Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

In Hong Kong's Court of Appeal this morning, the Court upheld the appeal concerning <a href="https://www.smartkarma.com/entities/allied-properties-h-k-limited" target="_blank" data-smartkarma-citation="entities:19953:1" rel="noopener">Allied Properties (H.K.) (56 HK)</a>'s Scheme, and concluded it would sanction the Scheme and confirm the reduction in capital. 
The decision was reached in less than ten minutes, which provides some indication of the flawed decision on the <a href="https://www.smartkarma.com/compose/insight/45601/The%20reasons%20for%20their%20judgment%20%22will%20be%20handed%20down%20in%20due%20course%22." target="_blank" rel="noopener">9 October</a>.
The reasons for the court's judgment "will be handed down in due course". As the appeal submissions and the transaction of the three previous hearings had been studied by the judges prior to today's hearing, and given the celerity with which a decision was reached, it is possible the judgment may be issued within a day or so. 
If today, then it is possible cheques under the proposal could be despatched by the 8 December.

In Hong Kong's Court of Appeal this morning, the Court upheld the appeal concerning Allied Properties (H.K.) (56 HK)'s Scheme, and concluded it would sanction the Scheme and confirm the reduction in capital. 
The decision was reached in less than ten minutes, which provides some indication of the flawed decision on the 9 October.
The reasons for the court's judgment "will be handed down in due course". As the appeal submissions and the transaction of the three previous hearings had been studied by the judges prior to today's hearing, and given the celerity with which a decision was reached, it is possible the judgment may be issued within a day or so. 
If today, then it is possible cheques under the proposal could be despatched by the 8 December.

Allied Prop (56 HK): In High Court Today ...

This is shaping up to be the week when the sanctioning of Schemes by the Courts goes awry.
Last Friday, Hong Kong's High Court <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1005/2020100502577.pdf" target="_blank" rel="noopener">declined to sanction</a> <a href="https://www.smartkarma.com/entities/allied-properties-h-k-limited" target="_blank" data-smartkarma-citation="entities:19953:1" rel="noopener">Allied Properties (H.K.) (56 HK)</a>'s Scheme. (<a href="https://skr.ma/Utws3" target="_blank" rel="noopener">Allied Properties (56 HK): Amateur Hour</a>). I would expect the Offeror, <a href="https://www.smartkarma.com/entities/allied-group-ltd" target="_blank" data-smartkarma-citation="entities:4387:1" rel="noopener">Allied (373 HK)</a>, to appeal the decision,  especially noting the irrelevancy of the headcount test discussed at length in the judgment, which likely influenced the judge's final opinion.
Tomorrow there is a high likelihood that New Zealand's High Court postpones the final hearing on the <a href="https://www.smartkarma.com/entities/metlifecare-ltd" target="_blank" data-smartkarma-citation="entities:19219:1" rel="noopener">Metlifecare Ltd (MET NZ)</a>'s Scheme.
At MET's Scheme Meeting on the <a href="https://www.metlifecare.co.nz/wp-content/uploads/2020/10/NZX-Release-and-Results-Announcement.pdf" target="_blank" rel="noopener">2 October</a>, 90.7% of the votes case voted for the Scheme. 9.14% (or 14.96mn shares) voted against. 
Of those naysayers, 1,000 shares are held by ResIL Investments Limited, who has, in a detailed letter (attached at the end of this insight) flagged what it perceives as breaches in the Takeovers Code, with reference to the valuation methodology in the Scheme Booklet
Those perceived breaches have been submitted to the Takeovers Panel.
Ahead of tomorrow's hearing, the Panel will need to consider ResIL's objections and whether the standard of disclosure is consistent with that required under the Code. If no objection, the Panel will issue a no-objection statement to approve the Scheme.
Yet merely obtaining a no-objection statement from the Takeovers Panel does not necessarily mean that the Court will approve a scheme.
There are no dissent or buy-out rights for shareholders who do not support Schemes in New Zealand. In effect, this is a statutory vacuum. It would be a dangerous precedent if this Scheme is not sanctioned after a disgruntled shareholder contends the contents of the Scheme Booklet are flawed - after the shareholder lost the vote.

This is shaping up to be the week when the sanctioning of Schemes by the Courts goes awry.
Last Friday, Hong Kong's High Court declined to sanction Allied Properties (H.K.) (56 HK)'s Scheme. (Allied Properties (56 HK): Amateur Hour). I would expect the Offeror, Allied (373 HK), to appeal the decision,  especially noting the irrelevancy of the headcount test discussed at length in the judgment, which likely influenced the judge's final opinion.
Tomorrow there is a high likelihood that New Zealand's High Court postpones the final hearing on the Metlifecare Ltd (MET NZ)'s Scheme.
At MET's Scheme Meeting on the 2 October, 90.7% of the votes case voted for the Scheme. 9.14% (or 14.96mn shares) voted against. 
Of those naysayers, 1,000 shares are held by ResIL Investments Limited, who has, in a detailed letter (attached at the end of this insight) flagged what it perceives as breaches in the Takeovers Code, with reference to the valuation methodology in the Scheme Booklet
Those perceived breaches have been submitted to the Takeovers Panel.
Ahead of tomorrow's hearing, the Panel will need to consider ResIL's objections and whether the standard of disclosure is consistent with that required under the Code. If no objection, the Panel will issue a no-objection statement to approve the Scheme.
Yet merely obtaining a no-objection statement from the Takeovers Panel does not necessarily mean that the Court will approve a scheme.
There are no dissent or buy-out rights for shareholders who do not support Schemes in New Zealand. In effect, this is a statutory vacuum. It would be a dangerous precedent if this Scheme is not sanctioned after a disgruntled shareholder contends the contents of the Scheme Booklet are flawed - after the shareholder lost the vote.

After the sanctioning of <a href="https://www.smartkarma.com/entities/allied-properties-h-k-limited" target="_blank" data-smartkarma-citation="entities:19953:1" rel="noopener">Allied Properties (H.K.) (56 HK)</a>'s (<a href="https://skr.ma/vN7NF" target="_blank" rel="noopener">APH) Scheme (Allied Prop (56 HK): Scheme Done. AGL Next?</a>) was thrice delayed by the High Court and further updates from the company shed no light on the issues faced, what was inconceivably feared became apparent last Friday night when the Court <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1005/2020100502577.pdf" target="_blank" rel="noopener">declined to sanction</a> the Scheme.
This afternoon, the High Court<a href="https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=131280&amp;currpage=T" target="_blank" rel="noopener"> judgment</a> appeared on the Hong Kong Judiciary website. 
It is ultimately a frustrating read, one in which some of the Offeror's (<a href="https://www.smartkarma.com/entities/allied-group-ltd" target="_blank" data-smartkarma-citation="entities:4387:1" rel="noopener">Allied (373 HK)</a>) preparatory work was sloppy or poorly prepared.
But the great double-take in this ruling is a large portion of the judgment devoted to the headcount test at the Scheme vote.
APH is incorporated in Hong Kong. S674(c) of the <a href="https://www.hklii.hk/eng/hk/legis/ord/622/s674.html" target="_blank" rel="noopener">Hong Kong Ordinance</a> says “subject to subsection 2(a)…”.  Subsection 2(a) replaced the headcount rule with the 10%-of-float veto. The headcount test was abolished in 2012 after a decision was reached on a <a href="https://www.legco.gov.hk/yr10-11/english/bc/bc03/papers/bc030530cb1-2019-2-e.pdf" target="_blank" rel="noopener">Companies Bill</a>.
It is not clear why Allied's counsel did not raise this abolishment; but instead, butchered an attempt to show a majority in number had occurred, and as a result of this off-piste analysis, negatively influenced the court on sanctioning the Scheme.
I expect Allied to appeal. I do not expect shares to resume trading during an appeal. 
Unfortunately for shareholders who approved the Scheme, payment under the offer appears some way off.

After the sanctioning of Allied Properties (H.K.) (56 HK)'s (APH) Scheme (Allied Prop (56 HK): Scheme Done. AGL Next?) was thrice delayed by the High Court and further updates from the company shed no light on the issues faced, what was inconceivably feared became apparent last Friday night when the Court declined to sanction the Scheme.
This afternoon, the High Court judgment appeared on the Hong Kong Judiciary website. 
It is ultimately a frustrating read, one in which some of the Offeror's (Allied (373 HK)) preparatory work was sloppy or poorly prepared.
But the great double-take in this ruling is a large portion of the judgment devoted to the headcount test at the Scheme vote.
APH is incorporated in Hong Kong. S674(c) of the Hong Kong Ordinance says “subject to subsection 2(a)…”.  Subsection 2(a) replaced the headcount rule with the 10%-of-float veto. The headcount test was abolished in 2012 after a decision was reached on a Companies Bill.
It is not clear why Allied's counsel did not raise this abolishment; but instead, butchered an attempt to show a majority in number had occurred, and as a result of this off-piste analysis, negatively influenced the court on sanctioning the Scheme.
I expect Allied to appeal. I do not expect shares to resume trading during an appeal. 
Unfortunately for shareholders who approved the Scheme, payment under the offer appears some way off.

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After shares were <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0929/2020092900089.pdf" target="_blank" rel="noopener">halted</a> before trading opened on the 29 September pursuant to the Hong Kong Code on Takeovers and Mergers,  <a href="https://www.smartkarma.com/entities/cimc-tianda-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15431:1" rel="noopener">CIMC-TianDa Holdings (445 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1004/2020100400027.pdf" target="_blank" rel="noopener">announced</a> on the 4 October an Offer by way of a Scheme primarily from <a href="https://www.smartkarma.com/entities/china-international-marine-cntnrs-gp-ltd" target="_blank" data-smartkarma-citation="entities:11752:1" rel="noopener">China International Marine Cntnrs Gp (2039 HK)</a> (CIMC). 
The cancellation price is HK$0.266/share, a 20.66% premium to last close. The price is final.
CIMC, together with joint offeror concert parties hold 75.53% of CIMC-Tianda, following the conversion of a CB held by <a href="https://www.smartkarma.com/entities/wison-engineering-services-co" target="_blank" data-smartkarma-citation="entities:24534:1" rel="noopener">Wison Engineering Services Co (2236 HK)</a>. Therefore Scheme Shareholders will comprise 24.47% of shares out.
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Conditions to the Scheme are standard - at a Court Meeting, at least 75% of Independent Shares vote FOR the Scheme &amp; not more than 10% of ALL Independent Shares against, or 2.447% of shares out. The headcount applies as CIMC-Tianda is Cayman incorporated.
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Despite solid 1H20 earnings, the announcement indicates those earnings were propped up by orders from last year, and it has proven challenging to procure a stable supply of raw materials and to complete new orders. Given this uncertain backdrop - one expected when exposed to the global aviation industry -  pricing appears okay.
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As always, more below the fold.
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After shares were halted before trading opened on the 29 September pursuant to the Hong Kong Code on Takeovers and Mergers,  CIMC-TianDa Holdings (445 HK) announced on the 4 October an Offer by way of a Scheme primarily from China International Marine Cntnrs Gp (2039 HK) (CIMC). 
The cancellation price is HK$0.266/share, a 20.66% premium to last close. The price is final.
CIMC, together with joint offeror concert parties hold 75.53% of CIMC-Tianda, following the conversion of a CB held by Wison Engineering Services Co (2236 HK). Therefore Scheme Shareholders will comprise 24.47% of shares out.


Conditions to the Scheme are standard - at a Court Meeting, at least 75% of Independent Shares vote FOR the Scheme &amp; not more than 10% of ALL Independent Shares against, or 2.447% of shares out. The headcount applies as CIMC-Tianda is Cayman incorporated.


Despite solid 1H20 earnings, the announcement indicates those earnings were propped up by orders from last year, and it has proven challenging to procure a stable supply of raw materials and to complete new orders. Given this uncertain backdrop - one expected when exposed to the global aviation industry -  pricing appears okay.


As always, more below the fold.


CIMC-Tianda (445 HK): Scheme Offer Lead By CIMC

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After shares were <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0929/2020092900255.pdf" target="_blank" rel="noopener">halted</a> after trading closed on the 29 September pursuant to the Hong Kong Code on Takeovers and Mergers, <a href="https://www.smartkarma.com/entities/hengxing-gold-holding-co-ltd" target="_blank" data-smartkarma-citation="entities:8874:1" rel="noopener">Hengxing Gold Holding (2303 HK)</a> (HGH) <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0930/2020093001586.pdf" target="_blank" rel="noopener">announced</a> on the 30 September a pre-conditional Scheme from <a href="https://www.smartkarma.com/entities/shandong-gold-mining-co-ltd-61153493-5437-47ee-a8d3-aec41fb7f1da" target="_blank" data-smartkarma-citation="entities:27455:1" rel="noopener">Shandong Gold Mining Co., Ltd. (1787 HK)</a> ("SGM").
Under the terms of the Scheme, SGM is offering 0.17241 SGM shares (5/29) for every HGH share. A special dividend of HK$0.3585/HGH was declared on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0929/2020092900669.pdf" target="_blank" rel="noopener">29 September</a>, for which the record date will be 16 October 2020. The scrip terms will not be adjusted for the special dividend. The offer, inclusive of the dividend represents a discount to last close of 2.2%. Terms will not be increased. 
The pre-conditions concern approvals from the NDRC and the Ministry of Commerce of the PRC or the Department of Commerce of Shandong Provincial Government, for outbound direct investment.
Conditions to the Scheme are standard - at a Court Meeting, at least 75% of Independent Shares vote FOR the Scheme &amp; not more than 10% of ALL Independent Shares against. The headcount test applies as HGH is Cayman incorporated.
SGM has received irrevocable of 75% of shares out from Ke Xiping (60%) and his son Ke Jiaqi (15%).  No HGH shareholders are required to abstain. The vote appears a formality.
This deal is effectively done. The only question mark is over the timing of the PRC regulatory approvals.
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As always, more below the fold.
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After shares were halted after trading closed on the 29 September pursuant to the Hong Kong Code on Takeovers and Mergers, Hengxing Gold Holding (2303 HK) (HGH) announced on the 30 September a pre-conditional Scheme from Shandong Gold Mining Co., Ltd. (1787 HK) ("SGM").
Under the terms of the Scheme, SGM is offering 0.17241 SGM shares (5/29) for every HGH share. A special dividend of HK$0.3585/HGH was declared on the 29 September, for which the record date will be 16 October 2020. The scrip terms will not be adjusted for the special dividend. The offer, inclusive of the dividend represents a discount to last close of 2.2%. Terms will not be increased. 
The pre-conditions concern approvals from the NDRC and the Ministry of Commerce of the PRC or the Department of Commerce of Shandong Provincial Government, for outbound direct investment.
Conditions to the Scheme are standard - at a Court Meeting, at least 75% of Independent Shares vote FOR the Scheme &amp; not more than 10% of ALL Independent Shares against. The headcount test applies as HGH is Cayman incorporated.
SGM has received irrevocable of 75% of shares out from Ke Xiping (60%) and his son Ke Jiaqi (15%).  No HGH shareholders are required to abstain. The vote appears a formality.
This deal is effectively done. The only question mark is over the timing of the PRC regulatory approvals.


As always, more below the fold.


Hengxing (2303 HK): Offer From Shandong Gold

Hong Kong

Allied Properties (H.K.) Limited, through its subsidiaries, provides investment, brokerage, and financing services.  The Company also develops and invests in property, provides property management, and operates hotels.

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Allied Properties (H.K.) (56 HK)

Allied Prop (56 HK): In High Court Today ...

Logic prevailed. Appeal upheld. Scheme to be sanctioned. Possible payment early December. No closure on the erroneous headcount analysis.

David Blennerhassett

Metlifecare: Statutory Vacuum

A small Metlifecare shareholder strongly believes the deal needs to be blocked and has lodged an opposition with the Takeovers Panel. This would...

David Blennerhassett

Allied Properties (56 HK): Amateur Hour

Amateur hour by Company Counsel leads to a frustrated judge torpedoing the Allied Properties (56 HK) Scheme. Expect an Appeal.

David Blennerhassett

CIMC-Tianda (445 HK): Scheme Offer Lead By CIMC

After shares were halted after trading closed on the 29 September pursuant to the Hong Kong Code on Takeovers and Mergers, Hengxing Gold Holding...

David Blennerhassett

Hengxing (2303 HK): Offer From Shandong Gold

After shares were halted lunchtime on the 22 September pursuant to the Hong Kong Code on Takeovers and Mergers, Amvig Holdings (2300 HK) last...

David Blennerhassett

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