Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Lanzhou Zhuangyuan Pasture / Event-Driven

<ul>
<li>PRC dairy farmer <a href="https://www.smartkarma.com/entities/lanzhou-zhuangyuan-pasture-co-ltd" target="_blank" data-smartkarma-citation="entities:10174:1" rel="noopener">Lanzhou Zhuangyuan Pasture (1533 HK)</a> has announced a Conditional Cash Offer for all H-shares at $10.89/share.</li>
<li>The Offer is being done via a Voluntary Cash Offer, therefore an onerous 90% tendering condition is present.</li>
<li>This transaction could potentially be wrapped up late-July. The FY21 dividend may also be added to terms. </li>
</ul>


PRC dairy farmer Lanzhou Zhuangyuan Pasture (1533 HK) has announced a Conditional Cash Offer for all H-shares at $10.89/share.
The Offer is being done via a Voluntary Cash Offer, therefore an onerous 90% tendering condition is present.
This transaction could potentially be wrapped up late-July. The FY21 dividend may also be added to terms. 


Zhuangyuan Pasture (1533 HK): H-Share Offer Via Buyback

<ul>
<li>PRC dairy farmer <a href="https://www.smartkarma.com/entities/lanzhou-zhuangyuan-pasture-co-ltd" target="_blank" data-smartkarma-citation="entities:10174:1" rel="noopener"></a><a href="https://www.smartkarma.com/entities/lanzhou-zhuangyuan-pasture-co-ltd" target="_blank" data-smartkarma-citation="entities:10174:1" rel="noopener">Lanzhou Zhuangyuan Pasture (1533 HK)</a> is proposing to buy back its H-shares, in cash. No price was cited in the HKEx announcement.</li>
<li>Such an Offer is expected to be done via a voluntary cash Offer. This suggests a condition to the Offer involves a tendering condition. </li>
<li>This is the second proposal in the Chinese dairy space in as many months, after 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>'s Scheme</li>
</ul>


PRC dairy farmer Lanzhou Zhuangyuan Pasture (1533 HK) is proposing to buy back its H-shares, in cash. No price was cited in the HKEx announcement.
Such an Offer is expected to be done via a voluntary cash Offer. This suggests a condition to the Offer involves a tendering condition. 
This is the second proposal in the Chinese dairy space in as many months, after infant-formula  firm Ausnutria Dairy Corp (1717 HK)'s Scheme


Lanzhou Zhuangyuan Pasture (1533 HK): Possible H-Share Delisting Offer

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Corrigenda: There is an error in this Insight. Please note the correction.
Correction: I initially took the view the MGO was conditional on the Offeror (Yili) and parties acting in concert with it holding more than 50% of the voting rights – and that the Vendors were acting in concert given the SPAs and irrevocables.   In hindsight, this is the wrong interpretation - otherwise, the MGO would be obligated by Yili AND the Vendors.   This changes how you view the outcome of the MGO. The MGO needs 15.67% of shares out to turn unconditional. ~24.27% won’t tender. Therefore  ~37.8% of the remaining  register needs to tender. Given the light premium, this MGO turning unconditional is by no means a certainty.
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On the 12 October, 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> was <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1012/2021101200109.pdf" target="_blank" rel="noopener">suspended</a> ahead of morning trading "pursuant to The Hong Kong Code on Takeovers and Mergers". But not before shares had gained 7.8% the day before on the largest volume since November of last year. 
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The rumour was that China’s biggest dairy producer <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> was set to make a proposal. As I wrote in <a href="https://skr.ma/Ft2Ss" target="_blank" rel="noopener">Will Yili Gulp Down Ausnutria (1717 HK)?</a>, a possible Offer could be structured by way of a Scheme - if Yili wanted to take Ausnutria private -  or Yili secures a majority stake via a sale and purchase agreement (SPA) and then a follow-on mandatory general offer (MGO).
Turns out to be the latter.
Late yesterday afternoon (the 27 October), Ausnutria <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1027/2021102700542.pdf" target="_blank" rel="noopener">announced</a> Yili had entered into various SPAs with major shareholders CITIC, <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 CEO van der Meer with a collective ownership in Ausnutria of 30.89%. Concurrently, Ausnutria entered into a subscription agreement with Yili for 90mn new shares or 5.24% of issued shares (4.98% on a fully diluted basis).
All told, should the agreements complete - and the SPA and subscription agreement are subject to various PRC regulatory approvals -  Yili would hold 34.33% of shares out on a fully diluted basis, and would then be obligated to make an MGO.
The MGO price is $10.06/share, a 13.67% premium to last close. The MGO is conditional on Yili and concert parties holding 50% of the voting rights. No irrevocables have been given to tender into the Offer. But Yili and concert parties would hold 51.93%.
This looks done. It's just a question of timing.
</div>



Corrigenda: There is an error in this Insight. Please note the correction.
Correction: I initially took the view the MGO was conditional on the Offeror (Yili) and parties acting in concert with it holding more than 50% of the voting rights – and that the Vendors were acting in concert given the SPAs and irrevocables.   In hindsight, this is the wrong interpretation - otherwise, the MGO would be obligated by Yili AND the Vendors.   This changes how you view the outcome of the MGO. The MGO needs 15.67% of shares out to turn unconditional. ~24.27% won’t tender. Therefore  ~37.8% of the remaining  register needs to tender. Given the light premium, this MGO turning unconditional is by no means a certainty.

On the 12 October, infant-formula firm Ausnutria Dairy Corp (1717 HK) was suspended ahead of morning trading "pursuant to The Hong Kong Code on Takeovers and Mergers". But not before shares had gained 7.8% the day before on the largest volume since November of last year. 


The rumour was that China’s biggest dairy producer Inner Mongolia Yili Industrial Group (A) (600887 CH) was set to make a proposal. As I wrote in Will Yili Gulp Down Ausnutria (1717 HK)?, a possible Offer could be structured by way of a Scheme - if Yili wanted to take Ausnutria private -  or Yili secures a majority stake via a sale and purchase agreement (SPA) and then a follow-on mandatory general offer (MGO).
Turns out to be the latter.
Late yesterday afternoon (the 27 October), Ausnutria announced Yili had entered into various SPAs with major shareholders CITIC, Center Laboratories (4123 TT), and CEO van der Meer with a collective ownership in Ausnutria of 30.89%. Concurrently, Ausnutria entered into a subscription agreement with Yili for 90mn new shares or 5.24% of issued shares (4.98% on a fully diluted basis).
All told, should the agreements complete - and the SPA and subscription agreement are subject to various PRC regulatory approvals -  Yili would hold 34.33% of shares out on a fully diluted basis, and would then be obligated to make an MGO.
The MGO price is $10.06/share, a 13.67% premium to last close. The MGO is conditional on Yili and concert parties holding 50% of the voting rights. No irrevocables have been given to tender into the Offer. But Yili and concert parties would hold 51.93%.
This looks done. It's just a question of timing.


Yili's Pre-Conditional Offer & Ausnutria (1717 HK)'s Crowded Register

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


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. 


Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
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Equity Capital Markets

China Youran Dairy Group Ltd / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/china-youran-dairy-group-ltd" target="_blank" data-smartkarma-citation="entities:31075:1" rel="noopener">China Youran Dairy Group Ltd (9858 HK)</a> announced the indicative price range of its IPO on 7th June 2021 at HK$6.98-8.66 per share, which implies a market cap and EV range of HK$26.5-32.9bn and HK$34.0-39.6bn respectively.China’s fragmented upstream dairy market consolidation process is led by two main players and the current market leader, Youran, is our first choice when it comes to exposure to this attractive investment theme.

China Youran Dairy Group Ltd (9858 HK) announced the indicative price range of its IPO on 7th June 2021 at HK$6.98-8.66 per share, which implies a market cap and EV range of HK$26.5-32.9bn and HK$34.0-39.6bn respectively.China’s fragmented upstream dairy market consolidation process is led by two main players and the current market leader, Youran, is our first choice when it comes to exposure to this attractive investment theme.

China

China Shengmu Organic Milk Limited produces organic dairy products. The Company offers raw milk, organic liquid milk, non-organic raw milk, and other related products. China Shengmu Organic Milk operates throughout China.

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China Shengmu Organic Milk (1432 HK)

Yili's Pre-Conditional Offer & Ausnutria (1717 HK)'s Crowded Register

At HK$9.39/share, Ausnutura is currently trading at a gross/annualised spread of 7.1%/17.9%, assuming late 1Q22 completion (~ 5 months). That looks...

David Blennerhassett

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

China Youran Dairy IPO: Peer Comparison

China’s fragmented upstream dairy market consolidation process is led by two main players and the current market leader, Youran, is our first...

Oshadhi Kumarasiri

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Zhuangyuan Pasture (1533 HK): H-Share Offer Via Buyback

Assuming late July payment, and inclusive of the FY21 dividend of RMB0.047/share, then I suggest buying up to ~HK$10.50/share or a gross/annualised...

David Blennerhassett

Lanzhou Zhuangyuan Pasture (1533 HK): Possible H-Share Delisting Offer

PRC-Diary farmer Lanzhou Zhuangyuan Pasture (1533 HK) is proposing to buy back its H-shares, in cash. No price was cited in the HKEx announcement....

David Blennerhassett

Yili's Pre-Conditional Offer & Ausnutria (1717 HK)'s Crowded Register

At HK$9.39/share, Ausnutura is currently trading at a gross/annualised spread of 7.1%/17.9%, assuming late 1Q22 completion (~ 5 months). That looks...

David Blennerhassett

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

China Youran Dairy IPO: Peer Comparison

China’s fragmented upstream dairy market consolidation process is led by two main players and the current market leader, Youran, is our first...

Oshadhi Kumarasiri