Is '24 the parent-child listing dissolution year'? We picked up 3 stocks with many resolving factors, and there was also a premium TOB 2.6 times higher than the previous day for delistings!

A movement is underway to resolve the “parent-child listing,” where both the consolidated subsidiary and parent company are listed, due to the delisting of the subsidiary. In order to delist a subsidiary, there are methods such as making it a wholly owned subsidiary by the parent company or selling it to another company, etc., but both require TOB or stock exchange to acquire shares. In most cases, premium is attached at that time, and someThere are also cases where stocks were bought at 2.6 times the closing price of the business day before the announcement。
We will introduce listed subsidiaries that have many factors that are likely to motivate the cancellation of parent-child listings, such as being under the umbrella of parent companies that are positive about the cancellation of parent-child listings.

Pick up stocks with many factors that are likely to motivate parent and child listing cancellation
In order to cancel the parent-child listing, the main premise is that the parent company has that intention above all else.A parent company with a track record of working to delist listed subsidiaries in '23It can be said that it meets those conditions.
Therefore, the parent company that worked on the delisting of listed subsidiaries in 23 (details will be described later) listed the listed subsidiaries described in the most recent securities report. From these, stocks that meet the following conditions are picked up.
[Screening conditions]
・Department of Non-Finance
・The type of business is different from the parent company
・PBR is less than 1 times
・ROA is less than 2%

3 reasons why the cancellation of parent-child listings is likely to progress in '24
According to the TSE listed company corporate governance white paper by the Tokyo Stock Exchange, the ratio of “listed subsidiaries” where parent companies are also listed dropped from 9.5% in 2014 to 6.8% in '22. Nevertheless, it has risen to 227 companies as of 23/3, and it seems that the movement to cancel the parent-child listing will continue in the future.
The following three reasons can be cited as the reason behind the movement to eliminate parent-child listings.

1. Initiatives aimed at “selection and concentration” by companies themselves
As companies work to improve capital efficiency and restructure their business portfolios, there are also cases where management decisions are made to resolve parent-child listings along with business selection and concentration. There are many companies that cite improving synergy effects and trying to make quick decisions as reasons for making listed subsidiaries wholly owned subsidiaries. In particular, in industries that are in the midst of industry restructuring, such needs seem to be strong.

2. Requests from the Tokyo Stock Exchange
In March 23, the Tokyo Stock Exchange requested listed companies to make improvements entitled “Response to Realize Management Aware of Capital Costs and Stock Prices.” Furthermore, in the Nihon Keizai Shimbun dated 12/11, it is reported that the Tokyo Stock Exchange will also ask over 1000 listed companies with parent-child relationships or equity law application relationships to explain the significance of having listed subsidiaries and efforts to ensure the independence of subsidiaries.

3. Expansion of activist activities
As activities by activists (talking shareholders) spread, there is also a possibility that they will target the cancellation of the parent-child listing. The transformation of the four subsidiaries into wholly owned subsidiaries by Fujisoft, which was implemented in 23, seems to have been supported by the fact that activist 3D Investment Partners (Singapore) sought support for subsidiaries with low market evaluations.

The cases of cancellation of parent-child listings in '23 have been revealed at once! 2.6 times and 2 times premium too
According to the list of delisted stocks on the Tokyo Stock Exchange, etc., at least 23 companies carried out procedures aimed at dissolving parent-child listings in '23. In all cases, the price when buying shares is above the closing price on the business day before the announcement date, and the Tokyo Special Electric Cable comes with a premium of about 2.6 times and the Tokyo Nissan Computer System.