IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/united-malt-group-ltd" target="_blank" data-smartkarma-citation="entities:29116:1" rel="noopener">United Malt Group Ltd (UMG AU)</a> has offered exclusive due diligence to Malteries Soufflet for its non-binding indicative proposal of A$5.00 per share, a 45.3% premium to the undisturbed price.</li>
<li>The offer follows on from three previous undisclosed proposals. The offer is subject to several conditions such as due diligence, Board recommendation and FIRB approval.</li>
<li>The presence of several substantial shareholders necessitates an attractive premium. The offer is attractive in comparison to historical share prices and peer multiples. </li>
</ul>



United Malt Group Ltd (UMG AU) has offered exclusive due diligence to Malteries Soufflet for its non-binding indicative proposal of A$5.00 per share, a 45.3% premium to the undisturbed price.
The offer follows on from three previous undisclosed proposals. The offer is subject to several conditions such as due diligence, Board recommendation and FIRB approval.
The presence of several substantial shareholders necessitates an attractive premium. The offer is attractive in comparison to historical share prices and peer multiples. 


United Malt (UMG AU): Malteries Soufflet’s Indicative A$5.00 Offer

<ul>
<li>On 10 January, <a href="https://www.smartkarma.com/entities/olam-group" target="_blank" data-smartkarma-citation="entities:765:1" rel="noopener">Olam Group (OLG SP)</a> announced the potential IPO of Olam Agri through a dual primary listing in SGX ST and Saudi Arabia as early as 1H2023. </li>
<li>The Olam Agri IPO could raise US$1 billion, according to press reports. Olam will seek shareholder approval at an EGM for the transaction.</li>
<li>The IPO marks the final stages of the strategy to unlock value. Our SoTP valuation is S$1.85 per share, a 19% upside to the last close price of S$1.56.</li>
</ul>


On 10 January, Olam Group (OLG SP) announced the potential IPO of Olam Agri through a dual primary listing in SGX ST and Saudi Arabia as early as 1H2023. 
The Olam Agri IPO could raise US$1 billion, according to press reports. Olam will seek shareholder approval at an EGM for the transaction.
The IPO marks the final stages of the strategy to unlock value. Our SoTP valuation is S$1.85 per share, a 19% upside to the last close price of S$1.56.


Olam Group (OLG SP): Entering the Final Stages to Unlock Value

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>Ten days after <a href="https://www.smartkarma.com/entities/olam-group" target="_blank" data-smartkarma-citation="entities:765:1" rel="noopener">Olam Group (OLG SP)</a>'s restructuring became effective, Saudi-backed SALIC, entered into an SPA to acquire 35.4% of Olam Agri (OGA).</li>
<li>The proposed US$1.24bn investment implied an equity value of US3.5bn for the bulk agricultural commodity player.</li>
<li>The OFI unit, which focuses on food ingredients (cocoa, coffee, nuts, and spices), is still seeking a listing in London. OGA is expected to go public six months after OFI. </li>
</ul>


Ten days after Olam Group (OLG SP)'s restructuring became effective, Saudi-backed SALIC, entered into an SPA to acquire 35.4% of Olam Agri (OGA).
The proposed US$1.24bn investment implied an equity value of US3.5bn for the bulk agricultural commodity player.
The OFI unit, which focuses on food ingredients (cocoa, coffee, nuts, and spices), is still seeking a listing in London. OGA is expected to go public six months after OFI. 


<ul>
<li>Olam Group set to replace <a href="https://www.smartkarma.com/entities/olam-international-ltd" target="_blank" data-smartkarma-citation="entities:765:1" rel="noopener">Olam International (OLAM SP)</a> as the listed company entity on 16 March. It consists of Olam Food Ingredients (ofi), Olam Agri and Olam International (OIL).</li>
<li>The complicated restructuring exercise which was announced in January 2020 is driven by the Board’s intent to unlock long-term shareholder value. </li>
<li>Our SoTP valuation is S$2.36 per share, which is a 34% upside to the last trading price of S$1.76 per share (9 March prior to the suspension of the shares).</li>
</ul>


Olam Group set to replace Olam International (OLAM SP) as the listed company entity on 16 March. It consists of Olam Food Ingredients (ofi), Olam Agri and Olam International (OIL).
The complicated restructuring exercise which was announced in January 2020 is driven by the Board’s intent to unlock long-term shareholder value. 
Our SoTP valuation is S$2.36 per share, which is a 34% upside to the last trading price of S$1.76 per share (9 March prior to the suspension of the shares).


Olam Group: Restructuring to Unlock Value

<div>
Back on the 26 February this year, Huon <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02347852-3A562617?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> a loss of A$95.3mn for the 1H21, including a non-impairment charge of A$113.9mn. In a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02336871-3A560489?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">market update</a> earlier that month, Huon said salmon prices had declined ~40% relative to the first six months of 2020. Concurrent with its 1H21 results, Huon said the board has initiated a strategic review to assess the potential for corporate-level transactions for the benefit of shareholders. In a follow-up announcement on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02387935-3A569418?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">25 June</a>, Huon said that strategic review remained ongoing. 
</div>
<div>
The most likely outcome of the review was a take-private transaction, however, an auction process dragged on, with a number of bidders pulling out on account of pricing. 
On the 6 August, Huon <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02404691-3A572314?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> a firm Offer, by way of a Scheme, with  Brazil's <a href="https://www.smartkarma.com/entities/jbs-sa" target="_blank" data-smartkarma-citation="entities:24455:1" rel="noopener">JBS SA (JBSS3 BZ)</a>. Huon shareholders would receive A$3.85/share in cash. A fully-franked dividend of $0.0125/share - if paid - will be netted.
The cash price was a 61% premium to the last close, before the strategic review was announced on the 26 February. The Bender family with 53% of shares out intend to vote all of their shares in support of the Scheme, in the absence of a superior offer. The Offer also required approval from FIRB.
Apart from FIRB signing off - no small ask given JBS had fallen foul of US regulators recently - this looked like a done deal, with possible completion in November. 
</div>
<div>
But Andrew Forrest's family fund Tattarang had other plans and promptly upped its stake to <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02405676-3A572494?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">18.51%</a> on the 10 August from 7.33% at the time of the SID announcement. That current stake all but blocks a Scheme. 
Not to be outdone,  JBS announced a parallel takeover bid on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02406953-3A572757?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">13 August</a>. This second Offer is conditional on 50.1% acceptances from shareholders.  With the Bender's stake, that Offer is effectively done - barring FIRB rejection. The Bender family also entered in a pre-bid acceptance agreement for 19.9% of shares out. 
It was unclear at the time whether Forrest was trying to block JBS in Huon or just looking for a better price.
In various media advertisements last Friday, Forrest <a href="https://www.harvestroad.com/its-time-to-commit-a-public-challenge-to-jbs-from-dr-andrew-forrest-ao/" target="_blank" rel="noopener">called on</a> JBS to commit to the same principles as Tattarang’s agri-food business, Harvest Road, and its beef processing company, Harvey Beef.
<div>
<blockquote>
For a small expense and through good management at Harvey Beef, we have established a clear No Pain No Fear framework in the critical stages of cattle processing as part of our ambition to exceed animal welfare standards and create a path for others to follow.
This means our customers don’t have to compromise their values when they choose to buy our products.
Animals provide humans with a valuable source of protein, the least we can do is respect this by ensuring they are treated with the utmost care.
As the world’s biggest protein producer, JBS can rise to this same standard.
</blockquote>
Not altogether surprisingly, JBS took umbrage with this challenge, saying it already adheres to high standards in its animal handling. As did Huon. 
Huon <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02409974-3A573426?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">said</a> this morning...   that it has been...
<blockquote>
uncompromising in its commitment to the highest standards of animal husbandry, biosecurity, environmental management, and sustainable farming practices. Huon remains the only seafood producer in Australia to achieve RSPCA Approved Farming certification and firmly believes its sustainable salmon farming practices can be benchmarked against the best standards in the world.
</blockquote>
</div>
Huon also added Tattarang had earlier expressed interest in Huon and submitted a non-binding and conditional indicative offer. Tattarang was invited to participate further in the strategic review process but declined to do so. Tattarang’s non-binding and conditional indicative offer was at a material discount to JBS’s $3.85 offer.
Oddly, Huon is trading almost at terms. Given the non-negligible risk FIRB blocks the deal, I would avoid shares here.
More below the fold. 

</div>


Back on the 26 February this year, Huon announced a loss of A$95.3mn for the 1H21, including a non-impairment charge of A$113.9mn. In a market update earlier that month, Huon said salmon prices had declined ~40% relative to the first six months of 2020. Concurrent with its 1H21 results, Huon said the board has initiated a strategic review to assess the potential for corporate-level transactions for the benefit of shareholders. In a follow-up announcement on the 25 June, Huon said that strategic review remained ongoing. 


The most likely outcome of the review was a take-private transaction, however, an auction process dragged on, with a number of bidders pulling out on account of pricing. 
On the 6 August, Huon announced a firm Offer, by way of a Scheme, with  Brazil's JBS SA (JBSS3 BZ). Huon shareholders would receive A$3.85/share in cash. A fully-franked dividend of $0.0125/share - if paid - will be netted.
The cash price was a 61% premium to the last close, before the strategic review was announced on the 26 February. The Bender family with 53% of shares out intend to vote all of their shares in support of the Scheme, in the absence of a superior offer. The Offer also required approval from FIRB.
Apart from FIRB signing off - no small ask given JBS had fallen foul of US regulators recently - this looked like a done deal, with possible completion in November. 


But Andrew Forrest's family fund Tattarang had other plans and promptly upped its stake to 18.51% on the 10 August from 7.33% at the time of the SID announcement. That current stake all but blocks a Scheme. 
Not to be outdone,  JBS announced a parallel takeover bid on the 13 August. This second Offer is conditional on 50.1% acceptances from shareholders.  With the Bender's stake, that Offer is effectively done - barring FIRB rejection. The Bender family also entered in a pre-bid acceptance agreement for 19.9% of shares out. 
It was unclear at the time whether Forrest was trying to block JBS in Huon or just looking for a better price.
In various media advertisements last Friday, Forrest called on JBS to commit to the same principles as Tattarang’s agri-food business, Harvest Road, and its beef processing company, Harvey Beef.


For a small expense and through good management at Harvey Beef, we have established a clear No Pain No Fear framework in the critical stages of cattle processing as part of our ambition to exceed animal welfare standards and create a path for others to follow.
This means our customers don’t have to compromise their values when they choose to buy our products.
Animals provide humans with a valuable source of protein, the least we can do is respect this by ensuring they are treated with the utmost care.
As the world’s biggest protein producer, JBS can rise to this same standard.

Not altogether surprisingly, JBS took umbrage with this challenge, saying it already adheres to high standards in its animal handling. As did Huon. 
Huon said this morning...   that it has been...

uncompromising in its commitment to the highest standards of animal husbandry, biosecurity, environmental management, and sustainable farming practices. Huon remains the only seafood producer in Australia to achieve RSPCA Approved Farming certification and firmly believes its sustainable salmon farming practices can be benchmarked against the best standards in the world.


Huon also added Tattarang had earlier expressed interest in Huon and submitted a non-binding and conditional indicative offer. Tattarang was invited to participate further in the strategic review process but declined to do so. Tattarang’s non-binding and conditional indicative offer was at a material discount to JBS’s $3.85 offer.
Oddly, Huon is trading almost at terms. Given the non-negligible risk FIRB blocks the deal, I would avoid shares here.
More below the fold. 



Australia

GrainCorp Limited operates as a food ingredients and agribusiness company. The Company processes and distributes wheat, barley, and canola, as well as offers a range of malt products and service to brewers and distillers. GrainCorp also supplies and refines edible oils. GrainCorp serves customers worldwide.*Dummy ticker for index membership mapping

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Graincorp Ltd A (GNC AU)

United Malt (UMG AU): Malteries Soufflet’s Indicative A$5.00 Offer

The offer is attractive in comparison to historical share prices and peer multiples. Due diligence lasts for 10 weeks. At the last close, the gross...

Arun George

Olam Group (OLG SP): Entering the Final Stages to Unlock Value

The IPO marks the final stages of the strategy to unlock value. Our SoTP valuation is S$1.85 per share, a 19% upside to the last close price of...

Arun George

Olam Teams Up With Saudi Arabia's SALIC

SALIC was clearly waiting in the wings until the demerger was completed. Trading a couple of spreads below where it traded heading into the...

David Blennerhassett

Olam Group: Restructuring to Unlock Value

Olam Group set to replace Olam International as the listed company entity on 16 March. Our SoTP valuation is S$2.36 per share, which is a 34%...

Arun George

Huon Ag (Huo AU): Twiggy Went To Market

Trading at a gross/annualised return of 0.2%/1.2%. I doubt there is a bump here. I'd be inclined to avoid this transaction. I think FIRB approval...

David Blennerhassett

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