Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Beijing Capital Land Ltd H / Event-Driven

<p>At long last - a summary of M&amp;A spreads (on deals discussed on Smartkarma) across Asia-Pacific.</p>
<p>I number 32, mostly firm, deals around the region.</p>
<p>This insight provides a quick summary of gross/annualised (where possible) spreads as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks</p>
<p>More below the fold.</p>

At long last - a summary of M&amp;A spreads (on deals discussed on Smartkarma) across Asia-Pacific.
I number 32, mostly firm, deals around the region.
This insight provides a quick summary of gross/annualised (where possible) spreads as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks
More below the fold.

Asia-Pac Weekly Risk Arb Summary: Sydney Aiport, Beijing Capital Land, IGO/Western Areas

<div>
<p><a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0809/2021080901151.pdf" target="_blank" rel="noopener">announced</a> on the 9 August all of the pre-cons attached to the the Partial Offer had been met - or waived (the Thai waiver in particular) - and that the Composite Document was expected to be dispatched, on or before, the 16 August.</p>
</div>
<div>
<p>The timing of that Record Date and the Close of the Offer suggested the FY21 Interim Dividend will likely be added to terms.</p>
<p>The Composite Doc is now <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0811/2021081101136.pdf" target="_blank" rel="noopener">out</a> and the Offer is open for acceptances. Irrevocables are expected to be tendered by the 16 August. The special dividend is expected to be declared the following day. The first close is the 2 September. It is quite possible this will also be the last closing date.</p>
</div>
<div>
<p>More below the fold.  Plus Ye Olde Arb Grids. </p>
</div>


Kerry Logistics Network (636 HK) announced on the 9 August all of the pre-cons attached to the the Partial Offer had been met - or waived (the Thai waiver in particular) - and that the Composite Document was expected to be dispatched, on or before, the 16 August.


The timing of that Record Date and the Close of the Offer suggested the FY21 Interim Dividend will likely be added to terms.
The Composite Doc is now out and the Offer is open for acceptances. Irrevocables are expected to be tendered by the 16 August. The special dividend is expected to be declared the following day. The first close is the 2 September. It is quite possible this will also be the last closing date.


More below the fold.  Plus Ye Olde Arb Grids. 


Kerry Logistics (636 HK): Doc Out Early - Offer Now Open

<div>
<p>On the 9 February, <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a> ("KLN") <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0210/2021021000043.pdf" target="_blank" rel="noopener">announced</a> a pre-conditional Partial Offer from  <a href="https://www.smartkarma.com/entities/maanshan-dingtai-rare-a" target="_blank" data-smartkarma-citation="entities:4128:1" rel="noopener">S.F. Holding (002352 CH)</a> ("SFH"). SFH intended to acquire 931.21mn shares or 51.8% of shares outstanding, of KLN. The Offer price is HK$18.80/share - a 19.83% discount to last close, although KLN's shares gained 25% prior to the suspension.</p>
<p>Pre-conditions were numerous - 17 all-told - including approvals from SAMR, NDRC, MoC, CFIUS, FTC, and a waiver from the relevant Thai authorities not to make a downstream Offer for <a href="https://www.smartkarma.com/entities/kerry-express-thailand" target="_blank" data-smartkarma-citation="entities:29253:1" rel="noopener">Kerry Express Thailand (KEX TB)</a>.</p>
<p>The Partial Offer was also conditional on KLN selling its Hong Kong and Taiwan warehouses to its parent company. Proceeds from that sale would be paid to shareholders on the Record Date (means the date immediately prior to the Final Closing Date of the Partial Offer) as a special dividend totalling HK$7.28/share. Shareholders who tender will get HK$7.28 on <em>all</em> their shares and HK$18.80 for the shares taken up under the Partial Offer. </p>
<p>Below is a timeline of events since the initial announcement:</p>
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 108.135px;">
<h3>Date</h3>
</td>
<td style="width: 637.877px;">
<h3>Data in that Date</h3>
</td>
</tr>
<tr>
<td style="width: 108.135px;">30-Mar-21</td>
<td style="width: 637.877px;">
<p>The controlling shareholders of KLN, including <a href="https://www.smartkarma.com/entities/kerry-properties-ltd" target="_blank" data-smartkarma-citation="entities:3320:1" rel="noopener">Kerry Properties (683 HK)</a>, plus shares held by executive directors, comprise 63.1% of shares out. These shareholders have given an irrevocable to tender 575.545mn shares or 32% of shares out. Those irrevocables have now been <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0330/2021033003206.pdf" target="_blank" rel="noopener">fulfilled</a> - this forms part of the pre-conditions.</p>
<p> </p>
<p>Elsewhere, KLN/ SF Holdings transaction is understood to be under a SAMR simple case review.</p>
</td>
</tr>
<tr>
<td style="width: 108.135px;">9-Apr-21</td>
<td style="width: 637.877px;">
<a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener"></a>KLN <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0409/2021040901991.pdf" target="_blank" rel="noopener">announced</a> that the antitrust approval has been received from the State Administration for Market Regulation with respect to the Partial Offer.</td>
</tr>
<tr>
<td style="width: 108.135px;">3-May-21</td>
<td style="width: 637.877px;">KLN announced it will hold an SGM on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0503/2021050300069.pdf" target="_blank" rel="noopener">26 May</a> for shareholders to vote on the sale of the Hong Kong and Taiwan warehouse businesses to Kerry Holdings. </td>
</tr>
<tr>
<td style="width: 108.135px;">26-May-21</td>
<td style="width: 637.877px;">At the SGM KLN shareholders overwhelmingly <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0526/2021052600981.pdf" target="_blank" rel="noopener">approved</a> the sale of its Hong Kong, Taiwan warehouse business to Kerry Holdings.</td>
</tr>
<tr>
<td style="width: 108.135px;">7-Jun-21</td>
<td style="width: 637.877px;">The free float waiver from the SFC was <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0607/2021060701185.pdf" target="_blank" rel="noopener">received</a>. </td>
</tr>
<tr>
<td style="width: 108.135px;">15-Jun-21</td>
<td style="width: 637.877px;">Shareholders of Kerry Props <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0615/2021061501141.pdf" target="_blank" rel="noopener">approve</a> the Partial Offer. </td>
</tr>
<tr>
<td style="width: 108.135px;">29-Jun-21</td>
<td style="width: 637.877px;">CFIUS approval <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0629/2021062900794.pdf" target="_blank" rel="noopener">received</a>. </td>
</tr>
<tr>
<td style="width: 108.135px;">20-Jul-21</td>
<td style="width: 637.877px;">
<a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener"></a>KLN <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0720/2021072000823.pdf" target="_blank" rel="noopener">announced</a> approval by the Independent Shareholders in respect of the Special Deal Agreements and the Framework Services Agreement had been obtained.</td>
</tr>
<tr>
<td style="width: 108.135px;">2-Aug-21</td>
<td style="width: 637.877px;">
<p>KLN <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0802/2021080201361.pdf" target="_blank" rel="noopener">announced</a> NDRC and MoC approval has been received as to the partial offer.</p>
</td>
</tr>
<tr>
<td colspan="2" style="width: 108.135px;"><em>Source: Various HKEx announcements</em></td>
</tr>
</tbody>
</table>
</div>
<div>
<p>Exactly on the Long Stop date, KLN has <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0809/2021080901151.pdf" target="_blank" rel="noopener">announced</a> all of the pre-cons have been met - or waived (the Thai waiver in particular) - and that the Composite Document is expected to be dispatched, on or before, the 16 August.</p>
<p>The timing of that Record Date and the Close of the Offer suggests the FY21 Interim Dividend will likely be added to terms.</p>
</div>
<div>
<p>More below the fold.  Plus Ye Olde Arb Grids - or at least one of them. </p>
</div>


On the 9 February, Kerry Logistics Network (636 HK) ("KLN") announced a pre-conditional Partial Offer from  S.F. Holding (002352 CH) ("SFH"). SFH intended to acquire 931.21mn shares or 51.8% of shares outstanding, of KLN. The Offer price is HK$18.80/share - a 19.83% discount to last close, although KLN's shares gained 25% prior to the suspension.
Pre-conditions were numerous - 17 all-told - including approvals from SAMR, NDRC, MoC, CFIUS, FTC, and a waiver from the relevant Thai authorities not to make a downstream Offer for Kerry Express Thailand (KEX TB).
The Partial Offer was also conditional on KLN selling its Hong Kong and Taiwan warehouses to its parent company. Proceeds from that sale would be paid to shareholders on the Record Date (means the date immediately prior to the Final Closing Date of the Partial Offer) as a special dividend totalling HK$7.28/share. Shareholders who tender will get HK$7.28 on all their shares and HK$18.80 for the shares taken up under the Partial Offer. 
Below is a timeline of events since the initial announcement:




Date


Data in that Date



30-Mar-21

The controlling shareholders of KLN, including Kerry Properties (683 HK), plus shares held by executive directors, comprise 63.1% of shares out. These shareholders have given an irrevocable to tender 575.545mn shares or 32% of shares out. Those irrevocables have now been fulfilled - this forms part of the pre-conditions.
 
Elsewhere, KLN/ SF Holdings transaction is understood to be under a SAMR simple case review.



9-Apr-21

KLN announced that the antitrust approval has been received from the State Administration for Market Regulation with respect to the Partial Offer.


3-May-21
KLN announced it will hold an SGM on the 26 May for shareholders to vote on the sale of the Hong Kong and Taiwan warehouse businesses to Kerry Holdings. 


26-May-21
At the SGM KLN shareholders overwhelmingly approved the sale of its Hong Kong, Taiwan warehouse business to Kerry Holdings.


7-Jun-21
The free float waiver from the SFC was received. 


15-Jun-21
Shareholders of Kerry Props approve the Partial Offer. 


29-Jun-21
CFIUS approval received. 


20-Jul-21

KLN announced approval by the Independent Shareholders in respect of the Special Deal Agreements and the Framework Services Agreement had been obtained.


2-Aug-21

KLN announced NDRC and MoC approval has been received as to the partial offer.



Source: Various HKEx announcements





Exactly on the Long Stop date, KLN has announced all of the pre-cons have been met - or waived (the Thai waiver in particular) - and that the Composite Document is expected to be dispatched, on or before, the 16 August.
The timing of that Record Date and the Close of the Offer suggests the FY21 Interim Dividend will likely be added to terms.


More below the fold.  Plus Ye Olde Arb Grids - or at least one of them. 


Kerry Logistics (636 HK): Pre-Cons Done. Partial Offer To Commence Next Week

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>*Another Poor Showing: </em></strong>Hang Seng Bank (11.HK) [Hang Seng] reported a 1H21 result of HKD 8.8 bn, improving HKD 1.2 bn (16.3%) HOH. However, core operating results improved only nominally by HKD 52 mn or 0.8% over the period. Were it not for the unreasonable decline of HKD 639 mn (65.3%) in loss provisions as credit deteriorated, results would have been far worse;  and</p><p><strong><em>*Provisions Now Significantly Understated: </em></strong>While the current NPL ratio is not alarming on its face, the HOH increase in net new NPLs is HKD 1.7 bn or 23.5% annualized - decelerating from the HKD 3.0 bn or 201% annualized at 2H20. We find Hang Seng under-provided for to the tune of HKD 10.6 bn or nearly 1.5x the bank’s core operating result.</p>

*Another Poor Showing: Hang Seng Bank (11.HK) [Hang Seng] reported a 1H21 result of HKD 8.8 bn, improving HKD 1.2 bn (16.3%) HOH. However, core operating results improved only nominally by HKD 52 mn or 0.8% over the period. Were it not for the unreasonable decline of HKD 639 mn (65.3%) in loss provisions as credit deteriorated, results would have been far worse;  and*Provisions Now Significantly Understated: While the current NPL ratio is not alarming on its face, the HOH increase in net new NPLs is HKD 1.7 bn or 23.5% annualized - decelerating from the HKD 3.0 bn or 201% annualized at 2H20. We find Hang Seng under-provided for to the tune of HKD 10.6 bn or nearly 1.5x the bank’s core operating result.

Hang Seng Bank – Wuihfung Remains In Full Control

<p><em><strong>*Poor 2Q21 Result: </strong></em>DBS Group Holdings (DBS.SP) [DBS] reported 2Q21 results of SGD 1.7 bn, decreasing SGD 304  mn (15.1%) on a linked quarter basis. The weaker results were driven primarily by an overall revenue decline, a loan provision increase, and a higher tax rate;</p><p><em><strong>*Watch Your Credit: </strong></em>We struggle continue to believe that DBS’ due diligence had actually caught all of LVB’s risk (see discussion below), and remain unconvinced that the moratorium exits are anything more than additional reliance on government schemes and relief programs. DBS has disclosed absolutely nothing about Shenzhen Rural Commercial Bank’s (SRCB) fundamentals. By our calculation, and given the NCOs of SGD 69 mn, we find that net new NPLs have re-accelerated – up SGD 266 mn or increasing 18.0% annualized versus SGD 85 mn or 5.6% in 1Q21. We feel that reserves should be shored up in the neighborhood of SGD 2.5bn – amounting now to about two quarters of operating results; and </p><p><strong><em>*Deal Distractions Mount: </em></strong> While SRCB dos not appear to be riddled with problems the way LVB is, no doubt there will be issues to contend with.  DBS apparently isn’t done with its shopping spree, being in the running for parts of Citigroup's (C.US) consumer business in Asia. Frankly, DBS needs to focus on improving its own legacy issues before it starts both taking on those of other financial institutions.</p>

*Poor 2Q21 Result: DBS Group Holdings (DBS.SP) [DBS] reported 2Q21 results of SGD 1.7 bn, decreasing SGD 304  mn (15.1%) on a linked quarter basis. The weaker results were driven primarily by an overall revenue decline, a loan provision increase, and a higher tax rate;*Watch Your Credit: We struggle continue to believe that DBS’ due diligence had actually caught all of LVB’s risk (see discussion below), and remain unconvinced that the moratorium exits are anything more than additional reliance on government schemes and relief programs. DBS has disclosed absolutely nothing about Shenzhen Rural Commercial Bank’s (SRCB) fundamentals. By our calculation, and given the NCOs of SGD 69 mn, we find that net new NPLs have re-accelerated – up SGD 266 mn or increasing 18.0% annualized versus SGD 85 mn or 5.6% in 1Q21. We feel that reserves should be shored up in the neighborhood of SGD 2.5bn – amounting now to about two quarters of operating results; and *Deal Distractions Mount:  While SRCB dos not appear to be riddled with problems the way LVB is, no doubt there will be issues to contend with.  DBS apparently isn’t done with its shopping spree, being in the running for parts of Citigroup's (C.US) consumer business in Asia. Frankly, DBS needs to focus on improving its own legacy issues before it starts both taking on those of other financial institutions.

Hong Kong

Chong Hing Bank Limited provides banking and related services.  It operates branches in Hong Kong, China, and the United States.

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Chong Hing Bank (1111 HK)

Asia-Pac Weekly Risk Arb Summary: Sydney Aiport, Beijing Capital Land, IGO/Western Areas

This insight provides a quick summary of gross/annualised spreads as at the last trading day, and how those spreads have changed over the last...

David Blennerhassett

Kerry Logistics (636 HK): Doc Out Early - Offer Now Open

If assuming that the Irrevocable Agreement signors intend to tender only what they put in their Irrevocable Agreement, then owning the stock around...

David Blennerhassett

Kerry Logistics (636 HK): Pre-Cons Done. Partial Offer To Commence Next Week

As it is, and taking the view the Controlling Shareholders will not tender more than the Irrevocable Quantity, buying around here looks reasonable.

David Blennerhassett

Hang Seng Bank – Wuihfung Remains In Full Control

HANG SENG BANK: Hang Seng reported a poor 1H21 HOH operating result. If provisions didn't decline 65%, results would have been worse. It under...

Thomas J. Monaco

DBS Group Holdings – Bad Print

DBS: DBS QOQ 2Q21 results declined 15.1% due to poor revenues and higher provisions. We worry that DBS has not caught the LVB risk, net new NPLs re...

Thomas J. Monaco

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