Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Event-Driven

Of recent there have been a few tidbits of news, but still no document. A short recap follows.In recent days we have had... an update on pre-conditions, an update on irrevocable acceptances of the Offer by more parties related to the existing owning family and management, which will reduce the fill ratio for minority shareholders, slightly weaker EPS forecasts on average, and a slightly stronger market than earlier this year.A week ago, Baoxin came out with an update on the pre-conditions noting…

Of recent there have been a few tidbits of news, but still no document. A short recap follows.In recent days we have had... an update on pre-conditions, an update on irrevocable acceptances of the Offer by more parties related to the existing owning family and management, which will reduce the fill ratio for minority shareholders, slightly weaker EPS forecasts on average, and a slightly stronger market than earlier this year.A week ago, Baoxin came out with an update on the pre-conditions noting…

Baoxin: CGAS Offer Update, Fair Value, And Arb Grids

Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Kelusa Asia Focus Funds

Equity Bottom-Up

2015 saw a reasonably large scale M&amp;A when China Grand launched a deal for a 75% stake in Baoxin Auto.  I believe we still have at least another acquisition if not two on the cards from China Grand in order for it to successfully satisfy its profit guarantee.Even though we have seen a very sharp recent share price correction of 35% the valuations of China Grand at 24x FY15 and 17x FY16 are still conducive for accretive acquisitions of H share listed auto dealerships.

2015 saw a reasonably large scale M&amp;A when China Grand launched a deal for a 75% stake in Baoxin Auto.  I believe we still have at least another acquisition if not two on the cards from China Grand in order for it to successfully satisfy its profit guarantee.Even though we have seen a very sharp recent share price correction of 35% the valuations of China Grand at 24x FY15 and 17x FY16 are still conducive for accretive acquisitions of H share listed auto dealerships.

Three months ago, on September 15th, China's largest publicly-traded automobile dealer <a href="https://www.smartkarma.com/entities/17171" target="_blank" data-smartkarma-citation="entities:17171">China Grand Automotive Services Co Ltd</a> (hereafter "China Grand" or CGAS") <a href="http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0915/LTN20150915457.pdf" target="_blank">announced</a> it was in preliminary talks to acquire <a href="https://www.smartkarma.com/entities/20829" target="_blank" data-smartkarma-citation="entities:20829">Baoxin Auto Group Ltd</a>  - China's largest distributor of BMW vehicles.Baoxin shares popped 36% the day after the announcement to HK$3.58/share. The stock could not keep those gains as it did not close for three consecutive days above that price until Friday Dec 4th, and that was only because on Wednesday the stock jumped 10.8% to $3.60/share on 3x the previous day's volume on news, then it jumped 15.5% on 5+x normal volume the next day. That will undoubtedly raise some flags, but one could easily say that until Dec3, "the market" was reasonably skeptical of a deal actually being done at a price favorable to Baoxin minorities. Baoxin shares were suspended Dec7 and on Dec9 a substantial shareholder <a href="http://sdinotice.hkex.com.hk/di/NSForm2.aspx?fn=286782&amp;sa2=ns&amp;sid=50000685&amp;corpn=Baoxin+Auto+Group+Ltd.&amp;sd=15%2f12%2f2014&amp;ed=04%2f12%2f2015&amp;sa1=cl&amp;scsd=11%2f12%2f2014&amp;sced=11%2f12%2f2015&amp;sc=1293&amp;src=MAIN&amp;lang=EN&amp;" target="_blank">filing</a> on the HKEx showed that China Grand had purchased 53.58% of Baoxin at HKD 5.99/share. <a href="https://www.smartkarma.com/profiles/11" target="_blank" data-smartkarma-citation="accounts:11">Crispin</a> wrote <a href="https://www.smartkarma.com/insights/baoxin-auto-group-mandatory-offer-to-kick-in" target="_blank" data-smartkarma-citation="insights:2101">a piece</a> noting a Mandatory Offer would kick in - as was the obvious conclusion. But it appears that filing was "hasty" or people got their wires crossed, and yesterday, the official <a href="http://www.hkexnews.hk/listedco/listconews/SEHK/2015/1211/LTN20151211945.pdf" target="_blank">Joint Announcement</a> of a deal was posted on the HKEx website. The deal is that CGAS will buy 75% of Baoxin and that Mr. Yang Aihua, Baoxin Investment and Auspicious Splendid had entered into an Irrevocable Undertaking agreement to accept the Offer. CGAS also released an English translation of a <a href="http://www.hkexnews.hk/listedco/listconews/SEHK/2015/1211/LTN201512111043.pdf" target="_blank">Major Asset Restructuring Report</a>.This deal looks pretty simple on the face of it, but for those who did the work on the China Resources Enterprise (now <a href="https://www.smartkarma.com/entities/399" target="_blank" data-smartkarma-citation="entities:399">China Resources Beer Holdings</a>) deal this past spring/summer/fall as to timing and deal-implied leverage, you'll see the similarities. That trade, if you looked at it the way we did here at Smartkarma, was REALLY interesting and profitable. If you liked Smartkarma's work on the CRE situation, we've got lots more below the fold.Including Arb Grids.

Three months ago, on September 15th, China's largest publicly-traded automobile dealer China Grand Automotive Services Co Ltd (hereafter "China Grand" or CGAS") announced it was in preliminary talks to acquire Baoxin Auto Group Ltd  - China's largest distributor of BMW vehicles.Baoxin shares popped 36% the day after the announcement to HK$3.58/share. The stock could not keep those gains as it did not close for three consecutive days above that price until Friday Dec 4th, and that was only because on Wednesday the stock jumped 10.8% to $3.60/share on 3x the previous day's volume on news, then it jumped 15.5% on 5+x normal volume the next day. That will undoubtedly raise some flags, but one could easily say that until Dec3, "the market" was reasonably skeptical of a deal actually being done at a price favorable to Baoxin minorities. Baoxin shares were suspended Dec7 and on Dec9 a substantial shareholder filing on the HKEx showed that China Grand had purchased 53.58% of Baoxin at HKD 5.99/share. Crispin wrote a piece noting a Mandatory Offer would kick in - as was the obvious conclusion. But it appears that filing was "hasty" or people got their wires crossed, and yesterday, the official Joint Announcement of a deal was posted on the HKEx website. The deal is that CGAS will buy 75% of Baoxin and that Mr. Yang Aihua, Baoxin Investment and Auspicious Splendid had entered into an Irrevocable Undertaking agreement to accept the Offer. CGAS also released an English translation of a Major Asset Restructuring Report.This deal looks pretty simple on the face of it, but for those who did the work on the China Resources Enterprise (now China Resources Beer Holdings) deal this past spring/summer/fall as to timing and deal-implied leverage, you'll see the similarities. That trade, if you looked at it the way we did here at Smartkarma, was REALLY interesting and profitable. If you liked Smartkarma's work on the CRE situation, we've got lots more below the fold.Including Arb Grids.

Baoxin: CGAS Partial Offer Promises Interesting Future - And Arb Grids

China

China Meidong Auto Holdings Limited is an automobile dealership and maintenance group in China.

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China MeiDong Auto (1268 HK)

Baoxin: CGAS Offer Update, Fair Value, And Arb Grids

Of recent there have been a few tidbits of news, but still no document. A short recap follows.In recent days we have had... an update on...

Travis Lundy

2016: More China Auto Dealer M&A?

2015 saw a reasonably large scale M&A when China Grand launched a deal for a 75% stake in Baoxin Auto. I believe we still have at least...

Sameer Taneja

Baoxin: CGAS Partial Offer Promises Interesting Future - And Arb Grids

Three months ago, on September 15th, China's largest publicly-traded automobile dealer China Grand Automotive Services Co Ltd (hereafter "China...

Travis Lundy

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