Unlocking Value: Dirt-Cheap Japanese Net-Net Chuoh Pack Gets 273% Premium Buyout Offer

Process Ultimately Started Due to TSE Reforms Around Unwinding Cross Shareholdings. A competitive bidding process was held. Expect more deals in the future.

Source: Chuoh Pack Homepage

Japan is often seen as a market full of value traps, but that's changing fast. Record buybacks, rising dividends, and increasing takeovers are unlocking hidden value. While steady shareholder returns are nice, I think we’re going to see a lot more high-premium buyouts of dirt-cheap stocks.

On January 31, 2025, Chuoh Pack Industries (3952) received a buyout offer from Nikkon Holdings (9072) at ¥5,034 per share—a massive 273% premium over its last closing price of ¥1,349. Chuoh Pack was a textbook deep-value net-net: a ¥6.7 billion market cap company, consistently profitable for over 20 years, trading at just 0.5x price-to-tangible-book in the boring world of packaging and corrugated products. I own dozens of stocks that fit this description!

The premium looks extreme at first glance, but it’s actually well within reason. A discounted cash flow analysis from the tender document valued the company between ¥2,629 and ¥4,817 per share. When you factor in the excess current assets, the buyout price makes sense. In fact, what’s truly crazy is that a company profitable for over two decades was ever trading below the value of its net current assets in the first place.

The ¥5,034 per share price wasn’t random—it came from a competitive bidding process. The company’s bankers contacted 19 operating companies and investment funds, inviting them to participate.

For over a decade, Chuoh Pack’s stock drifted between ¥900 and ¥1,500 per share, quietly paying out ~4% in annual dividends. It was the definition of a sleepy Japanese deep-value stock.

Unfortunately I didn’t own it because it trades exclusively on the Nagoya Stock Exchange and Interactive Brokers doesn’t provide access. Those with local brokerage accounts should have no problem accessing it though.

The driving force behind the Chuoh Pack buyout? Pressure from the Tokyo Stock Exchange’s corporate governance reforms. Chuoh Pack’s largest shareholder, Toyoto (~24%), informed the company in March 2024 that they planned to divest their stake to align with the new guidelines. After consulting Nomura Securities, the company decided by August 2024 that the best path forward was a full sale—maximizing value for all shareholders.

Chuoh Pack isn’t alone—several other high-premium buyouts have caught my attention recently.

• Ishii Iron Works (6362) - Received a tender offer from its founding family on Aug 9, 2024 for ¥8,364 per share, a 188% premium to the last closing price of ¥2,900. One reason provided for the MBO was that the company had no real reason to be public as they haven’t relied on equity financing in over 60 years.

• Faith (4295) - Received a tender offer from its founder and longtime CEO on November 11, 2024 for ¥1,220 per share, a 222% premium to the last closing price of ¥379. They also mentioned that they have no reason to be public as they haven’t raised capital from markets since IPOing.

I expect to see many more takeovers and management buyouts in Japan in the coming years. But while these deals are exciting, they aren’t necessary. Japanese net-nets have outperformed the market for years—even before the recent governance reforms. The surge in buyouts is just a bonus.

I didn’t own Ishii Iron Works or Faith, but I have a feeling some of my basket stocks will get bought out soon enough.

I remain incredibly bullish on deep value net-nets in Japan.