Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>If <strong><a href="https://www.smartkarma.com/entities/bhp-group-ltd" target="_blank" data-smartkarma-citation="entities:147:1" rel="noopener">BHP Group (BHP AU)</a></strong> announces an off-market buyback, there will be demand to replace the shares bought back, re-based higher.</li>
<li>
<strong><a href="https://www.smartkarma.com/entities/bank-of-east-asia-ltd" target="_blank" data-smartkarma-citation="entities:341:1" rel="noopener">Bank of East Asia (23 HK)</a></strong>is trading cheap as Elliott throws in the towel.</li>
<li>The <strong><a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a></strong> selldown could be larger than people expect, and it is a decent chance to put on the arb trade. </li>
</ul>


If BHP Group (BHP AU) announces an off-market buyback, there will be demand to replace the shares bought back, re-based higher.

Bank of East Asia (23 HK)is trading cheap as Elliott throws in the towel.
The Sydney Airport (SYD AU) selldown could be larger than people expect, and it is a decent chance to put on the arb trade. 


Last Week in Event SPACE: BHP, Bank Of East Asia, Sydney Airport, Boral

Travis Lundy

<ul>
<li>
<a href="https://www.smartkarma.com/entities/boral-ltd" target="_blank" data-smartkarma-citation="entities:1487:1" rel="noopener">Boral Ltd (BLD AU)</a> today announced a special dividend and return of capital totalling $2.72/share. That is 46% of yesterday's closing price. </li>
<li>This was not unexpected. Management had promised, media articles had proposed as much. Now it is coming through. </li>
<li>Despite an 11% jump in the forward ex-div price today, the stock is cheap on a FY23 basis.  </li>
</ul>



Boral Ltd (BLD AU) today announced a special dividend and return of capital totalling $2.72/share. That is 46% of yesterday's closing price. 
This was not unexpected. Management had promised, media articles had proposed as much. Now it is coming through. 
Despite an 11% jump in the forward ex-div price today, the stock is cheap on a FY23 basis.  


Boral's 45% Capital Return - Resetting Forward Expectations

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<p>S&amp;P Dow Jones Indices will announce changes to the S&amp;P/ASX 100, <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> and S&amp;P/ASX300 as part of the September index review on 3 September and the changes will be effective after the close of trading on 17 September.</p><p>The review period for the rebalance ends on 20 August, so there are only 3 days to go in the review period with 124 days completed.</p><p>For the ASX100, we see <a href="https://www.smartkarma.com/entities/boral-ltd" target="_blank" data-smartkarma-citation="entities:1487:1" rel="noopener">Boral Ltd (BLD AU)</a> as a potential deletion following the reduction in its free float following <a href="https://www.smartkarma.com/entities/seven-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:803:1" rel="noopener">Seven Group Holdings (SVW AU)</a>'s tender offer. This is the possibility of another change with <a href="https://www.smartkarma.com/entities/steadfast-group-ltd" target="_blank" data-smartkarma-citation="entities:8181:1" rel="noopener">Steadfast (SDF AU)</a> replacing <a href="https://www.smartkarma.com/entities/beach-energy-ltd" target="_blank" data-smartkarma-citation="entities:795:1" rel="noopener">Beach Energy (BPT AU)</a> in the index.</p><p>For the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a>, we see <a href="https://www.smartkarma.com/entities/pinnacle-investment-management" target="_blank" data-smartkarma-citation="entities:20624:1" rel="noopener">Pinnacle Investment Management (PNI AU)</a>, <a href="https://www.smartkarma.com/entities/sealink-travel-group-ltd" target="_blank" data-smartkarma-citation="entities:6400:1" rel="noopener">Sealink Travel (SLK AU)</a>, <a href="https://www.smartkarma.com/entities/de-grey-mining-ltd" target="_blank" data-smartkarma-citation="entities:6192:1" rel="noopener">De Grey Mining (DEG AU)</a> and <a href="https://www.smartkarma.com/entities/amalgamated-holdings-ltd" target="_blank" data-smartkarma-citation="entities:20978:1" rel="noopener">Event Hospitality and Entertainment (EVT AU)</a> as potential inclusions, while <a href="https://www.smartkarma.com/entities/nuix-limited" target="_blank" data-smartkarma-citation="entities:31040:1" rel="noopener">Nuix Limited (NXL AU)</a>, <a href="https://www.smartkarma.com/entities/nrw-holdings-ltd" target="_blank" data-smartkarma-citation="entities:9271:1" rel="noopener">NRW Holdings (NWH AU)</a>, <a href="https://www.smartkarma.com/entities/g8-education-ltd" target="_blank" data-smartkarma-citation="entities:581:1" rel="noopener">G8 Education (GEM AU)</a> and <a href="https://www.smartkarma.com/entities/westgold-resources-ltd" target="_blank" data-smartkarma-citation="entities:24269:1" rel="noopener">Westgold Resources (WGX AU)</a> are potential deletions.</p><p>For the ASX300, potential inclusions are <a href="https://www.smartkarma.com/entities/paladin-energy-ltd" target="_blank" data-smartkarma-citation="entities:10117:1" rel="noopener">Paladin Energy (PDN AU)</a>, <a href="https://www.smartkarma.com/entities/imugene-ltd" target="_blank" data-smartkarma-citation="entities:20276:1" rel="noopener">Imugene Ltd (IMU AU)</a>, <a href="https://www.smartkarma.com/entities/liontown-resources-ltd" target="_blank" data-smartkarma-citation="entities:20488:1" rel="noopener">Liontown Resources (LTR AU)</a>, <a href="https://www.smartkarma.com/entities/betmakers-technology-group-ltd" target="_blank" data-smartkarma-citation="entities:25489:1" rel="noopener">BetMakers Technology Group (BET AU)</a>, <a href="https://www.smartkarma.com/entities/novonix-ltd" target="_blank" data-smartkarma-citation="entities:29093:1" rel="noopener">Novonix Ltd (NVX AU)</a>, <a href="https://www.smartkarma.com/entities/dubber-corp-ltd" target="_blank" data-smartkarma-citation="entities:15396:1" rel="noopener">Dubber Corp Ltd (DUB AU)</a>, <a href="https://www.smartkarma.com/entities/johns-lyng-group-ltd" target="_blank" data-smartkarma-citation="entities:26649:1" rel="noopener">Johns Lyng (JLG AU)</a> and <a href="https://www.smartkarma.com/entities/strike-energy-ltd" target="_blank" data-smartkarma-citation="entities:12473:1" rel="noopener">Strike Energy (STX AU)</a>, while potential deletions are <a href="https://www.smartkarma.com/entities/bubs-australia-ltd" target="_blank" data-smartkarma-citation="entities:6296:1" rel="noopener">Bubs Australia (BUB AU)</a>, <a href="https://www.smartkarma.com/entities/synlait-milk-ltd" target="_blank" data-smartkarma-citation="entities:16298:1" rel="noopener">Synlait Milk (SML NZ)</a>, <a href="https://www.smartkarma.com/entities/integrated-research-ltd" target="_blank" data-smartkarma-citation="entities:6744:1" rel="noopener">Integrated Research (IRI AU)</a>, <a href="https://www.smartkarma.com/entities/maca-ltd" target="_blank" data-smartkarma-citation="entities:11390:1" rel="noopener">Maca Ltd (MLD AU)</a> and <a href="https://www.smartkarma.com/entities/medical-developments-international" target="_blank" data-smartkarma-citation="entities:18644:1" rel="noopener">Medical Developments International (MVP AU)</a>.</p><p>The impact is quite large on the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> expected changes while there could be a large impact on <a href="https://www.smartkarma.com/entities/steadfast-group-ltd" target="_blank" data-smartkarma-citation="entities:8181:1" rel="noopener">Steadfast (SDF AU)</a> if it is included in the ASX100.</p>

S&amp;P Dow Jones Indices will announce changes to the S&amp;P/ASX 100, S&amp;P/ASX 200 (AS51 INDEX) and S&amp;P/ASX300 as part of the September index review on 3 September and the changes will be effective after the close of trading on 17 September.The review period for the rebalance ends on 20 August, so there are only 3 days to go in the review period with 124 days completed.For the ASX100, we see Boral Ltd (BLD AU) as a potential deletion following the reduction in its free float following Seven Group Holdings (SVW AU)'s tender offer. This is the possibility of another change with Steadfast (SDF AU) replacing Beach Energy (BPT AU) in the index.For the S&amp;P/ASX 200 (AS51 INDEX), we see Pinnacle Investment Management (PNI AU), Sealink Travel (SLK AU), De Grey Mining (DEG AU) and Event Hospitality and Entertainment (EVT AU) as potential inclusions, while Nuix Limited (NXL AU), NRW Holdings (NWH AU), G8 Education (GEM AU) and Westgold Resources (WGX AU) are potential deletions.For the ASX300, potential inclusions are Paladin Energy (PDN AU), Imugene Ltd (IMU AU), Liontown Resources (LTR AU), BetMakers Technology Group (BET AU), Novonix Ltd (NVX AU), Dubber Corp Ltd (DUB AU), Johns Lyng (JLG AU) and Strike Energy (STX AU), while potential deletions are Bubs Australia (BUB AU), Synlait Milk (SML NZ), Integrated Research (IRI AU), Maca Ltd (MLD AU) and Medical Developments International (MVP AU).The impact is quite large on the S&amp;P/ASX 200 (AS51 INDEX) expected changes while there could be a large impact on Steadfast (SDF AU) if it is included in the ASX100.

ASX100/200/300 Index Rebalance Preview: Big Impact & Large Shorts

<div>
<p>After <a href="https://www.smartkarma.com/entities/boral-ltd" target="_blank" data-smartkarma-citation="entities:1487:1" rel="noopener">Boral Ltd (BLD AU)</a>'s board rejected <a href="https://www.smartkarma.com/entities/seven-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:803:1" rel="noopener">Seven Group Holdings (SVW AU)</a>'s $6.50/share Offer in its <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02383423-2A1302901?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">Target Statement</a> of 9 June, Seven <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02383423-2A1302901?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">bumped</a> its Offer on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02388314-2A1305588?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">25 June</a>, stating it would pay $7.30 cash if they get to 29.5%, and up to $7.40 cash if they get to 34.5%.</p>
</div>
<div>
<p>Seven reached 29.5% by <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02390670-2A1307144?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">July 1</a>, 34.5% less than a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02392570-2A1308444?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">week later</a>, then 52.65% on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02395727-2A1310071?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">15 July</a>. Clearing 50% automatically extended the Offer period (pursuant to<a href="http://www5.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s624.html" target="_blank" rel="noopener"> s624</a> of the Corporations Act) to the 29 July - i.e. a two-week extension.</p>
<p>As of this morning, Seven held <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02398044-2A1311218?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">59.23%</a>. </p>
</div>
<div>
<p><a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25" rel="noopener">Travis Lundy</a> and I have tackled this Offer <a href="https://skr.ma/Bxs7L" target="_blank" rel="noopener">here</a>, <a href="https://www.smartkarma.com/compose/insight/54682/Boral%20Ltd%20(BLD%20AU)%20Rejects%20Seven's%20Bump.%20Read%20more:%20https:/skr.ma/46Wun" target="_blank" rel="noopener">here</a>, and <a href="https://skr.ma/q9jMa" target="_blank" rel="noopener">here</a>.</p>
<p>With the Offer tentatively expected to close in a week's time, now is a good time to address a handful of questions I and other readers have raised.</p>
</div>


After Boral Ltd (BLD AU)'s board rejected Seven Group Holdings (SVW AU)'s $6.50/share Offer in its Target Statement of 9 June, Seven bumped its Offer on the 25 June, stating it would pay $7.30 cash if they get to 29.5%, and up to $7.40 cash if they get to 34.5%.


Seven reached 29.5% by July 1, 34.5% less than a week later, then 52.65% on the 15 July. Clearing 50% automatically extended the Offer period (pursuant to s624 of the Corporations Act) to the 29 July - i.e. a two-week extension.
As of this morning, Seven held 59.23%. 


Travis Lundy and I have tackled this Offer here, here, and here.
With the Offer tentatively expected to close in a week's time, now is a good time to address a handful of questions I and other readers have raised.


Boral Ltd: Seven's Done Deal. What Happens Next?

<div><p>After completing the $1.3bn sale of its 50% stake in USG Boral to Knauf Gips KG, international building and construction materials play <a href="https://www.smartkarma.com/entities/boral-ltd" target="_blank" data-smartkarma-citation="entities:1487:1" rel="noopener">Boral Ltd (BLD AU)</a> made an <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02359742-2A1290439?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announcement</a> on April 1 it would use the proceeds to reduce net debt to A$1.5bn from A$1.9bn, and apply the remaining proceeds to a stock buyback. </p></div><div><p>Boral aims to buy up to 10% of shares out, or ~122mn shares, at a cost of A$670mn based on the then-prevalent share price. CEO Zlato Todorcevski said: “we believe that an on-market buy-back is the most effective method of returning this surplus capital to our shareholders.”</p></div><div>
<p>As of the morning of <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02372944-2A1297240?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">May 10th</a>, Boral had bought back ~10.15mn shares - a bit less than 1%. </p>
<p>After the close that day, <a href="https://www.smartkarma.com/entities/seven-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:803:1" rel="noopener">Seven Group Holdings (SVW AU)</a> <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02373310-2A1297476?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> an off-market takeover at $6.50, at a zero premium to the last close. There were essentially no conditions to this Offer. There was no minimum acceptance condition. Seven held ~23.18% and said it would be "satisfied" for the Offer to result in a holding of around 30%. But there was no cap, and they were clearly happy to go higher. </p>
<p>Seven Group had bought shares in the market in early 2020 in the covid crash, and by early June, owned 10%. by 11 September it owned 19.98%. In Australia, you can't go above 20% unless you launch a takeover, except for the neat little workaround which is that Australia's "creep rules" allow someone with more than 20% to buy up to but not more than 3.00% of shares out every six months. Seven got to 22.984% in early April. </p>
<p>Boral's board rejected the Seven Offer in its <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02383423-2A1302901?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">Target Statement</a> of 9 June. The Independent Expert Grant Samuel came out with a fair value range of A$8.25-A$9.13/share, and concluded the Offer was <em>not fair or reasonable</em>.</p>
<p>In an ASX release on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02386227-2A1304322?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">21 June</a>, Boral said it would sell its North American Building Products business for US$2.15bn (~A$2.9bn). That figure was above expectations, but Seven criticized them for selling at a loss. </p>
<p>About a week later, Seven <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02383423-2A1302901?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">bumped</a> its Offer, saying it would pay $7.30 cash if they get to 29.5%. Or $7.40 cash if they get to 34.5%.</p>
<p>Seven got to 29.5% by July 1, and 34.5% less than a week later.</p>
<p>Boral finished its buyback Wednesday having spent A$859.5MM buying back 122MM+ shares at an average price of $7.01 per share. This reduces the denominator, so Seven's stake has gone higher automatically in the interim.</p>
<p>Yesterday they announced they were at 44.9% as of Monday's close, and this morning they announced 48.41%. The deal closes 7pm Thursday which means two more submission days. It looks like they will get to 50.0% and if that happens, then there is an automatic 14-day extension. </p>
<p><a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a> has provided great background research on this situation in <a href="https://www.smartkarma.com/insights/boral-ltd-bld-au-seven-s-nil-premium" target="_blank" data-smartkarma-citation="insights:51279" rel="noopener">Boral Ltd (BLD AU): Seven's Nil Premium</a> and <a href="https://www.smartkarma.com/insights/boral-ltd-bld-au-rejects-seven-s-bump" target="_blank" data-smartkarma-citation="insights:53624" rel="noopener">Boral Ltd (BLD AU) Rejects Seven's Bump</a>. </p>
<p>I seek to add on with last minute strategy and thinking about the post-Offer landscape, and there is more below the fold. </p>
</div>

After completing the $1.3bn sale of its 50% stake in USG Boral to Knauf Gips KG, international building and construction materials play Boral Ltd (BLD AU) made an announcement on April 1 it would use the proceeds to reduce net debt to A$1.5bn from A$1.9bn, and apply the remaining proceeds to a stock buyback. Boral aims to buy up to 10% of shares out, or ~122mn shares, at a cost of A$670mn based on the then-prevalent share price. CEO Zlato Todorcevski said: “we believe that an on-market buy-back is the most effective method of returning this surplus capital to our shareholders.”
As of the morning of May 10th, Boral had bought back ~10.15mn shares - a bit less than 1%. 
After the close that day, Seven Group Holdings (SVW AU) announced an off-market takeover at $6.50, at a zero premium to the last close. There were essentially no conditions to this Offer. There was no minimum acceptance condition. Seven held ~23.18% and said it would be "satisfied" for the Offer to result in a holding of around 30%. But there was no cap, and they were clearly happy to go higher. 
Seven Group had bought shares in the market in early 2020 in the covid crash, and by early June, owned 10%. by 11 September it owned 19.98%. In Australia, you can't go above 20% unless you launch a takeover, except for the neat little workaround which is that Australia's "creep rules" allow someone with more than 20% to buy up to but not more than 3.00% of shares out every six months. Seven got to 22.984% in early April. 
Boral's board rejected the Seven Offer in its Target Statement of 9 June. The Independent Expert Grant Samuel came out with a fair value range of A$8.25-A$9.13/share, and concluded the Offer was not fair or reasonable.
In an ASX release on the 21 June, Boral said it would sell its North American Building Products business for US$2.15bn (~A$2.9bn). That figure was above expectations, but Seven criticized them for selling at a loss. 
About a week later, Seven bumped its Offer, saying it would pay $7.30 cash if they get to 29.5%. Or $7.40 cash if they get to 34.5%.
Seven got to 29.5% by July 1, and 34.5% less than a week later.
Boral finished its buyback Wednesday having spent A$859.5MM buying back 122MM+ shares at an average price of $7.01 per share. This reduces the denominator, so Seven's stake has gone higher automatically in the interim.
Yesterday they announced they were at 44.9% as of Monday's close, and this morning they announced 48.41%. The deal closes 7pm Thursday which means two more submission days. It looks like they will get to 50.0% and if that happens, then there is an automatic 14-day extension. 
David Blennerhassett has provided great background research on this situation in Boral Ltd (BLD AU): Seven's Nil Premium and Boral Ltd (BLD AU) Rejects Seven's Bump. 
I seek to add on with last minute strategy and thinking about the post-Offer landscape, and there is more below the fold. 


Boral's Bump Earned, Likely to Extend, but THEN WHAT?

Australia

Boral Limited is a manufacturer and supplier of building and construction materials in Australia and internationally.  Boral supplies building products to the residential and commercial building markets, operates clay brick business in the U.S. (for clay roof tiles and fly ash) along with the production of plasterboard, timber products and concrete products.

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Boral Ltd (BLD AU)

Last Week in Event SPACE: BHP, Bank Of East Asia, Sydney Airport, Boral

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Boral's 45% Capital Return - Resetting Forward Expectations

Boral has finally announced its massive capital return to shareholders after significant asset sales in the last 12 months. There is probably more...

Travis Lundy

ASX100/200/300 Index Rebalance Preview: Big Impact & Large Shorts

There are a lot of changes expected across the ASX100, 200 & 300 indices at the September rebalance. A lot of those stocks will have a large impact...

Brian Freitas

Boral Ltd: Seven's Done Deal. What Happens Next?

I wouldn't short shares here. Not until you have some visibility whether Seven keeps extending, and/or closes in on 75%. If Seven gets to 75%, they...

David Blennerhassett

Boral's Bump Earned, Likely to Extend, but THEN WHAT?

Seven Group is nearing 50% on Boral, with two days left in the offer. Odds are they get there. If they do, the offer extends 14 days automatically....

Travis Lundy

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