Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Sichuan Languang Justbon Service Group / Event-Driven

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<p>On the 22 March, <a href="https://www.smartkarma.com/entities/sichuan-languang-justbon-service-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:28337:1" rel="noopener">Sichuan Languang Justbon Service Group (2606 HK)</a> ("Justbon") <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0322/2021032201066.pdf" target="_blank" rel="noopener">announced</a> its major shareholder (plus two other vendors) had entered into MOUs with <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> (CGS), such that 126,011,860 H shares AND 750,000 domestic shares or 71.17% of shares out would be acquired. Upon completion, CGS was obligated to make an unconditional mandatory general Offer (MGO) for the H shares (at HK$51.0571/share) and domestic shares (at RMB42.8547/share).</p>
<p>In addition, if a delisting resolution was approved by independent H-shareholders and a 90% acceptance condition (of independent H-shares)) was satisfied, H-shareholders will receive HK$54.30/share and domestic shareholders RMB45.5768/share.</p>
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<div>On the 19 April, Justbon said all three agreements had completed, giving CGS <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0419/2021041901491.pdf" target="_blank" rel="noopener">71.17%</a>.</div>
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<div>The Composite Document has now been <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0502/2021050200153.pdf" target="_blank" rel="noopener">despatched</a>, and the Offer is open to acceptances. The H Share Class Meeting will be held on the 17 June, which is also the first closing date. </div>
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<div>Assuming the delisting resolution is approved, the latest time for the acceptance condition to be satisfied is the 3 September, four months from now. </div>
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<div>But as this is an unconditional MGO, this extended acceptance period tilts the deal in favour of CGS securing the 90% tendering condition.</div>
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<div>More below the fold.</div>


On the 22 March, Sichuan Languang Justbon Service Group (2606 HK) ("Justbon") announced its major shareholder (plus two other vendors) had entered into MOUs with Country Garden Services Holdings (6098 HK) (CGS), such that 126,011,860 H shares AND 750,000 domestic shares or 71.17% of shares out would be acquired. Upon completion, CGS was obligated to make an unconditional mandatory general Offer (MGO) for the H shares (at HK$51.0571/share) and domestic shares (at RMB42.8547/share).
In addition, if a delisting resolution was approved by independent H-shareholders and a 90% acceptance condition (of independent H-shares)) was satisfied, H-shareholders will receive HK$54.30/share and domestic shareholders RMB45.5768/share.







On the 19 April, Justbon said all three agreements had completed, giving CGS 71.17%.







The Composite Document has now been despatched, and the Offer is open to acceptances. The H Share Class Meeting will be held on the 17 June, which is also the first closing date. 

Assuming the delisting resolution is approved, the latest time for the acceptance condition to be satisfied is the 3 September, four months from now. 

But as this is an unconditional MGO, this extended acceptance period tilts the deal in favour of CGS securing the 90% tendering condition.

More below the fold.

Languang Justbon (2606 HK): Offer Now Open - For Up To Four Months

Zhejiang Cangnan Instrument / Event-Driven

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<p>Back on the 5 February, gas meter manufacturer <a href="https://www.smartkarma.com/entities/zhejiang-cangnan-h" target="_blank" data-smartkarma-citation="entities:27212:1" rel="noopener">Zhejiang Cangnan Instrument (1743 HK)</a>  <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0205/2021020501022.pdf" target="_blank" rel="noopener">announced</a> the board of directors had resolved to repurchase all the issued H shares in the company at a minimum price of HK$22.00/share, a 15.18% premium to last close. The buyback was subject to approval from the local bureau of the State Administration of Foreign Exchange.</p>
<p>This was followed by a conditional cash offer on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0312/2021031201722.pdf" target="_blank" rel="noopener">12 March</a>. The Offer is a "Merger by Absorption", incorporating a Scheme-like vote (≥ 75% for, ≤10% against); and a tendering condition of 90%. All H-shares are subject to the buy-back and the effective tendering % is 90%.</p>
<p>The Offer Document has been despatched with the IFA <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0401/2021040100071.pdf" target="_blank" rel="noopener">concluding</a> the Offer price to be fair and reasonable.</p>
<p>The EGM will take place on the 17 May and the first closing date is the 31 May.</p>
<p>Trading at a gross/annualised spread of 7.3%/57.2%. But the thorny issue is the 90% tendering condition.</p>
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<p>More below the fold.</p>
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Back on the 5 February, gas meter manufacturer Zhejiang Cangnan Instrument (1743 HK)  announced the board of directors had resolved to repurchase all the issued H shares in the company at a minimum price of HK$22.00/share, a 15.18% premium to last close. The buyback was subject to approval from the local bureau of the State Administration of Foreign Exchange.
This was followed by a conditional cash offer on the 12 March. The Offer is a "Merger by Absorption", incorporating a Scheme-like vote (≥ 75% for, ≤10% against); and a tendering condition of 90%. All H-shares are subject to the buy-back and the effective tendering % is 90%.
The Offer Document has been despatched with the IFA concluding the Offer price to be fair and reasonable.
The EGM will take place on the 17 May and the first closing date is the 31 May.
Trading at a gross/annualised spread of 7.3%/57.2%. But the thorny issue is the 90% tendering condition.


More below the fold.


Zhejiang Cangnan (1743 HK): H-Share Buyback

Thematic (Sector/Industry)

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<p>This revised guide is part of a series of M&amp;A guides that our Quiddity* team (see our profiles or the footnote below) are publishing to aid investors in understanding the rules, parameters, possibilities, and processes when companies conduct mergers and acquisitions. </p>
<p>The initial guide - <em><a href="https://skr.ma/7bVPk" target="_blank" rel="noopener">Quiddity Hong Kong M&amp;A Guide 2019</a></em> - was published in April 2019. Since that time, there have been various new developments, many of which pertain to PRC-incorporated companies being taken private. This is an update.</p>
<p><em>These insights are designed to be used as a reference. They are not actionable.</em></p>
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This revised guide is part of a series of M&amp;A guides that our Quiddity* team (see our profiles or the footnote below) are publishing to aid investors in understanding the rules, parameters, possibilities, and processes when companies conduct mergers and acquisitions. 
The initial guide - Quiddity Hong Kong M&amp;A Guide 2019 - was published in April 2019. Since that time, there have been various new developments, many of which pertain to PRC-incorporated companies being taken private. This is an update.
These insights are designed to be used as a reference. They are not actionable.









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<p>Back on the 25 February, property management service provider <a href="https://www.smartkarma.com/entities/sichuan-languang-justbon-service-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:28337:1" rel="noopener">Sichuan Languang Justbon Service Group (2606 HK)</a> ("SLJS") <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0225/2021022500961.pdf" target="_blank" rel="noopener">announced</a> its major shareholder had entered into a MOU with <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> (CGS) to sell 115,090,200 H-shares or a 64.62% stake. The seller is Languang Hejun, a wholly-owned entity of <a href="https://www.smartkarma.com/entities/sichuan-languang-development-co-ltd" target="_blank" data-smartkarma-citation="entities:7403:1" rel="noopener">Sichuan Languang Development (600466 CH)</a>. Terms under the MOU were RMB42.1105/share. No HK$-equivalent figure was quoted, but at the prevailing exchange rate, this was roughly ~HK$50.61/share, or a ~30% premium to last close.</p>
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<p>On the 11 March, SLJS <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0311/2021031101126.pdf" target="_blank" rel="noopener">announced</a> some subtle changes to the MOU, such that shares to be acquired include 115,090,200 H shares AND 750,000 domestic shares or 65.04% of shares out. The price per H shares was also revised up to RMB42.8546/share.</p>
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<h3>The New News</h3>
<p>Late last night SLJS <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0322/2021032201066.pdf" target="_blank" rel="noopener">announced</a> a possible unconditional mandatory general Offer (MGO) from CGS for the H shares (at HK$51.0571/share) and domestic shares (at RMB42.8547/share).</p>
<p>CGS has also proposed a voluntary delisting, and if the delisting resolution is approved by independent H-shareholders and the listing acceptance condition (yep, one with an infamous 90% handle) is satisfied, H-shareholders will receive HK$54.30/share and domestic shareholders RMB45.5768/share.</p>
<p>The MGO appears a lock, so you have an effective floor of HK$51.0571. The question, therefore, is: do you chase the delisting bump?</p>
<p>More below the fold.</p>


Back on the 25 February, property management service provider Sichuan Languang Justbon Service Group (2606 HK) ("SLJS") announced its major shareholder had entered into a MOU with Country Garden Services Holdings (6098 HK) (CGS) to sell 115,090,200 H-shares or a 64.62% stake. The seller is Languang Hejun, a wholly-owned entity of Sichuan Languang Development (600466 CH). Terms under the MOU were RMB42.1105/share. No HK$-equivalent figure was quoted, but at the prevailing exchange rate, this was roughly ~HK$50.61/share, or a ~30% premium to last close.


On the 11 March, SLJS announced some subtle changes to the MOU, such that shares to be acquired include 115,090,200 H shares AND 750,000 domestic shares or 65.04% of shares out. The price per H shares was also revised up to RMB42.8546/share.

The New News
Late last night SLJS announced a possible unconditional mandatory general Offer (MGO) from CGS for the H shares (at HK$51.0571/share) and domestic shares (at RMB42.8547/share).
CGS has also proposed a voluntary delisting, and if the delisting resolution is approved by independent H-shareholders and the listing acceptance condition (yep, one with an infamous 90% handle) is satisfied, H-shareholders will receive HK$54.30/share and domestic shareholders RMB45.5768/share.
The MGO appears a lock, so you have an effective floor of HK$51.0571. The question, therefore, is: do you chase the delisting bump?
More below the fold.

Languang Justbon (2606 HK): Be Wary Of Chasing The Delisting Bump

Beijing Jingneng Clean Energy / Event-Driven

<p><strong>80.22%</strong>. That's the only figure that matters.</p>
<p><a href="https://www.smartkarma.com/entities/beijing-jingneng-clean-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:16316:1" rel="noopener">Beijing Jingneng Clean Energy (579 HK)</a> joins <a href="https://www.smartkarma.com/entities/harbin-electric-co-ltd-h" target="_blank" data-smartkarma-citation="entities:11116:1" rel="noopener">Harbin Electric Co Ltd H (1133 HK)</a> as the second Merger by Absorption transaction to <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0301/2021030103095.pdf" target="_blank" rel="noopener">fail</a> on account of the tendering condition.</p>
<p>1,207,310,872 H Shares, or 80.22% of the total issued H Shares held by the Independent H Shareholders, tendered. </p>
<p><a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0520/ltn20190520874.pdf" target="_blank" rel="noopener">85.8%</a> of independent shares tendered into the Harbin Offer by the 60th day, and the Offer was subsequently, and unprecedently, extended (&amp; then failed). <a href="https://www.smartkarma.com/entities/huaneng-renewables-corp-h" target="_blank" data-smartkarma-citation="entities:7542:1" rel="noopener">Huaneng Renewables Corp H (958 HK)</a> received <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0120/2020012000919.pdf" target="_blank" rel="noopener">90.8%</a> on the 60th day - therefore the Offer was declared unconditional as to <em>acceptances - </em>but the Offer was still subject to approvals from NDRC and MOFCOM, and the registration of SAFE approval - and was also granted an extension by the SFC.</p>
<p>With less than 90% tendered AND with approvals/registration with Beijing SASAC, NDRC, and BAFE outstanding, the Offer for Jingneng was not extended.</p>
<p>Share tendered will be returned "<em>as soon as possible but in any event within ten days</em>".</p>
<p>More below the fold.</p>

80.22%. That's the only figure that matters.
Beijing Jingneng Clean Energy (579 HK) joins Harbin Electric Co Ltd H (1133 HK) as the second Merger by Absorption transaction to fail on account of the tendering condition.
1,207,310,872 H Shares, or 80.22% of the total issued H Shares held by the Independent H Shareholders, tendered. 
85.8% of independent shares tendered into the Harbin Offer by the 60th day, and the Offer was subsequently, and unprecedently, extended (&amp; then failed). Huaneng Renewables Corp H (958 HK) received 90.8% on the 60th day - therefore the Offer was declared unconditional as to acceptances - but the Offer was still subject to approvals from NDRC and MOFCOM, and the registration of SAFE approval - and was also granted an extension by the SFC.
With less than 90% tendered AND with approvals/registration with Beijing SASAC, NDRC, and BAFE outstanding, the Offer for Jingneng was not extended.
Share tendered will be returned "as soon as possible but in any event within ten days".
More below the fold.

Beijing Jingneng (579 HK): And That's a Fail

China

Harbin Electric Company Limited manufactures a comprehensive range of electric power generation equipment including thermal power generator sets, boilers, steam and hydro turbine and turbine generator sets.  The Company also provides power station engineering services and manufactures ancillary equipment for power stations as well as AC/DC motor and other products.

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Harbin Electric Co Ltd H (1133 HK)

Languang Justbon (2606 HK): Offer Now Open - For Up To Four Months

Mindful of the four-month acceptance period, one in which shares tendred are not entitled (by my reckoning) to be withdrawn, I believe the...

David Blennerhassett

Quiddity M&A Guide 2021: Hong Kong

This revised guide is part of a series of M&A guides to aid investors in understanding the rules, parameters, possibilities, and processes when...

David Blennerhassett

Languang Justbon (2606 HK): Be Wary Of Chasing The Delisting Bump

The MGO price is all but assured. The delisting offer price less so. But it does avail investors to a possible free option. This is a buy in the...

David Blennerhassett

Beijing Jingneng (579 HK): And That's a Fail

There will be selling pressure on the stock, in two phases - tomorrow, and when shares are returned. However, Jingneng is trading cheap. This is a...

David Blennerhassett

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Languang Justbon (2606 HK): Offer Now Open - For Up To Four Months

Mindful of the four-month acceptance period, one in which shares tendred are not entitled (by my reckoning) to be withdrawn, I believe the...

David Blennerhassett

Zhejiang Cangnan (1743 HK): H-Share Buyback

Given the company's dubious price action and shareholder concentration, I would normally give this stock a wide birth. Bit it is precisely this...

David Blennerhassett

Quiddity M&A Guide 2021: Hong Kong

This revised guide is part of a series of M&A guides to aid investors in understanding the rules, parameters, possibilities, and processes when...

David Blennerhassett

Languang Justbon (2606 HK): Be Wary Of Chasing The Delisting Bump

The MGO price is all but assured. The delisting offer price less so. But it does avail investors to a possible free option. This is a buy in the...

David Blennerhassett

Beijing Jingneng (579 HK): And That's a Fail

There will be selling pressure on the stock, in two phases - tomorrow, and when shares are returned. However, Jingneng is trading cheap. This is a...

David Blennerhassett