrica started three years ago.

The increase puts the business on a firm footing for long-term growth. Metrica would like to offer sincere thanks to everyone who worked hard throughout the various lock-downs to make this possible.

By |2020-07-17T15:35:18+08:001 July 2020|Metrica news|

Current trends in Asia-Pacific M&A

We look at the current opportunity set in Asia-Pacific M&A, and how it has changed since the onset of the pandemic.

The figure below shows the cancellation / completion ratio of Asia-Pacific deals going back twenty years. The chart shows how this year has been a huge outlier, with the ratio moving well above two times, compared with a historical range rarely exceeding one. In other words, in 2020, more than two deals have been cancelled for every deal that has completed. This indicates the scale of the disruption in the M&A space this year.

M&A cancel / complete ratio (x)

What does this imply for M&A investment returns for the rest of the year? We think they will be strongly positive for the following reasons: (more…)

By |2020-06-01T10:19:38+08:0027 May 2020|Newsletter|

A perfect storm

The Covid-19 crisis has created a perfect storm for global M&A:

  • Earnings are falling precipitously. Acquirers are calling off deals by invoking Material Adverse Change (MAC) clauses. Many transactions have either broken or widened out to spreads of 30% to 70%.
  • Even less-risky deals are seeing much wider spreads due to forced de-leveraging. For example, we saw annualised returns in Japan which have been around 2-3% for months blow out to 40%+ at one point.

The disruption in the M&A space has been more severe than during the GFC, as this time the correction has been stunningly abrupt. (more…)

By |2020-06-01T10:19:38+08:003 April 2020|Newsletter|
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