Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

AVIC International Holdings / Event-Driven

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<p>What does one do when the total value attributable to a company based on the market capitalisation of its listed investments is more than five times above the Offer Price? One must conclude it lacks any significant validity.</p>
<p>This forms part of the IFA's opinion - page 86 of the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0107/2020010701434.pdf" target="_blank" rel="noopener">Composite Document</a> - released last night, in relation to the Offer for <a href="https://www.smartkarma.com/entities/avic-international-holding-h" target="_blank" data-smartkarma-citation="entities:3287:1" rel="noopener">Avic International Holding-H (161 HK)</a>.</p>
<p>To recap, on the 2 October, AVIC <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/1002/2019100201606.pdf" target="_blank" rel="noopener">announced</a> a privatisation Offer from its parent, AVIC International (37.5% shareholder), by way of a Merger by Absorption.  The Offer price of $9.00/share, a 29% premium to last close and 81.31% premium to the average closing price in the past 30 days, has been declared "Final."</p>
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<p>The transaction is a hybrid scheme - similar to the ongoing Offer for <a href="https://www.smartkarma.com/entities/huaneng-renewables-corp-h" target="_blank" data-smartkarma-citation="entities:7542:1" rel="noopener">Huaneng Renewables Corp H (958 HK)</a> - owing to the fact AVIC is PRC-incorporated with unlisted domestic shares, and as such, shares cannot be compulsorily acquired by law.</p>
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<p>The proposal requires ≥ 75% for, ≤10% against, in a scheme-like vote from independent H-shareholders. A 10% blocking stake is equal to 32.6mn shares or HK$269mn using the last traded price. No single H shareholder has a blocking stake - <a href="https://www.smartkarma.com/entities/ck-hutchison-holdings-ltd" target="_blank" data-smartkarma-citation="entities:132:1" rel="noopener">CK Hutchison Holdings (1 HK)</a> holding 30.12mn shares or 9.04% of H shares out, <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/1126/2019112600776.pdf" target="_blank" rel="noopener">intends</a> to vote its shares in favour of the relevant delisting resolutions. </p>
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<p>Should the vote pass, the tendering acceptance condition in this two-step Offer is 90% of H shares in issue. With the dispatch of the Composite Document, the Offer is now open to acceptances.</p>
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<p>The risk to the deal is a repeat of the <a href="https://www.smartkarma.com/entities/harbin-electric-co-ltd-h" target="_blank" data-smartkarma-citation="entities:11116:1" rel="noopener">Harbin Electric Co Ltd H (1133 HK)</a> failed privatisation attempt (<em><a href="https://skr.ma/2i54Q" target="_blank" rel="noopener">Post-Mortem on Harbin Electric</a></em>).</p>
<p>The Offer will <em>probably</em> get up. But it's hairy, and the shares are not behaving as you would expect in an arb situation, showing significant, unexplained swings.</p>
<p>The shareholder vote takes place on the 14 February. The close of the Offer is the 6 March, 60 days from the dispatch of the Composite Document.</p>
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What does one do when the total value attributable to a company based on the market capitalisation of its listed investments is more than five times above the Offer Price? One must conclude it lacks any significant validity.
This forms part of the IFA's opinion - page 86 of the Composite Document - released last night, in relation to the Offer for Avic International Holding-H (161 HK).
To recap, on the 2 October, AVIC announced a privatisation Offer from its parent, AVIC International (37.5% shareholder), by way of a Merger by Absorption.  The Offer price of $9.00/share, a 29% premium to last close and 81.31% premium to the average closing price in the past 30 days, has been declared "Final."


The transaction is a hybrid scheme - similar to the ongoing Offer for Huaneng Renewables Corp H (958 HK) - owing to the fact AVIC is PRC-incorporated with unlisted domestic shares, and as such, shares cannot be compulsorily acquired by law.


The proposal requires ≥ 75% for, ≤10% against, in a scheme-like vote from independent H-shareholders. A 10% blocking stake is equal to 32.6mn shares or HK$269mn using the last traded price. No single H shareholder has a blocking stake - CK Hutchison Holdings (1 HK) holding 30.12mn shares or 9.04% of H shares out, intends to vote its shares in favour of the relevant delisting resolutions. 


Should the vote pass, the tendering acceptance condition in this two-step Offer is 90% of H shares in issue. With the dispatch of the Composite Document, the Offer is now open to acceptances.


The risk to the deal is a repeat of the Harbin Electric Co Ltd H (1133 HK) failed privatisation attempt (Post-Mortem on Harbin Electric).
The Offer will probably get up. But it's hairy, and the shares are not behaving as you would expect in an arb situation, showing significant, unexplained swings.
The shareholder vote takes place on the 14 February. The close of the Offer is the 6 March, 60 days from the dispatch of the Composite Document.


China

FIYTA Holdings Ltd. designs, manufactures, and markets watches and clocks. Its products include quartz watches, artistic clocks, scratch proof precious stone watches, and timing regulators. The Company also has operation in property rental business.

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Fiyta Holdings (000026 CH)

AVIC: Just Ignore The Market-Based Value

What does one do when the total value attributable to a company based on the market capitalisation of its listed investments is more than five...

David Blennerhassett

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