IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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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

<p><a href="https://www.smartkarma.com/entities/ausnutria-dairy-corp-ltd" target="_blank" data-smartkarma-citation="entities:13799:1" rel="noopener">Ausnutria Dairy Corp (1717 HK)</a> is an international high-end dairy and nutrition products company with an entire business chain of raw milk collection, R&amp;D, production, and end-market sales. Ausnutria is the fifth largest infant formula player in China with a 6.3% market share in 2020.   </p><p>As discussed in <a href="https://www.smartkarma.com/insights/ausnutria-in-trading-halt-will-yili-lob-an-offer" target="_blank" data-smartkarma-citation="insights:58863" rel="noopener">Ausnutria in Trading Halt - Will Yili Lob an Offer?</a>,  Ausnutria entered a trading halt on 12 October pursuant to the Hong Kong Code on Takeovers and Mergers. Earlier, on 1 October, Bloomberg reported that <a href="https://www.smartkarma.com/entities/inner-mongolia-yili-indus-a" target="_blank" data-smartkarma-citation="entities:3220:1" rel="noopener">Inner Mongolia Yili Industrial Group (A) (600887 CH)</a> is exploring a potential takeover of Ausnutria. We noted that Yili is the likely suitor as it has a strategy to increase its scale in the milk powder business through mergers and acquisitions.</p><p>Today, Ausnutria announced a share purchase and subscription agreement with Yili. Yili has entered into a share purchase agreement to acquire 530.8 million shares which represent 30.89% of the outstanding shares at a purchase price is HK$10.06 per sale share. Second, Yili has also entered into a subscription agreement to purchase 90.0 newly issued shares at a purchase price of HK$10.06 per subscription share. The subscription agreement requires EGM approval while both agreements require SAMR approval.</p><p>The completion of the two agreements will result in Yili owning 34.33% of the enlarged share capital and voting rights, which will trigger a mandatory share offer under Rule 26.1 of the Takeovers Code. The potential MGO price of HK$10.06 per share represents a premium of 13.67% over the closing price of HK$8.85 per share on the last trading date (11 October prior to the trading halt) and a premium of 25.1% over the closing price of HK$8.04 per share on the unaffected date (30 September prior to the Bloomberg article).</p><p>The mandatory share offer is conditional on the offeror and parties acting in concert with it holding more than 50% of the voting rights. The offeror has received irrecovables not to accept the offer which represents 24.23% of the enlarged share capital. </p><div class="content-highlight"><p>The 50%+ voting threshold will be satisfied if Yili's MGO secures an additional 283 million shares. Due to the irrecovables not to accept, 37.5% of public shareholders (assuming other directors accept the offer) will need to accept the MGO for it to become unconditional. As the MGO price implies a modest premium to peer multiples and long-term share prices, we think achieving the 50%+ voting threshold could be a tough task. We also note that Yili has stated that it has no intention to privatize Ausnutria. </p></div>

Ausnutria Dairy Corp (1717 HK) is an international high-end dairy and nutrition products company with an entire business chain of raw milk collection, R&amp;D, production, and end-market sales. Ausnutria is the fifth largest infant formula player in China with a 6.3% market share in 2020.   As discussed in Ausnutria in Trading Halt - Will Yili Lob an Offer?,  Ausnutria entered a trading halt on 12 October pursuant to the Hong Kong Code on Takeovers and Mergers. Earlier, on 1 October, Bloomberg reported that Inner Mongolia Yili Industrial Group (A) (600887 CH) is exploring a potential takeover of Ausnutria. We noted that Yili is the likely suitor as it has a strategy to increase its scale in the milk powder business through mergers and acquisitions.Today, Ausnutria announced a share purchase and subscription agreement with Yili. Yili has entered into a share purchase agreement to acquire 530.8 million shares which represent 30.89% of the outstanding shares at a purchase price is HK$10.06 per sale share. Second, Yili has also entered into a subscription agreement to purchase 90.0 newly issued shares at a purchase price of HK$10.06 per subscription share. The subscription agreement requires EGM approval while both agreements require SAMR approval.The completion of the two agreements will result in Yili owning 34.33% of the enlarged share capital and voting rights, which will trigger a mandatory share offer under Rule 26.1 of the Takeovers Code. The potential MGO price of HK$10.06 per share represents a premium of 13.67% over the closing price of HK$8.85 per share on the last trading date (11 October prior to the trading halt) and a premium of 25.1% over the closing price of HK$8.04 per share on the unaffected date (30 September prior to the Bloomberg article).The mandatory share offer is conditional on the offeror and parties acting in concert with it holding more than 50% of the voting rights. The offeror has received irrecovables not to accept the offer which represents 24.23% of the enlarged share capital. The 50%+ voting threshold will be satisfied if Yili's MGO secures an additional 283 million shares. Due to the irrecovables not to accept, 37.5% of public shareholders (assuming other directors accept the offer) will need to accept the MGO for it to become unconditional. As the MGO price implies a modest premium to peer multiples and long-term share prices, we think achieving the 50%+ voting threshold could be a tough task. We also note that Yili has stated that it has no intention to privatize Ausnutria. 

Ausnutria’s Potential Conditional MGO from Yili

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<div>
<p>A little over a week ago, Bloomberg <a href="https://www.just-food.com/news/chinese-dairy-firm-yili-said-to-be-weighing-approach-for-infant-formula-maker-ausnutria/" target="_blank" rel="noopener">reported</a> <a href="https://www.smartkarma.com/entities/inner-mongolia-yili-indus-a" target="_blank" data-smartkarma-citation="entities:3220:1" rel="noopener">Inner Mongolia Yili Industrial Group (A) (600887 CH)</a>, China’s biggest dairy producer, had been running a ruler over infant-formula firm <a href="https://www.smartkarma.com/entities/ausnutria-dairy-corp-ltd" target="_blank" data-smartkarma-citation="entities:13799:1" rel="noopener">Ausnutria Dairy Corp (1717 HK)</a>.</p>
<p>Before the commencement of trading yesterday, Ausnutria was <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1012/2021101200109.pdf" target="_blank" rel="noopener">suspended</a> pursuant to the Hong Kong Code on Takeovers and Mergers. Shares had gained 7.8% on Monday (the 11th) on the largest volume since November of last year. </p>
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<p><a href="https://www.smartkarma.com/entities/charoen-pokphand-foods-public-company-limited" target="_blank" data-smartkarma-citation="entities:16131:1" rel="noopener"></a>SOE CITIC Group is the largest shareholder with <a href="https://di.hkex.com.hk/di/NSForm2.aspx?fn=CS20200831E00300&amp;sa2=as&amp;sid=37215&amp;corpn=Ausnutria+Dairy+Corporation+Ltd.&amp;sd=13%2f10%2f2020&amp;ed=13%2f10%2f2021&amp;cid=0&amp;sa1=cl&amp;scsd=13%2f10%2f2020&amp;sced=13%2f10%2f2021&amp;sc=1717&amp;src=MAIN&amp;lang=EN&amp;g_lang=en&amp;" target="_blank" rel="noopener">22.05%</a>, having being introduced as a strategic investor back in October 2018.</p>
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<p>This insight provides some brief background on Ausnutria, plus speculates on a fair price should a firm Offer unfold. </p>
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A little over a week ago, Bloomberg reported Inner Mongolia Yili Industrial Group (A) (600887 CH), China’s biggest dairy producer, had been running a ruler over infant-formula firm Ausnutria Dairy Corp (1717 HK).
Before the commencement of trading yesterday, Ausnutria was suspended pursuant to the Hong Kong Code on Takeovers and Mergers. Shares had gained 7.8% on Monday (the 11th) on the largest volume since November of last year. 


SOE CITIC Group is the largest shareholder with 22.05%, having being introduced as a strategic investor back in October 2018.


This insight provides some brief background on Ausnutria, plus speculates on a fair price should a firm Offer unfold. 


<p><a href="https://www.smartkarma.com/entities/ausnutria-dairy-corp-ltd" target="_blank" data-smartkarma-citation="entities:13799:1" rel="noopener">Ausnutria Dairy Corp (1717 HK)</a> is an international high-end dairy and nutrition products company with an entire business chain of raw milk collection, R&amp;D, production, and end-market sales. Ausnutria is the fifth largest infant formula player in China with a 6.3% market share in 2020.   </p><p>Ausnutria entered a trading halt today pursuant to the Hong Kong Code on Takeovers and Mergers. On 1 October, Bloomberg reported that <a href="https://www.smartkarma.com/entities/inner-mongolia-yili-indus-a" target="_blank" data-smartkarma-citation="entities:3220:1" rel="noopener">Inner Mongolia Yili Industrial Group (A) (600887 CH)</a> is exploring a potential takeover of Ausnutria. Yili was said to be in talks with banks to finance a potential deal. The article also speculated that Ausnutria could attract takeover interest from other industry players. There was no takeover price or valuation mentioned in the article.  </p><p>We think that Yili is the likely suitor as there is a strong strategic rationale in acquiring Ausnutria. Yili has a strategy to increase its scale in the milk powder business through mergers and acquisitions. Yili was recently unsuccessful in its bid to acquire <a href="https://www.smartkarma.com/entities/reckitt-benckiser-group-plc" target="_blank" data-smartkarma-citation="entities:22105:1" rel="noopener">Reckitt Benckiser (RB/ LN)</a>’s infant-formula and child nutrition business in China. </p><div class="content-highlight"><p>In this note, we look at the strategic rationale for Yili’s potential bid and take a stab at estimating the potential offer price.  </p></div>

Ausnutria Dairy Corp (1717 HK) is an international high-end dairy and nutrition products company with an entire business chain of raw milk collection, R&amp;D, production, and end-market sales. Ausnutria is the fifth largest infant formula player in China with a 6.3% market share in 2020.   Ausnutria entered a trading halt today pursuant to the Hong Kong Code on Takeovers and Mergers. On 1 October, Bloomberg reported that Inner Mongolia Yili Industrial Group (A) (600887 CH) is exploring a potential takeover of Ausnutria. Yili was said to be in talks with banks to finance a potential deal. The article also speculated that Ausnutria could attract takeover interest from other industry players. There was no takeover price or valuation mentioned in the article.  We think that Yili is the likely suitor as there is a strong strategic rationale in acquiring Ausnutria. Yili has a strategy to increase its scale in the milk powder business through mergers and acquisitions. Yili was recently unsuccessful in its bid to acquire Reckitt Benckiser (RB/ LN)’s infant-formula and child nutrition business in China. In this note, we look at the strategic rationale for Yili’s potential bid and take a stab at estimating the potential offer price.  

Ausnutria in Trading Halt - Will Yili Lob an Offer?

Equity Capital Markets

Jacobio Pharmaceuticals / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/jacobio-pharmaceuticals" target="_blank" data-smartkarma-citation="entities:29696:1" rel="noopener">Jacobio Pharmaceuticals (1588148D CH)</a> is a clinical-stage pharma company focusing on the in-house discovery and development of innovative oncology therapies. Jacobio’s strategy of “drugging the undruggable” is based on developing clinical-stage small-molecule drug candidates to modulate enzymes by binding to their allosteric sites. Jacobio is backed by Qiming Venture Partners, Hillhouse Capital, LAV, <a href="https://www.smartkarma.com/entities/center-laboratories-inc" target="_blank" data-smartkarma-citation="entities:10778:1" rel="noopener">Center Laboratories (4123 TT)</a> and CICC Capital Management. The Series C+ round in February 2020 raised $26.0 million at a post-money valuation of $455 million. </p><div class="content-highlight"><p>Jacobio is seeking to raise $300 million through a Hong Kong IPO. Jacobio is one of the few Chinese biotechs which have licensed out their drug candidates to leading global pharma companies such as <a href="https://www.smartkarma.com/entities/abbvie-inc" target="_blank" data-smartkarma-citation="entities:1135:1" rel="noopener">Abbvie Inc (ABBV US)</a>. Jacobio claims to have discovered several drug candidates with the potential to be among the first few market entrants in their respective drug classes globally. Overall, we believe that Jacobio’s clinical assets are attractive. </p></div>

Jacobio Pharmaceuticals (1588148D CH) is a clinical-stage pharma company focusing on the in-house discovery and development of innovative oncology therapies. Jacobio’s strategy of “drugging the undruggable” is based on developing clinical-stage small-molecule drug candidates to modulate enzymes by binding to their allosteric sites. Jacobio is backed by Qiming Venture Partners, Hillhouse Capital, LAV, Center Laboratories (4123 TT) and CICC Capital Management. The Series C+ round in February 2020 raised $26.0 million at a post-money valuation of $455 million. Jacobio is seeking to raise $300 million through a Hong Kong IPO. Jacobio is one of the few Chinese biotechs which have licensed out their drug candidates to leading global pharma companies such as Abbvie Inc (ABBV US). Jacobio claims to have discovered several drug candidates with the potential to be among the first few market entrants in their respective drug classes globally. Overall, we believe that Jacobio’s clinical assets are attractive. 

Jacobio Pharma IPO Initiation: Drugging the Undruggable

Founder

Kemp Dolliver, CFA

Cherrystone Hill Research

<p>Jacobio Pharmaceuticals Group is a pre-revenue pharmaceutical company focused on “drugging the undruggable” targets to treat cancer. The company's pipeline is cutting edge and early stage, but comes with relatively high risk. A license and collaboration agreement with multinational <a href="https://www.smartkarma.com/entities/abbvie-inc" target="_blank" data-smartkarma-citation="entities:1135:1" rel="noopener">Abbvie Inc (ABBV US)</a> provides validation and non-dilutive funding. The management team is experienced and accomplished. The venture investors are credible; and the patent estate has a long life.</p><p>This Insight provides an overview of the business, including some initial thoughts on valuation. We will provide an update with more definitive views on valuation in a future Insight.</p>

Jacobio Pharmaceuticals Group is a pre-revenue pharmaceutical company focused on “drugging the undruggable” targets to treat cancer. The company's pipeline is cutting edge and early stage, but comes with relatively high risk. A license and collaboration agreement with multinational Abbvie Inc (ABBV US) provides validation and non-dilutive funding. The management team is experienced and accomplished. The venture investors are credible; and the patent estate has a long life.This Insight provides an overview of the business, including some initial thoughts on valuation. We will provide an update with more definitive views on valuation in a future Insight.

Taiwan

Center Laboratories Inc. manufactures and markets oral liquid formulations and children's formulations.  The Company is focusing on the development of respiratory care and pain relief products.

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Center Laboratories (4123 TT)

Ausnutria’s Potential Conditional MGO from Yili

The completion of the agreements will result in Yili owning 34.33% voting rights, triggering an MGO at HK$10.06 per share. However, we think...

Arun George

Will Yili Gulp Down Ausnutria (1717 HK)?

Ausnutria is currently trading around multi-year high lows on all metrics despite edging towards an all-time profit high. Optically, this could...

David Blennerhassett

Ausnutria in Trading Halt - Will Yili Lob an Offer?

Bloomberg reported on 1 Oct that Yili is weighing a bid for Ausnutria. We look at the strategic rationale for Yili/Ausnutria combination and take a...

Arun George

Jacobio Pharma IPO Initiation: Drugging the Undruggable

Jacobio is seeking to raise $300 million through a Hong Kong IPO. Overall, we believe that Jacobio’s clinical assets are attractive.

Arun George

Jacobio Pharma: Focus on Novel Targets

An in-depth overview of the proposed listing of Jacobio Pharmaceuticals using a framework that touches on the science, market opportunity,...

Kemp Dolliver, CFA

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