Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p>Back on the 29 July, trading and wealth management software provider <a href="https://www.smartkarma.com/entities/iress-ltd" target="_blank" data-smartkarma-citation="entities:15342:1" rel="noopener">Iress Ltd (IRE AU)</a> <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02400486-3A571606?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> it had received a confidential, unsolicited, non-binding, and indicative proposal from Swedish PE outfit EQT Fund Management via a Scheme of Arrangement at a price range of between A$15.30 and A$15.50 cash per share. EQT had previously fielded an Offer of A$14.80/share on the 18 June.</p>
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<p>Iress' board unanimously concluded that the 4% bump - if using the mid-price of the price range - attached to the latest Proposal was<em> "conditional and did not represent compelling value for Iress shareholders</em>". </p>
<p>In <em><a href="https://skr.ma/2sAsB" target="_blank" rel="noopener">Iress (ASX AU) Bats Away EQT - For Now</a></em>, I suggested getting involved around $14.30/share.</p>
<p>Iress' board has now backed a revised Offer from EQT - but at <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">$15.91/share</a>, just 3.3% above the previous proposal.</p>
<p>Due diligence, on an exclusive basis, has been granted. </p>
<p>This looks done, but remains non-binding. Plus there is the question mark over why the board was quick to agree to terms such that an additional ~3% becomes "compelling". </p>
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<p>As always, more below the fold.</p>
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Back on the 29 July, trading and wealth management software provider Iress Ltd (IRE AU) announced it had received a confidential, unsolicited, non-binding, and indicative proposal from Swedish PE outfit EQT Fund Management via a Scheme of Arrangement at a price range of between A$15.30 and A$15.50 cash per share. EQT had previously fielded an Offer of A$14.80/share on the 18 June.


Iress' board unanimously concluded that the 4% bump - if using the mid-price of the price range - attached to the latest Proposal was "conditional and did not represent compelling value for Iress shareholders". 
In Iress (ASX AU) Bats Away EQT - For Now, I suggested getting involved around $14.30/share.
Iress' board has now backed a revised Offer from EQT - but at $15.91/share, just 3.3% above the previous proposal.
Due diligence, on an exclusive basis, has been granted. 
This looks done, but remains non-binding. Plus there is the question mark over why the board was quick to agree to terms such that an additional ~3% becomes "compelling". 


As always, more below the fold.


Iress (IRE AU) Accepts EQT's Latest Proposal

<p>The bidding for companies in Australia's technology sector continues.</p>
<p>Trading and wealth management software provider <a href="https://www.smartkarma.com/entities/iress-ltd" target="_blank" data-smartkarma-citation="entities:15342:1" rel="noopener">Iress Ltd (IRE AU)</a> <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02400486-3A571606?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> this morning it had received a confidential, unsolicited, non-binding, and indicative proposal from Swedish PE outfit EQT Fund Management via a Scheme of Arrangement at a price range of between A$15.30 and A$15.50 cash per share.</p>
<p>EQT had previously fielded an Offer of A$14.80/share on the 18 June.</p>
<p>Iress' board unanimously concluded that the Proposal was "<em>conditional and did not represent compelling value for Iress shareholders</em>". But the board was:</p>
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<p>prepared to provide it with access to limited non-public information so EQT can develop a proposal that is capable of being recommended to shareholders.</p>
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<p>Iress closed up 15% today, but still 7% below the mid-point of the Indicative Offer price range.</p>
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<p>As always, more below the fold.</p>
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The bidding for companies in Australia's technology sector continues.
Trading and wealth management software provider Iress Ltd (IRE AU) announced this morning it had received a confidential, unsolicited, non-binding, and indicative proposal from Swedish PE outfit EQT Fund Management via a Scheme of Arrangement at a price range of between A$15.30 and A$15.50 cash per share.
EQT had previously fielded an Offer of A$14.80/share on the 18 June.
Iress' board unanimously concluded that the Proposal was "conditional and did not represent compelling value for Iress shareholders". But the board was:

prepared to provide it with access to limited non-public information so EQT can develop a proposal that is capable of being recommended to shareholders.

Iress closed up 15% today, but still 7% below the mid-point of the Indicative Offer price range.

As always, more below the fold.


Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

<p>On 16 November 2020, Australia-based Childcare company <a href="https://www.smartkarma.com/entities/think-childcare-ltd" target="_blank" data-smartkarma-citation="entities:18899:1" rel="noopener">Think Childcare (TNK AU)</a> received a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02308970-3A555430?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">Non-binding Indicative Proposal</a> at an Offer Price of A$1.35/share from the PE arm of <a href="https://www.alceon.com.au/" target="_blank" rel="noopener">Alceon Group</a> which is an Australian independent multi-strategy alternative investments firm. </p><p>In my insight <a href="https://www.smartkarma.com/insights/think-childcare-tnk-au-takeover-proposal-from-alceon-group-seems-light" target="_blank" data-smartkarma-citation="insights:45429" rel="noopener">Think Childcare (TNK AU) : Takeover Proposal From Alceon Group Seems Light</a>, I concluded that this Offer Price of A$1.35 seemed light on a growth-adjusted basis and when compared against the valuations of other local and global peers.  I mentioned the possibility of bumpitrage but low liquidity made it iffy and I was not bullish on the trade.</p><p>A week later, on 23rd Nov 2020, TNK received a <em><strong><a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02311977-3A556064?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">competitive bid</a></strong></em> at an Offer Price of A$1.75/share from Busy Bees Early Learning Australia Pty Ltd which is the Australian arm of multinational child care firm Busy Bees Nursery Group which is backed by Ontario Teachers’ Pension Plan (OTPP) and Temasek.</p><p><em>I got bullish</em> and discussed this competitive situation in <a href="https://www.smartkarma.com/insights/think-childcare-tnk-au-competitive-bid-by-busy-bees" target="_blank" data-smartkarma-citation="insights:45609" rel="noopener">Think Childcare (TNK AU): Competitive Bid by Busy Bees</a> pointing out the implications of Alceon's matching right and since TNK's share price of A$1.60 translated to a <em>very</em> attractive spread given the high likelihood of a further overbid, I was Bullish on the stock.</p><blockquote><p><strong>THE TRADE: I would be LONG now.</strong> I expect TNK shareholders to receive at least A$1.75/share at the end of this competitive situation and I also expect TNK to trade much closer to terms once there is more clarity on Alceon's stance in the next 5 days. <strong>(<a href="https://www.smartkarma.com/insights/think-childcare-tnk-au-competitive-bid-by-busy-bees" target="_blank" rel="noopener">written 23 Nov 2020</a>)</strong></p></blockquote><p>Although initially Alceon let their matching right lapse, a month later, on 24th December 2020, they launched a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02326507-3A558868?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">revised non-binding and indicative proposal</a> matching that of Busy Bees' non-binding bid (A$1.75/share) and also announced they had acquired a relevant interest of 19.23% in TNK.  </p><p>Today, Busy Bees <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02332137-3A559736?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">revised their competitive bid</a> to A$2.10/share -  a 20% bump from the previous bid level. </p><p>TNK shares last closed at A$2.00. </p><div><p><em>More below the fold. </em></p></div><hr><div><div><div class="content-remarks"><p>For more information about M&amp;A rules, regulations, and practices in Australia, please refer to <a href="https://www.smartkarma.com/insights/quiddity-australia-m-a-guide-2019" target="_blank" data-smartkarma-citation="insights:30118" rel="noopener">Quiddity Australia M&amp;A Guide 2019</a> and <a href="https://www.smartkarma.com/insights/quiddity-m-a-australia-foreign-investment-reforms" target="_blank" data-smartkarma-citation="insights:40210" rel="noopener">Quiddity M&amp;A: Australia Foreign Investment Reforms</a> </p></div></div></div>

On 16 November 2020, Australia-based Childcare company Think Childcare (TNK AU) received a Non-binding Indicative Proposal at an Offer Price of A$1.35/share from the PE arm of Alceon Group which is an Australian independent multi-strategy alternative investments firm. In my insight Think Childcare (TNK AU) : Takeover Proposal From Alceon Group Seems Light, I concluded that this Offer Price of A$1.35 seemed light on a growth-adjusted basis and when compared against the valuations of other local and global peers.  I mentioned the possibility of bumpitrage but low liquidity made it iffy and I was not bullish on the trade.A week later, on 23rd Nov 2020, TNK received a competitive bid at an Offer Price of A$1.75/share from Busy Bees Early Learning Australia Pty Ltd which is the Australian arm of multinational child care firm Busy Bees Nursery Group which is backed by Ontario Teachers’ Pension Plan (OTPP) and Temasek.I got bullish and discussed this competitive situation in Think Childcare (TNK AU): Competitive Bid by Busy Bees pointing out the implications of Alceon's matching right and since TNK's share price of A$1.60 translated to a very attractive spread given the high likelihood of a further overbid, I was Bullish on the stock.THE TRADE: I would be LONG now. I expect TNK shareholders to receive at least A$1.75/share at the end of this competitive situation and I also expect TNK to trade much closer to terms once there is more clarity on Alceon's stance in the next 5 days. (written 23 Nov 2020)Although initially Alceon let their matching right lapse, a month later, on 24th December 2020, they launched a revised non-binding and indicative proposal matching that of Busy Bees' non-binding bid (A$1.75/share) and also announced they had acquired a relevant interest of 19.23% in TNK.  Today, Busy Bees revised their competitive bid to A$2.10/share -  a 20% bump from the previous bid level. TNK shares last closed at A$2.00. More below the fold. For more information about M&amp;A rules, regulations, and practices in Australia, please refer to Quiddity Australia M&amp;A Guide 2019 and Quiddity M&amp;A: Australia Foreign Investment Reforms 

Think Childcare (TNK AU): Bigger Bid by Busy Bees

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

<p><strong><em>*Interesting Strategic Move: </em></strong>On December 23, 2020, Challenger (CGF.AU) announced its intention to acquire MyLifeMyFinance (MLMF), an Australian savings &amp; loan (S&amp;L) for AUD 35 mn from MyLifeMyMoney Superannuation Fund (known as “Catholic Super”). Following the acquisition, Challenger will hold an Australian Prudential Regulation Authority (APRA) authorized deposit-taking institution (ADI) license. Unlike traditional Australian banks, Challenger will relay far less on home lending an rather focus its asset generation on existing investment activities;  and</p><p><strong><em>*But A Pricey Deal: </em></strong>While this is an interesting strategic transaction for Challenger, it was not cheap. Challenger paid 2.4x P/BV for MLMF based on 3Q20 figures – well above the commercial bank average in Australia. We infer from Challenger’s guidance for FY 2021 that MLMF generates approximately AUD 2 mn per annum – implying a P/E of 17.5x. Taking its 60 bp cover of stated loans, we are confident that MLMF is actually understating its full cost by between AUD 2-3 mn. It’s a good thing the absolute dollar value was tiny. </p>

*Interesting Strategic Move: On December 23, 2020, Challenger (CGF.AU) announced its intention to acquire MyLifeMyFinance (MLMF), an Australian savings &amp; loan (S&amp;L) for AUD 35 mn from MyLifeMyMoney Superannuation Fund (known as “Catholic Super”). Following the acquisition, Challenger will hold an Australian Prudential Regulation Authority (APRA) authorized deposit-taking institution (ADI) license. Unlike traditional Australian banks, Challenger will relay far less on home lending an rather focus its asset generation on existing investment activities;  and*But A Pricey Deal: While this is an interesting strategic transaction for Challenger, it was not cheap. Challenger paid 2.4x P/BV for MLMF based on 3Q20 figures – well above the commercial bank average in Australia. We infer from Challenger’s guidance for FY 2021 that MLMF generates approximately AUD 2 mn per annum – implying a P/E of 17.5x. Taking its 60 bp cover of stated loans, we are confident that MLMF is actually understating its full cost by between AUD 2-3 mn. It’s a good thing the absolute dollar value was tiny. 

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<p>On the 12 October,  <a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Administration Holdings (LNK AU)</a> <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02292481-2A1255763?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> a conditional, non-binding indicative proposal from a consortium comprising PEP and the Carlyle Group, by way of a Scheme. The indicative cash price was A$5.20/share, a 30% premium to last close. Perpetual, holding 9.65% of shares out, said it would vote for a firm Offer of $5.20/share and above.</p>
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<div>On the 23 October, Link <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02297758-2A1258281?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">said</a> the proposal from PEP/Carlyle "<em>materially undervalued the company</em>". </div>
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<div>Three days later PEP/Carlyle <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02298663-2A1258716?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">tabled</a> a A$5.40/share non-binding indicative Offer, in cash. The proposal includes an option of a cash offer for Link ex-Property Exchange Australia (PEXA) of A$3.80/share, along with the ability to take an indirect interest in PEXA. Shareholders with <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02298654-2A1258715?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">14.62%</a> of shares out stated their intention to vote in favour of PEP/Carlyle's latest proposal, in the absence of a superior offer.</div>
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<p>PEP/Carlyle said it required six weeks of due diligence, and if DD access was not provided by the 28 October, they would walk. Link <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02300645-2A1259592?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">responded</a> that the proposal was not compelling - but gave the consortium DD access nonetheless.</p>
<h3>The New News</h3>
<p>Software provider <a href="https://www.smartkarma.com/entities/ss-c-technologies-holdings" target="_blank" data-smartkarma-citation="entities:3464:1" rel="noopener">Ss&amp;C Technologies (SSNC US)</a> has now pitched a non-binding indicative proposal, by way of Scheme, at A$5.65/share, 4.6% above PEP/Carlyle's proposal.</p>
<p>Conditions to this proposal largely mirror that of PEP/Carlyle's: confirmatory DD, obtaining debt financing, FIRB (and ACCC). And no further dividends.</p>
<p>Less than six weeks ago, Link's board said a $5.40/share Offer did not represent compelling value for Link. It is difficult to believe an offer 4.6% higher will change that view.</p>
<p>More below the fold.</p>
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On the 12 October,  Link Administration Holdings (LNK AU) announced a conditional, non-binding indicative proposal from a consortium comprising PEP and the Carlyle Group, by way of a Scheme. The indicative cash price was A$5.20/share, a 30% premium to last close. Perpetual, holding 9.65% of shares out, said it would vote for a firm Offer of $5.20/share and above.


On the 23 October, Link said the proposal from PEP/Carlyle "materially undervalued the company". 

Three days later PEP/Carlyle tabled a A$5.40/share non-binding indicative Offer, in cash. The proposal includes an option of a cash offer for Link ex-Property Exchange Australia (PEXA) of A$3.80/share, along with the ability to take an indirect interest in PEXA. Shareholders with 14.62% of shares out stated their intention to vote in favour of PEP/Carlyle's latest proposal, in the absence of a superior offer.



PEP/Carlyle said it required six weeks of due diligence, and if DD access was not provided by the 28 October, they would walk. Link responded that the proposal was not compelling - but gave the consortium DD access nonetheless.
The New News
Software provider Ss&amp;C Technologies (SSNC US) has now pitched a non-binding indicative proposal, by way of Scheme, at A$5.65/share, 4.6% above PEP/Carlyle's proposal.
Conditions to this proposal largely mirror that of PEP/Carlyle's: confirmatory DD, obtaining debt financing, FIRB (and ACCC). And no further dividends.
Less than six weeks ago, Link's board said a $5.40/share Offer did not represent compelling value for Link. It is difficult to believe an offer 4.6% higher will change that view.
More below the fold.


Link Admin (LNK AU): SS&C Trumps PEP/Carlyle

Australia

Challenger Limited is an investment management firm  The Company offers annuities and other retirement income products as well as manages assets for domestic and international clients.

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Challenger Ltd (CGF AU)

Iress (IRE AU) Accepts EQT's Latest Proposal

Currently trading at a 5.4%/13.4% gross/annualised spread, assuming five months from hereon to complete. That looks like a reasonable price level...

David Blennerhassett

Iress (ASX AU) Bats Away EQT - For Now

I would be picking Iress up on any weakness. This space is attracting a lot of interested parties. However, this is still a non-binding situation.

David Blennerhassett

Think Childcare (TNK AU): Bigger Bid by Busy Bees

Investors in Think Childcare have seen a bump, a match, and now another 20% bump. Alceon is sitting on 20% gains and can match, beat, or sell. It's...

Janaghan Jeyakumar, CFA

Challenger - Big Opportunity

CHALLENGER LTD: Challenger announced its intention to acquire MyLifeMyFinance . This deal, while small, was not cheap - but no doubt will be...

Thomas J. Monaco

Link Admin (LNK AU): SS&C Trumps PEP/Carlyle

This remains a non-binding situation, albeit a competitive one. I'd play the spread, and pay at SS&C Technologie's terms.

David Blennerhassett

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