Singapore fund manager says Line tender offer price is too low

Bloomberg featured our views on the squeeze-out of LINE Corp shareholders (with no shareholder vote) by SoftBank Group and NAVER Corp.: ... more

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