Weekly Snack #22
Japanese arcade roll-ups, special situations against a country, and an M&A arb trade
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Investment Pitches
TL;DR:
recently wrote about Genda (9166.JP), a Japanese amusement arcade roll-up company. The main attraction for Genda to do this is the high-cash nature of this type of business relative to fixed costs. Their M&A strategy emphasizes buying assets at low valuations prior to realizing any synergies, expanding into new verticals for growth, and being able to license their IP once they’ve acquired them. While the company, or the industry, might not be a sexy one, it is a slow growth market that is highly fragmented and ripe for consolidation. With an emphasis on per share value creation, Genda could be an interesting serial acquirer play in Japan.
TL;DR:
wrote their notes on a legal special situation for Ascent Resources (AST), an oil and gas exploration company. The author highlights the legal battle the company is currently going through right now with the country of Slovenia in regards to the permit that they’ve been trying to obtain for years. Long story short, the country has been giving them the runaround for something that has grossly been delayed, the director has been charged with corruption, and now, AST can’t build out the infrastruture needed to do business. Because of this, the company is seeking damages from them and given the current size of the company, even a settlement could really send this stock higher. Have a read above.
TL;DR:
posted their thoughts on a popular arbitrage trade between SiriusXM SIRI 0.00%↑ and Liberty Sirius LSXMK 0.00%↑. The trade actually seems too good to be true. Because of how the deal is structured, LSXMK shareholders will get one SIRI share for each share of SIRI LSXMK owns (net of LSXMK liabilities). This works out to ~8.4 SIRI shares for every LSXMK share outstanding. SIRI is a publicly traded stock, and the stock price currently hovers just below $5/share. That would come out to ~$41/LSXMK share, yet LSXMK is currently trading for ~$30/share. He does a great job explaining the trade and the risks invovled.
Tweets of the Week
General Research
Podcasts & Interviews
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Until next week,
Paul Cerro