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>Bloomberg <a href="https://news.bloomberglaw.com/mergers-and-acquisitions/esr-bidders-said-to-weigh-bringing-in-more-investors-for-buyout" target="_blank" rel="noopener">reports</a> that the bidding consortium is in talks to bring in other partners, such as QIA, PIF, and CPP Investment Board, to aid in privatising <a href="https://www.smartkarma.com/entities/esr-group-ltd" target="_blank" data-smartkarma-citation="entities:27983:1" rel="noopener">ESR Group (1821 HK)</a>.</li>
<li>Warburg Pincus and OMERS have blocking stakes for a Cayman scheme. Warburg Pincus is seemingly supportive, and the consortium’s expansion talks suggest confidence in meeting OMERS’ price expectations.</li>
<li>Our best guess is that an offer is around HK$14.00. ESR’s current valuation is undemanding, with its forward EV/EBITDA multiple at a 40% discount compared to the median peers’ multiple.</li>
</ul>


Bloomberg reports that the bidding consortium is in talks to bring in other partners, such as QIA, PIF, and CPP Investment Board, to aid in privatising ESR Group (1821 HK).
Warburg Pincus and OMERS have blocking stakes for a Cayman scheme. Warburg Pincus is seemingly supportive, and the consortium’s expansion talks suggest confidence in meeting OMERS’ price expectations.
Our best guess is that an offer is around HK$14.00. ESR’s current valuation is undemanding, with its forward EV/EBITDA multiple at a 40% discount compared to the median peers’ multiple.


ESR Group (1821 HK): Consortium’s Expansion Talks Suggest Progress

<ul>
<li>On 7 November, the ACCC published a <a href="https://www.accc.gov.au/system/files/public-registers/documents/Blackstone%20I%27rom%20-%20Statement%20of%20Issues%20-%207%20November%202024.pdf?ref=0&amp;download=y" target="_blank" rel="noopener">Statement of Issues</a> outlining preliminary competition concerns on <a href="https://www.smartkarma.com/entities/blackstone-inc" target="_blank" data-smartkarma-citation="entities:27166:1" rel="noopener">Blackstone (BX US)</a>'s proposed acquisition of <a href="https://www.smartkarma.com/entities/i-rom-group-co-ltd" target="_blank" data-smartkarma-citation="entities:2686:1" rel="noopener">I'Rom Group (2372 JP)</a>. </li>
<li>The ACCC’s decision will be announced on 6 February 2025. In response, Blackstone has delayed (for the second time) the tender start to the end of February 2025.</li>
<li>The ACCC's competition concerns are potentially a deal breaker, as it is unclear if Blackstone can or will provide an undertaking to satisfy the ACCC’s concerns. </li>
</ul>


On 7 November, the ACCC published a Statement of Issues outlining preliminary competition concerns on Blackstone (BX US)'s proposed acquisition of I'Rom Group (2372 JP). 
The ACCC’s decision will be announced on 6 February 2025. In response, Blackstone has delayed (for the second time) the tender start to the end of February 2025.
The ACCC's competition concerns are potentially a deal breaker, as it is unclear if Blackstone can or will provide an undertaking to satisfy the ACCC’s concerns. 


I'rom Group (2372 JP): ACCC Tail Event Risk Is a Concern

<ul>
<li>
<a href="https://www.smartkarma.com/entities/esr-group-ltd" target="_blank" data-smartkarma-citation="entities:27983:1" rel="noopener">ESR Group (1821 HK)</a> provided a positive update on the indicative proposal. The update notes that the consortium has expanded from three to six, representing 39.91% of outstanding shares.</li>
<li>The addition of new consortium members is a positive. While the recent market rally is not a dealbreaker, it should give the consortium renewed impetus to launch an acceptable offer.   </li>
<li>The downside to a deal break is low as ESR’s valuation is undemanding, which is supported by the potential earnings recovery in a more benign interest rate environment.</li>
</ul>



ESR Group (1821 HK) provided a positive update on the indicative proposal. The update notes that the consortium has expanded from three to six, representing 39.91% of outstanding shares.
The addition of new consortium members is a positive. While the recent market rally is not a dealbreaker, it should give the consortium renewed impetus to launch an acceptable offer.   
The downside to a deal break is low as ESR’s valuation is undemanding, which is supported by the potential earnings recovery in a more benign interest rate environment.


ESR Group (1821 HK): Inching Closer to a Binding Proposal

<ul>
<li>A media outlet that Reports on Deals reported that the consortium will offer HK$14.50 per share, a 22.1% and 61.8% premium to the last close (HK$11.88) and undisturbed price (HK$8.96).</li>
<li>While not a knockout offer, the consortium’s impending binding proposal suggests confidence that the offer price and structure would gain the support of the substantial shareholders. </li>
<li>The downside to a deal break is low as ESR’s valuation is undemanding. Its forward EV/EBITDA multiple is at a 30% discount to the median peers’ multiple.</li>
</ul>


A media outlet that Reports on Deals reported that the consortium will offer HK$14.50 per share, a 22.1% and 61.8% premium to the last close (HK$11.88) and undisturbed price (HK$8.96).
While not a knockout offer, the consortium’s impending binding proposal suggests confidence that the offer price and structure would gain the support of the substantial shareholders. 
The downside to a deal break is low as ESR’s valuation is undemanding. Its forward EV/EBITDA multiple is at a 30% discount to the median peers’ multiple.


ESR Group (1821 HK): A Rumoured Offer Price Surfaces

China Traditional Chinese Medicine / Event-Driven

<ul>
<li>We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.</li>
<li>Highest spreads: <a href="https://www.smartkarma.com/entities/yichang-hec-changjiang-pharmaceutical" target="_blank" data-smartkarma-citation="entities:21040:1" rel="noopener">Yichang HEC Changjiang Pharma (1558 HK)</a>, <a href="https://www.smartkarma.com/entities/china-traditional-chinese-medicine" target="_blank" data-smartkarma-citation="entities:351:1" rel="noopener">China Traditional Chinese Medicine (570 HK)</a>, <a href="https://www.smartkarma.com/entities/canvest-environmental-protection-group-co-ltd" target="_blank" data-smartkarma-citation="entities:100:1" rel="noopener">Canvest Environmental Protection Group (1381 HK)</a>, <a href="https://www.smartkarma.com/entities/greatview-aseptic-packaging" target="_blank" data-smartkarma-citation="entities:10802:1" rel="noopener">Greatview Aseptic Packaging (468 HK)</a>, <a href="https://www.smartkarma.com/entities/asia-cement-china-holdings" target="_blank" data-smartkarma-citation="entities:3374:1" rel="noopener">Asia Cement China (743 HK)</a>. 
</li>
<li>Lowest spreads: <a href="https://www.smartkarma.com/entities/fancl-corp" target="_blank" data-smartkarma-citation="entities:15862:1" rel="noopener">Fancl Corp (4921 JP)</a>, <a href="https://www.smartkarma.com/entities/mimasu-semiconductor-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:5531:1" rel="noopener">Mimasu Semiconductor Industry (8155 JP)</a>, <a href="https://www.smartkarma.com/entities/infocom-corp" target="_blank" data-smartkarma-citation="entities:8412:1" rel="noopener">Infocom Corp (4348 JP)</a>, <a href="https://www.smartkarma.com/entities/l-occitane-international-sa" target="_blank" data-smartkarma-citation="entities:6772:1" rel="noopener">L'Occitane (973 HK)</a>, <a href="https://www.smartkarma.com/entities/qantm-intellectual-property" target="_blank" data-smartkarma-citation="entities:24317:1" rel="noopener">Qantm Intellectual Property (QIP AU)</a>, <a href="https://www.smartkarma.com/entities/alps-logistics-co-ltd" target="_blank" data-smartkarma-citation="entities:3935:1" rel="noopener">Alps Logistics (9055 JP)</a>. 
</li>
</ul>


We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Greatview Aseptic Packaging (468 HK), Asia Cement China (743 HK). 

Lowest spreads: Fancl Corp (4921 JP), Mimasu Semiconductor Industry (8155 JP), Infocom Corp (4348 JP), L'Occitane (973 HK), Qantm Intellectual Property (QIP AU), Alps Logistics (9055 JP). 



Merger Arb Mondays (29 Jul) - China TCM, Canvest, CPMC, GA Pack, Tohokushinsha, Furukawa, Tatsuta

United States

Blackstone Inc. operates as an investment company. The Company focuses on real estate, hedge funds, private equity, leveraged lending, senior debts, and rescue financing. Blackstone serves customers worldwide.

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Blackstone (BX US)

ESR Group (1821 HK): Consortium’s Expansion Talks Suggest Progress

The probability of an offer remains high, and the latest Bloomberg reports suggest progress towards a binding proposal. Our best guess is that an...

Arun George

I'rom Group (2372 JP): ACCC Tail Event Risk Is a Concern

The ACCC's competition concerns are potentially a deal breaker, as it is unclear if Blackstone can or will provide an undertaking to satisfy the...

Arun George

ESR Group (1821 HK): Inching Closer to a Binding Proposal

The addition of new consortium members is a key positive. While the recent market rally is not a dealbreaker, it should give the consortium renewed...

Arun George

ESR Group (1821 HK): A Rumoured Offer Price Surfaces

The rumoured price is not a knockout bid. However, the price and structure would be sufficient to get the support of the major shareholders. The...

Arun George

Merger Arb Mondays (29 Jul) - China TCM, Canvest, CPMC, GA Pack, Tohokushinsha, Furukawa, Tatsuta

This week, the highest gross spreads are HEC Pharma (126.8%), China TCM (37.3%), Canvest (11.9%), GAPack (11.8%), Asia Cement China (10.7%),...

Arun George

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