IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

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<li>
<a href="https://www.smartkarma.com/entities/giordano-international-ltd" target="_blank" data-smartkarma-citation="entities:13899:1" rel="noopener">Giordano International (709 HK)</a>’s voluntary conditional from the Cheng Yu Tung family (24.57% of outstanding shares) at HK$1.88 per share is open with a first closing date of 5 September.</li>
<li>Crucially, the offeror will not increase the offer price. In combination with an ongoing retail recovery, the low-ball offer has little chance of meeting the 50%+ minimum acceptance threshold.</li>
<li>While the IFA says the offer is fair and reasonable, key directors will not accept the offer. A deal break implies, at most, another 10% downside to the last close.</li>
</ul>



Giordano International (709 HK)’s voluntary conditional from the Cheng Yu Tung family (24.57% of outstanding shares) at HK$1.88 per share is open with a first closing date of 5 September.
Crucially, the offeror will not increase the offer price. In combination with an ongoing retail recovery, the low-ball offer has little chance of meeting the 50%+ minimum acceptance threshold.
While the IFA says the offer is fair and reasonable, key directors will not accept the offer. A deal break implies, at most, another 10% downside to the last close.


Giordano’s Conditional Offer Open, Price Declared Final, Unlikely to Meet 50%+ Voting Threshold

<ul>
<li>
<a href="https://www.smartkarma.com/entities/giordano-international-ltd" target="_blank" data-smartkarma-citation="entities:13899:1" rel="noopener">Giordano International (709 HK)</a>’s 1H22 net profit is expected to be in the range of HK$91-101 million, which represents YoY growth of 52-68%. Interims will be out in early August.</li>
<li>The clear sign of a retail recovery diminishes the prospect of the Cheng family’s low-ball offer of HK$1.88 per share hitting the 50%+ minimum acceptance threshold.</li>
<li>The offer price has not been declared final suggesting that the Cheng family retains some room to test shareholder appetite with an improved offer.   </li>
</ul>



Giordano International (709 HK)’s 1H22 net profit is expected to be in the range of HK$91-101 million, which represents YoY growth of 52-68%. Interims will be out in early August.
The clear sign of a retail recovery diminishes the prospect of the Cheng family’s low-ball offer of HK$1.88 per share hitting the 50%+ minimum acceptance threshold.
The offer price has not been declared final suggesting that the Cheng family retains some room to test shareholder appetite with an improved offer.   


Giordano’s Retail Recovery Will Force the Cheng Family into a Rethink

<ul>
<li>
<a href="https://www.smartkarma.com/entities/giordano-international-ltd" target="_blank" data-smartkarma-citation="entities:13899:1" rel="noopener">Giordano International (709 HK)</a> announced a voluntary conditional offer from the Cheng Yu Tung family at HK$1.88 per share, an 18.2% premium to the undisturbed price.  </li>
<li>The VGO is conditional on the offeror and concert parties holding more than 50% of the voting rights (currently own 24.57%). The VGO price is underwhelming.</li>
<li>David Webb’s (the retail activist investor) presence on the shareholder register likely deterred a privatisation bid. We think there is a 50% chance that the VGO becomes unconditional.  </li>
</ul>



Giordano International (709 HK) announced a voluntary conditional offer from the Cheng Yu Tung family at HK$1.88 per share, an 18.2% premium to the undisturbed price.  
The VGO is conditional on the offeror and concert parties holding more than 50% of the voting rights (currently own 24.57%). The VGO price is underwhelming.
David Webb’s (the retail activist investor) presence on the shareholder register likely deterred a privatisation bid. We think there is a 50% chance that the VGO becomes unconditional.  


Giordano’s Conditional Offer at HK$1.88

<ul>
<li>
<a href="https://www.smartkarma.com/entities/giordano-international-ltd" target="_blank" data-smartkarma-citation="entities:13899:1" rel="noopener">Giordano International (709 HK)</a> entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers on 8 June.  </li>
<li>It is likely that the family of Cheng Yu Tung (the largest shareholder with a 24.4% stake) could either agree to sell into the offer or roll over its shares.</li>
<li>The median trailing EV/EBITDA multiple of the precedent transactions is 5.1x, implying a privatisation price of at least HK$2.46 per share.</li>
</ul>



Giordano International (709 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers on 8 June.  
It is likely that the family of Cheng Yu Tung (the largest shareholder with a 24.4% stake) could either agree to sell into the offer or roll over its shares.
The median trailing EV/EBITDA multiple of the precedent transactions is 5.1x, implying a privatisation price of at least HK$2.46 per share.


Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<div>
<p>On the 6 December, fashion wear and accessory player <a href="https://www.smartkarma.com/entities/i-t-ltd" target="_blank" data-smartkarma-citation="entities:2795:1" rel="noopener">I.T Ltd (999 HK)</a> received a pre-conditional <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1206/2020120600017.pdf" target="_blank" rel="noopener">Offer</a>, by way of a Scheme, at HK$3.00/share, a 54.6% premium to last close. The Offer price is final.</p>
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<div>
<p>The Offeror was Brooklyn Investment Limited, which is 50.65% owned by the Founder Holdco and 49.35% by CVC Holdco. Founder Holdco is held by Sham Kar Wai (Chairman and founder of I.T.), Sham Kin Wai (ED and CCO), and family members. Founder also controls 63.61% of shares out. CVC Holdco is wholly-owned by CVC Funds.</p>
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<p>The pre-condition, which referred to approval from the State Administration for Market Regulation of the PRC, the anti-monopoly watchdog, was satisfied on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0120/2021012001069.pdf" target="_blank" rel="noopener">19 January</a>.</p>
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<p>Conditions to the Scheme are stock standard: at least 75% of Independent/Disinterested Shares FOR &amp; not more than 10% of ALL Independent Shares against. The headcount test applies as IT is Bermuda incorporated. </p>
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<div>
<p>After <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1222/2020122200797.pdf" target="_blank" rel="noopener">delaying</a> the despatch of the Scheme Document,  I.T has now <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0321/2021032100039.pdf" target="_blank" rel="noopener">despatched</a> the Doc.</p>
<p>The Court Meeting will be held on 16 April. The joint IFAs (Challenge Capital &amp; China Tonghai) considered the Offer price to be fair and reasonable.</p>
</div>
<div>
<p>More below the fold.</p>
</div>


On the 6 December, fashion wear and accessory player I.T Ltd (999 HK) received a pre-conditional Offer, by way of a Scheme, at HK$3.00/share, a 54.6% premium to last close. The Offer price is final.


The Offeror was Brooklyn Investment Limited, which is 50.65% owned by the Founder Holdco and 49.35% by CVC Holdco. Founder Holdco is held by Sham Kar Wai (Chairman and founder of I.T.), Sham Kin Wai (ED and CCO), and family members. Founder also controls 63.61% of shares out. CVC Holdco is wholly-owned by CVC Funds.


The pre-condition, which referred to approval from the State Administration for Market Regulation of the PRC, the anti-monopoly watchdog, was satisfied on the 19 January.


Conditions to the Scheme are stock standard: at least 75% of Independent/Disinterested Shares FOR &amp; not more than 10% of ALL Independent Shares against. The headcount test applies as IT is Bermuda incorporated. 


After delaying the despatch of the Scheme Document,  I.T has now despatched the Doc.
The Court Meeting will be held on 16 April. The joint IFAs (Challenge Capital &amp; China Tonghai) considered the Offer price to be fair and reasonable.


More below the fold.


I.T. (999 HK): Scheme Meeting 16 April. IFA Says Fair

Hong Kong

Portico International Holdings Ltd designs, manufactures, and retails ladies' and men's fashion garments, and sells accessories such as shoes, handbags, scarves, and fragrances in China and Hong Kong under its brand name PORT INTERNATIONAL.

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Portico International Holdings (589 HK)

Giordano’s Conditional Offer Open, Price Declared Final, Unlikely to Meet 50%+ Voting Threshold

As the offeror will not increase the offer price, there is little chance of meeting the 50%+ minimum acceptance threshold. A deal break implies, at...

Arun George

Giordano’s Retail Recovery Will Force the Cheng Family into a Rethink

The positive profit alert diminishes the prospect of the Cheng family’s offer hitting the 50%+ voting threshold. The offer has not been declared...

Arun George

Giordano’s Conditional Offer at HK$1.88

We think there is a 50% chance that the VGO meets the 50%+ minimum acceptance condition. Buy up to HK$1.74 per share, which implies a 50% deal...

Arun George

Giordano's Possible Privatisation Price

The median trailing EV/EBITDA multiple of the precedent transactions is 5.1x, implying a privatisation price of at least HK$2.46 per share.

Arun George

I.T. (999 HK): Scheme Meeting 16 April. IFA Says Fair

Currently trading at a wide gross/annualised spread of 5.6%/53.9% given the significant downside if the deal breaks. But I think there's enough in...

David Blennerhassett

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