Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Capitaland, Boral, Milton/WHSP, Santos/Oil Search, Education Profit Ban

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<p>After <a href="https://www.smartkarma.com/entities/boral-ltd" target="_blank" data-smartkarma-citation="entities:1487:1" rel="noopener">Boral Ltd (BLD AU)</a>'s board rejected <a href="https://www.smartkarma.com/entities/seven-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:803:1" rel="noopener">Seven Group Holdings (SVW AU)</a>'s $6.50/share Offer in its <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02383423-2A1302901?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">Target Statement</a> of 9 June, Seven <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02383423-2A1302901?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">bumped</a> its Offer on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02388314-2A1305588?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">25 June</a>, stating it would pay $7.30 cash if they get to 29.5%, and up to $7.40 cash if they get to 34.5%.</p>
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<p>Seven reached 29.5% by <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02390670-2A1307144?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">July 1</a>, 34.5% less than a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02392570-2A1308444?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">week later</a>, then 52.65% on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02395727-2A1310071?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">15 July</a>. Clearing 50% automatically extended the Offer period (pursuant to<a href="http://www5.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s624.html" target="_blank" rel="noopener"> s624</a> of the Corporations Act) to the 29 July - i.e. a two-week extension.</p>
<p>As of this morning, Seven held <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02398044-2A1311218?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">59.23%</a>. </p>
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<p><a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25" rel="noopener">Travis Lundy</a> and I have tackled this Offer <a href="https://skr.ma/Bxs7L" target="_blank" rel="noopener">here</a>, <a href="https://www.smartkarma.com/compose/insight/54682/Boral%20Ltd%20(BLD%20AU)%20Rejects%20Seven's%20Bump.%20Read%20more:%20https:/skr.ma/46Wun" target="_blank" rel="noopener">here</a>, and <a href="https://skr.ma/q9jMa" target="_blank" rel="noopener">here</a>.</p>
<p>With the Offer tentatively expected to close in a week's time, now is a good time to address a handful of questions I and other readers have raised.</p>
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After Boral Ltd (BLD AU)'s board rejected Seven Group Holdings (SVW AU)'s $6.50/share Offer in its Target Statement of 9 June, Seven bumped its Offer on the 25 June, stating it would pay $7.30 cash if they get to 29.5%, and up to $7.40 cash if they get to 34.5%.


Seven reached 29.5% by July 1, 34.5% less than a week later, then 52.65% on the 15 July. Clearing 50% automatically extended the Offer period (pursuant to s624 of the Corporations Act) to the 29 July - i.e. a two-week extension.
As of this morning, Seven held 59.23%. 


Travis Lundy and I have tackled this Offer here, here, and here.
With the Offer tentatively expected to close in a week's time, now is a good time to address a handful of questions I and other readers have raised.


Boral Ltd: Seven's Done Deal. What Happens Next?

Travis Lundy

<div><p>After completing the $1.3bn sale of its 50% stake in USG Boral to Knauf Gips KG, international building and construction materials play <a href="https://www.smartkarma.com/entities/boral-ltd" target="_blank" data-smartkarma-citation="entities:1487:1" rel="noopener">Boral Ltd (BLD AU)</a> made an <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02359742-2A1290439?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announcement</a> on April 1 it would use the proceeds to reduce net debt to A$1.5bn from A$1.9bn, and apply the remaining proceeds to a stock buyback. </p></div><div><p>Boral aims to buy up to 10% of shares out, or ~122mn shares, at a cost of A$670mn based on the then-prevalent share price. CEO Zlato Todorcevski said: “we believe that an on-market buy-back is the most effective method of returning this surplus capital to our shareholders.”</p></div><div>
<p>As of the morning of <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02372944-2A1297240?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">May 10th</a>, Boral had bought back ~10.15mn shares - a bit less than 1%. </p>
<p>After the close that day, <a href="https://www.smartkarma.com/entities/seven-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:803:1" rel="noopener">Seven Group Holdings (SVW AU)</a> <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02373310-2A1297476?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> an off-market takeover at $6.50, at a zero premium to the last close. There were essentially no conditions to this Offer. There was no minimum acceptance condition. Seven held ~23.18% and said it would be "satisfied" for the Offer to result in a holding of around 30%. But there was no cap, and they were clearly happy to go higher. </p>
<p>Seven Group had bought shares in the market in early 2020 in the covid crash, and by early June, owned 10%. by 11 September it owned 19.98%. In Australia, you can't go above 20% unless you launch a takeover, except for the neat little workaround which is that Australia's "creep rules" allow someone with more than 20% to buy up to but not more than 3.00% of shares out every six months. Seven got to 22.984% in early April. </p>
<p>Boral's board rejected the Seven Offer in its <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02383423-2A1302901?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">Target Statement</a> of 9 June. The Independent Expert Grant Samuel came out with a fair value range of A$8.25-A$9.13/share, and concluded the Offer was <em>not fair or reasonable</em>.</p>
<p>In an ASX release on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02386227-2A1304322?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">21 June</a>, Boral said it would sell its North American Building Products business for US$2.15bn (~A$2.9bn). That figure was above expectations, but Seven criticized them for selling at a loss. </p>
<p>About a week later, Seven <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02383423-2A1302901?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">bumped</a> its Offer, saying it would pay $7.30 cash if they get to 29.5%. Or $7.40 cash if they get to 34.5%.</p>
<p>Seven got to 29.5% by July 1, and 34.5% less than a week later.</p>
<p>Boral finished its buyback Wednesday having spent A$859.5MM buying back 122MM+ shares at an average price of $7.01 per share. This reduces the denominator, so Seven's stake has gone higher automatically in the interim.</p>
<p>Yesterday they announced they were at 44.9% as of Monday's close, and this morning they announced 48.41%. The deal closes 7pm Thursday which means two more submission days. It looks like they will get to 50.0% and if that happens, then there is an automatic 14-day extension. </p>
<p><a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a> has provided great background research on this situation in <a href="https://www.smartkarma.com/insights/boral-ltd-bld-au-seven-s-nil-premium" target="_blank" data-smartkarma-citation="insights:51279" rel="noopener">Boral Ltd (BLD AU): Seven's Nil Premium</a> and <a href="https://www.smartkarma.com/insights/boral-ltd-bld-au-rejects-seven-s-bump" target="_blank" data-smartkarma-citation="insights:53624" rel="noopener">Boral Ltd (BLD AU) Rejects Seven's Bump</a>. </p>
<p>I seek to add on with last minute strategy and thinking about the post-Offer landscape, and there is more below the fold. </p>
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After completing the $1.3bn sale of its 50% stake in USG Boral to Knauf Gips KG, international building and construction materials play Boral Ltd (BLD AU) made an announcement on April 1 it would use the proceeds to reduce net debt to A$1.5bn from A$1.9bn, and apply the remaining proceeds to a stock buyback. Boral aims to buy up to 10% of shares out, or ~122mn shares, at a cost of A$670mn based on the then-prevalent share price. CEO Zlato Todorcevski said: “we believe that an on-market buy-back is the most effective method of returning this surplus capital to our shareholders.”
As of the morning of May 10th, Boral had bought back ~10.15mn shares - a bit less than 1%. 
After the close that day, Seven Group Holdings (SVW AU) announced an off-market takeover at $6.50, at a zero premium to the last close. There were essentially no conditions to this Offer. There was no minimum acceptance condition. Seven held ~23.18% and said it would be "satisfied" for the Offer to result in a holding of around 30%. But there was no cap, and they were clearly happy to go higher. 
Seven Group had bought shares in the market in early 2020 in the covid crash, and by early June, owned 10%. by 11 September it owned 19.98%. In Australia, you can't go above 20% unless you launch a takeover, except for the neat little workaround which is that Australia's "creep rules" allow someone with more than 20% to buy up to but not more than 3.00% of shares out every six months. Seven got to 22.984% in early April. 
Boral's board rejected the Seven Offer in its Target Statement of 9 June. The Independent Expert Grant Samuel came out with a fair value range of A$8.25-A$9.13/share, and concluded the Offer was not fair or reasonable.
In an ASX release on the 21 June, Boral said it would sell its North American Building Products business for US$2.15bn (~A$2.9bn). That figure was above expectations, but Seven criticized them for selling at a loss. 
About a week later, Seven bumped its Offer, saying it would pay $7.30 cash if they get to 29.5%. Or $7.40 cash if they get to 34.5%.
Seven got to 29.5% by July 1, and 34.5% less than a week later.
Boral finished its buyback Wednesday having spent A$859.5MM buying back 122MM+ shares at an average price of $7.01 per share. This reduces the denominator, so Seven's stake has gone higher automatically in the interim.
Yesterday they announced they were at 44.9% as of Monday's close, and this morning they announced 48.41%. The deal closes 7pm Thursday which means two more submission days. It looks like they will get to 50.0% and if that happens, then there is an automatic 14-day extension. 
David Blennerhassett has provided great background research on this situation in Boral Ltd (BLD AU): Seven's Nil Premium and Boral Ltd (BLD AU) Rejects Seven's Bump. 
I seek to add on with last minute strategy and thinking about the post-Offer landscape, and there is more below the fold. 


Boral's Bump Earned, Likely to Extend, but THEN WHAT?

Last Week In Event SPACE: Didi Chuxing, Sydney Airport, Weibo, Container Shipping, Macau Gaming

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<div><p>S&amp;P Dow Jones Indices will announce changes to the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> as part of the September index review on 3 September and the changes will be effective after the close of trading on 17 September.</p></div><div>We are almost three quarters of the way through the review period. There are 3 potential inclusions at the review - <a href="https://www.smartkarma.com/entities/centuria-capital-group" target="_blank" data-smartkarma-citation="entities:15546:1" rel="noopener">Centuria Capital (CNI AU)</a>, <a href="https://www.smartkarma.com/entities/pinnacle-investment-manageme" target="_blank" data-smartkarma-citation="entities:20624:1" rel="noopener">Wilson (PNI AU)</a> and <a href="https://www.smartkarma.com/entities/sealink-travel-group-ltd" target="_blank" data-smartkarma-citation="entities:6400:1" rel="noopener">Sealink Travel (SLK AU)</a> while the potential deletions are <a href="https://www.smartkarma.com/entities/nuix-limited" target="_blank" data-smartkarma-citation="entities:31040:1" rel="noopener">Nuix Limited (NXL AU)</a>, <a href="https://www.smartkarma.com/entities/nrw-holdings-ltd" target="_blank" data-smartkarma-citation="entities:9271:1" rel="noopener">NRW Holdings (NWH AU)</a> and <a href="https://www.smartkarma.com/entities/g8-education-ltd" target="_blank" data-smartkarma-citation="entities:581:1" rel="noopener">G8 Education (GEM AU)</a>.</div><div></div><div>
<a href="https://www.smartkarma.com/entities/galaxy-resources-ltd" target="_blank" data-smartkarma-citation="entities:13914:1" rel="noopener">Galaxy Resources (GXY AU)</a> is placed in the inclusion zone but is unlikely to be added to the index given its pending merger with <a href="https://www.smartkarma.com/entities/orocobre-ltd" target="_blank" data-smartkarma-citation="entities:3572:1" rel="noopener">Orocobre Ltd (ORE AU)</a>.</div><div></div><div>
<a href="https://www.smartkarma.com/entities/de-grey-mining-ltd" target="_blank" data-smartkarma-citation="entities:6192:1" rel="noopener">De Grey Mining (DEG AU)</a> is a close add and the corresponding deletion is <a href="https://www.smartkarma.com/entities/westgold-resources-ltd" target="_blank" data-smartkarma-citation="entities:24269:1" rel="noopener">Westgold Resources (WGX AU)</a>.</div><div></div><div>There is a large impact expected on the inclusions while the impact on the deletions is lower.</div><div></div><div>For <a href="https://www.smartkarma.com/entities/g8-education-ltd" target="_blank" data-smartkarma-citation="entities:581:1" rel="noopener">G8 Education (GEM AU)</a>, the short interest is close to the estimated passive selling. For the other two deletes, short interest is a lot smaller than the estimated passive selling and there will be more shorts created from now to rebalance implementation day.</div>

S&amp;P Dow Jones Indices will announce changes to the S&amp;P/ASX 200 (AS51 INDEX) as part of the September index review on 3 September and the changes will be effective after the close of trading on 17 September.We are almost three quarters of the way through the review period. There are 3 potential inclusions at the review - Centuria Capital (CNI AU), Wilson (PNI AU) and Sealink Travel (SLK AU) while the potential deletions are Nuix Limited (NXL AU), NRW Holdings (NWH AU) and G8 Education (GEM AU).
Galaxy Resources (GXY AU) is placed in the inclusion zone but is unlikely to be added to the index given its pending merger with Orocobre Ltd (ORE AU).
De Grey Mining (DEG AU) is a close add and the corresponding deletion is Westgold Resources (WGX AU).There is a large impact expected on the inclusions while the impact on the deletions is lower.For G8 Education (GEM AU), the short interest is close to the estimated passive selling. For the other two deletes, short interest is a lot smaller than the estimated passive selling and there will be more shorts created from now to rebalance implementation day.

ASX200 Sep21 Index Rebalance Preview: Large Impact Names

Australia

Seven Group Holdings Ltd. is a diversified operating and investment group. The Groups interests include media holdings that include Seven Network, a commercial television network and publishing company, a telecommunications company, and a heavy equipment dealer that operates  Caterpillar dealerships in Australia and North Eastern China.

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Seven Group Holdings (SVW AU)

Last Week in Event SPACE: Capitaland, Boral, Milton/WHSP, Santos/Oil Search, Education Profit Ban

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Boral Ltd: Seven's Done Deal. What Happens Next?

I wouldn't short shares here. Not until you have some visibility whether Seven keeps extending, and/or closes in on 75%. If Seven gets to 75%, they...

David Blennerhassett

Boral's Bump Earned, Likely to Extend, but THEN WHAT?

Seven Group is nearing 50% on Boral, with two days left in the offer. Odds are they get there. If they do, the offer extends 14 days automatically....

Travis Lundy

Last Week In Event SPACE: Didi Chuxing, Sydney Airport, Weibo, Container Shipping, Macau Gaming

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

ASX200 Sep21 Index Rebalance Preview: Large Impact Names

We see 3 potential changes to the ASX200 at the Sep rebalance with CNI, PNI and SLK being included and NXL, NRW and GEM being deleted. Passive...

Brian Freitas

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