LY Corporation's Strategic Buyback: A Catalyst for Value in SoftBank's Digital Ecosystem

The tender offer by LY Corporation (LY) in June 2025 represents a pivotal moment in its capital allocation strategy, aligning with SoftBank Group's (SBG) vision to sharpen focus on high-growth digital assets. By reducing its stake through a ¥116 billion buyback, AHD—a wholly owned SBG subsidiary—signals a strategic recalibration that enhances capital efficiency, shareholder value, and governance within the SoftBank ecosystem. This move contrasts sharply with ArcelorMittal's long-term buyback approach, underscoring LY's near-term priorities and the dynamics of corporate control in Japan's tech-driven economy.

Capital Efficiency: A Precision Tool for Value Creation

The tender offer's pro-rata allocation mechanism ensures equitable participation for all shareholders, reducing liquidity concerns and signaling confidence in LY's undervaluation. By repurchasing 3.05% of shares at a 15% premium to the 52-week low, LY aims to boost its adjusted EPS to ¥25.9–26.9 by FY2026, up from prior targets. This contrasts with ArcelorMittal's multiyear buyback programs, which prioritize steady capital reduction over time. For instance, Arcelor's 2025–2030 plan targets incremental share purchases tied to free cash flow, reflecting a more conservative, long-term approach.

LY's near-term focus, however, is strategically timed. The buyback consumes only ¥150 billion of its ¥580 billion capital buffer, leaving ample flexibility for future M&A or further buybacks. This contrasts with Arcelor's rigid 50% post-dividend free cash flow buyback policy, which may limit agility in volatile markets.

Corporate Governance: Balancing Control and Accountability

AHD's stake reduction to 59.99%—from 62.45%—is a deliberate move to avoid overconcentration of ownership while retaining operational influence. This aligns with SoftBank's broader governance reforms, such as appointing four independent directors to LY's six-member board by June 2025. The shift emphasizes transparency and shareholder alignment, addressing concerns about management accountability.

In contrast, ArcelorMittal's buybacks often involve direct purchases from its founding family to maintain voting control, as seen in its 2021 program. LY's approach, however, prioritizes broad shareholder benefit over concentrated power, signaling a shift toward more equitable governance in the SoftBank ecosystem.

Strategic Priorities: Focusing on Digital Growth

The buyback funds SoftBank's pivot toward high-margin digital segments within LY. PayPay's 17.7% revenue growth and 347% EBITDA jump in FY2024 highlight the potential of these assets. By trimming AHD's stake, SoftBank signals intent to treat LY as a standalone entity, reducing perceived dependency on its parent. This contrasts with Arcelor's buybacks, which primarily serve to strengthen balance sheets rather than reposition portfolios around growth engines.

Risks and Considerations

While the buyback enhances EPS, over-subscription risks could dilute gains if proration occurs. Geopolitical risks, such as U.S. tariffs, remain low for LY, but its reliance on SoftBank's capital allocation decisions introduces dependency risk. Additionally, the media segment's display ad slump—affecting Line and Yahoo—requires cost discipline to sustain profitability.

Investment Implications: Near-Term Gains, Long-Term Caution

The buyback positions LY as a compelling short-to-medium-term play. The ¥533 per share tender price reflects confidence in undervaluation, while the dividend hike to ¥7.00 (26% increase) bolsters yield appeal. Investors should monitor:
- LY's FY2026 EPS achievement against targets.
- PayPay's cross-border expansion through the EBINO acquisition.
- SoftBank's capital allocation trends, particularly post-buyback.

Conclusion

LY's buyback strategy is a masterclass in capital efficiency, using a near-term liquidity boost to align with SoftBank's digital priorities. While risks linger in legacy segments like media, the focus on PayPay and commerce positions LY to outperform peers in Japan's tech-driven recovery. Investors seeking exposure to SoftBank's ecosystem should view this buyback as a strategic inflection point—not just for LY, but for the broader digital assets under SBG's wing.

Recommendation: Consider a hold-to-buy stance on LY, with a target price of ¥550–¥600 by end-2026, contingent on execution of growth initiatives and stakeholder alignment. Avoid over-leveraging bets on near-term EPS gains without monitoring broader market sentiment toward tech valuations.

This analysis synthesizes LY's financial disclosures, SoftBank's corporate governance trends, and comparative insights from ArcelorMittal's buyback strategy. Always conduct further due diligence before making investment decisions.