Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Back in May 2016, subsequent to a reshuffling in the indirect ownership into <a href="https://www.smartkarma.com/entities/china-automation-group" target="_blank" data-smartkarma-citation="entities:3335:1">China Automation (569 HK)</a> ("CAGL"), Xuan Rui Guo, CAGL's chairman (with financing from <a href="http://www.ascendentcp.com/en/" target="_blank">Ascendent Capital Partners</a> (AACL)) <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2016/0624/ltn20160624982.pdf" target="_blank">launche</a>d a conditional mandatory general offer at $1.20 (an 11.1% and 36.2% premium to last close and one-month VWAP).
The intention then was to maintain CAGL's listing. The <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2016/0805/ltn20160805013.pdf" target="_blank">Offer document</a> was issued on the 5 August and the Offer successfully <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2016/0909/ltn20160909857.pdf" target="_blank">closed</a> with 25.46% in the hands of minorities. Shares were held as to 50.25% (515.7mn) by Brightex, Xuan's vehicle, and 24.19% (248.2mn) by AACL.  This shareholding structure has remained largely static since. 
In March 2017, CAGL <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2017/0331/ltn20170331013.pdf" target="_blank">announced</a> an intention to acquire an interest in a privately owned hospital in Suzhou, and was <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2017/0727/ltn20170727013.pdf" target="_blank">completed</a> in July. The vendor was AACL.
The New News
Xuan and AACL have <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0614/ltn201906141055.pdf" target="_blank">announced</a> a privatisation by way of a Scheme at $1.50/share cash, an 11.94% and 47.78% premium to last close and one-month VWAP. The Offer Price is also a 27.12% premium over the closing price on 30 April, being the last full trading day prior to the issuance of the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0503/ltn201905031531.pdf" target="_blank">initial announcement</a>. 
The headcount test applies as CAGL is Cayman incorporated. Independent shareholders hold 25.44% of the company, therefore, the blocking stake is 2.54% or 26.1mn shares. At terms, that is just about US$5mm.
The Scheme Offer Price appears to be short-changing minorities, but there's probably not a lot they can (or want to) do - shares are illiquid and the premium to the unaffected price is decent, with the price around a three-year high. 
This Offer should get up. I see a gross/annualised spread of 7.9%/24.7% assuming late October completion.
<hr>
<div class="content-highlight">
Quiddity's new <a href="https://www.smartkarma.com/insights/quiddity-hong-kong-m-a-guide-2019" target="_blank" data-smartkarma-citation="insights:29174">Quiddity Hong Kong M&amp;A Guide 2019</a> is now published with guidelines to the relevant rules, regulations, documentation, and pointers to the Hong Kong M&amp;A landscape. There are several others in the series, and watch for more to come shortly. 
</div>

Back in May 2016, subsequent to a reshuffling in the indirect ownership into China Automation (569 HK) ("CAGL"), Xuan Rui Guo, CAGL's chairman (with financing from Ascendent Capital Partners (AACL)) launched a conditional mandatory general offer at $1.20 (an 11.1% and 36.2% premium to last close and one-month VWAP).
The intention then was to maintain CAGL's listing. The Offer document was issued on the 5 August and the Offer successfully closed with 25.46% in the hands of minorities. Shares were held as to 50.25% (515.7mn) by Brightex, Xuan's vehicle, and 24.19% (248.2mn) by AACL.  This shareholding structure has remained largely static since. 
In March 2017, CAGL announced an intention to acquire an interest in a privately owned hospital in Suzhou, and was completed in July. The vendor was AACL.
The New News
Xuan and AACL have announced a privatisation by way of a Scheme at $1.50/share cash, an 11.94% and 47.78% premium to last close and one-month VWAP. The Offer Price is also a 27.12% premium over the closing price on 30 April, being the last full trading day prior to the issuance of the initial announcement. 
The headcount test applies as CAGL is Cayman incorporated. Independent shareholders hold 25.44% of the company, therefore, the blocking stake is 2.54% or 26.1mn shares. At terms, that is just about US$5mm.
The Scheme Offer Price appears to be short-changing minorities, but there's probably not a lot they can (or want to) do - shares are illiquid and the premium to the unaffected price is decent, with the price around a three-year high. 
This Offer should get up. I see a gross/annualised spread of 7.9%/24.7% assuming late October completion.


Quiddity's new Quiddity Hong Kong M&amp;A Guide 2019 is now published with guidelines to the relevant rules, regulations, documentation, and pointers to the Hong Kong M&amp;A landscape. There are several others in the series, and watch for more to come shortly. 


China

China Automation Group Limited provides safety and critical control systems for the petrochemical, oil and gas, and railway industries in the Peoples Republic of China.

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China Automation (569 HK)

China Automation's Scheme Should Get Up

Back in May 2016, subsequent to a reshuffling in the indirect ownership into China Automation (569 HK) ("CAGL"), Xuan Rui Guo, CAGL's chairman...

David Blennerhassett

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