HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Event-Driven

<ul>
<li>Since ORG needs to pay a high price, it certainly hopes that the effect of the acquisition is 1+1&gt;2, otherwise it is equivalent to failure considering the future debt payment.</li>
<li>We’re unsure if the situation on Zhang Wei's side will change. If afterwards integration falls short of expectations, ORG may “deliberately slow down the progress”, which is a risk point.</li>
<li>Considering the complexity of this deal, we recommend investors do more comprehensive and deeper thinking. Due to risks behind, we certainly hope to obtain higher returns (at least 20% annualized).</li>
</ul>


Since ORG needs to pay a high price, it certainly hopes that the effect of the acquisition is 1+1&gt;2, otherwise it is equivalent to failure considering the future debt payment.
We’re unsure if the situation on Zhang Wei's side will change. If afterwards integration falls short of expectations, ORG may “deliberately slow down the progress”, which is a risk point.
Considering the complexity of this deal, we recommend investors do more comprehensive and deeper thinking. Due to risks behind, we certainly hope to obtain higher returns (at least 20% annualized).


CPMC Holdings (906.HK) Update - These Are the Reasons Why We Find This Deal "Tricky"

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

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.

<ul>
<li>The monthly update notes further progress made by <a href="https://www.smartkarma.com/entities/org-technology-co-ltd-a" target="_blank" data-smartkarma-citation="entities:17510:1" rel="noopener">ORG Technology Co., Ltd. A (002701 CH)</a> in satisfying the precondition for its HK$7.21 voluntary offer for <a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a>. </li>
<li>The remaining preconditions (ORG shareholder and NDRC/SAFE approval) are low-risk. Including irrevocable, ORG represents 46.45% of outstanding shares within reach of the 50% minimum acceptance condition. </li>
<li>The two event risks (irrevocable termination date, precondition long stop date) should not derail the deal. At the last close, the gross spread was 4.9%. </li>
</ul>


The monthly update notes further progress made by ORG Technology Co., Ltd. A (002701 CH) in satisfying the precondition for its HK$7.21 voluntary offer for CPMC Holdings (906 HK). 
The remaining preconditions (ORG shareholder and NDRC/SAFE approval) are low-risk. Including irrevocable, ORG represents 46.45% of outstanding shares within reach of the 50% minimum acceptance condition. 
The two event risks (irrevocable termination date, precondition long stop date) should not derail the deal. At the last close, the gross spread was 4.9%. 


CPMC Holdings (906 HK): ORG Inching Towards the Launch of the Offer

<ul>
<li>Acquiring CPMC at low price is in line with Baosteel's strategic goals and the new assessment indicators of Baowu Group. This explains why Baosteel didn't choose to raise its Offer </li>
<li>ORG intends to acquire 100% equity of CPMC. This means state-owned capital needs to withdraw completely from CPMC. So, would China Foods/COFCO (both SOEs) agree to be acquired by ORG?</li>
<li>If ORG is “forced to” acquire CPMC due to Baosteel's low Offer Price, will ORG change mind and choose to withdraw midway?Such “potential unwillingness” from ORG makes the deal “tricky”.</li>
</ul>


Acquiring CPMC at low price is in line with Baosteel's strategic goals and the new assessment indicators of Baowu Group. This explains why Baosteel didn't choose to raise its Offer 
ORG intends to acquire 100% equity of CPMC. This means state-owned capital needs to withdraw completely from CPMC. So, would China Foods/COFCO (both SOEs) agree to be acquired by ORG?
If ORG is “forced to” acquire CPMC due to Baosteel's low Offer Price, will ORG change mind and choose to withdraw midway?Such “potential unwillingness” from ORG makes the deal “tricky”.


CPMC Holdings (906.HK) Privatization Update - Will ORG Withdraw Midway?

<ul>
<li>Huarui Offer has been approved by SAMR, which marks a solid step forward.Meanwhile, ORG’s management stated that the reduction of Huangshan Novel shares is to raise funds to acquire CPMC.</li>
<li>While Baosteel may want to “test the waters”, the signals ORG is sending is it will make every effort to advance the acquisition of CPMC and is accelerating the process. </li>
<li>The return on Huarui Offer isn't attractive.We recommend waiting for Baosteel to raise its Offer, or simply choosing to add more positions in China TCM, whose privatization is more lucrative.</li>
</ul>


Huarui Offer has been approved by SAMR, which marks a solid step forward.Meanwhile, ORG’s management stated that the reduction of Huangshan Novel shares is to raise funds to acquire CPMC.
While Baosteel may want to “test the waters”, the signals ORG is sending is it will make every effort to advance the acquisition of CPMC and is accelerating the process. 
The return on Huarui Offer isn't attractive.We recommend waiting for Baosteel to raise its Offer, or simply choosing to add more positions in China TCM, whose privatization is more lucrative.


CPMC Holdings (906.HK) Privatization Update - ORG Is Pushing Baosteel to Raise Its Offer

<ul>
<li>Baosteel's choice to maintain its original Offer may partly reflect its "confidence" in the deal. If investors bet that Huarui Offer will succeed, they need to bear some risks.</li>
<li>If investors choose to arbitrage at HK$7.21/share, annualized return is 9% assuming privatization would be completed in mid-Jan 2025.Such return may not be attractive considering the uncertainties behind the deal. </li>
<li>If investors are optimistic about Baosteel's final acquisition of CPMC, they can consider buying Baosteel shares, as Baosteel will become the new industry leader, with greater upside potential for valuation.</li>
</ul>


Baosteel's choice to maintain its original Offer may partly reflect its "confidence" in the deal. If investors bet that Huarui Offer will succeed, they need to bear some risks.
If investors choose to arbitrage at HK$7.21/share, annualized return is 9% assuming privatization would be completed in mid-Jan 2025.Such return may not be attractive considering the uncertainties behind the deal. 
If investors are optimistic about Baosteel's final acquisition of CPMC, they can consider buying Baosteel shares, as Baosteel will become the new industry leader, with greater upside potential for valuation.


CPMC Holdings (906.HK) Privatization Update- Due to Risk Behind ORG's Offer, Baosteel Is a Wiser Bet

China

Shanghai Baosteel Packaging Co. Ltd., manufactures steel products. The Company also provides metal packaging services. Shanghai Baosteel Packaging serves customers and clients internationally.

Shanghai Baosteel Packaging-A (601968 CH)

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Shanghai Baosteel Packaging-A (601968 CH)

CPMC Holdings (906.HK) Update - These Are the Reasons Why We Find This Deal "Tricky"

Huarui has completed filing process with the NDRC. The only remaining item under Pre- Condition is the SAFE approval.We hope ORG can accelerate the...

Xinyao (Criss) Wang

CPMC Holdings (906 HK): ORG Inching Towards the Launch of the Offer

The precondition is almost done as CPMC shareholder and NDRC approvals are secured. Only SAFE approval, which is a formality, is outstanding. This...

Arun George

CPMC Holdings (906.HK) Privatization Update - Will ORG Withdraw Midway?

ORG want 100% equity and kick SOE out because even if 50% acceptance hurdle can be cleared, the effect of acquisition is lower-than-expected if ORG...

Xinyao (Criss) Wang

CPMC Holdings (906.HK) Privatization Update - ORG Is Pushing Baosteel to Raise Its Offer

Baosteel failed to hit the 50% minimum acceptance condition and let the Offer lapse without taking any further actions. Now it's time to see ORG's...

Xinyao (Criss) Wang

CPMC Holdings (906.HK) Privatization Update- Due to Risk Behind ORG's Offer, Baosteel Is a Wiser Bet

Baosteel's confidence in maintaining original Offer makes investors reconsider betting on ORG.Arbitrage return not attractive under Huarui...

Xinyao (Criss) Wang

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

CPMC Holdings (906.HK) Update - These Are the Reasons Why We Find This Deal "Tricky"

Huarui has completed filing process with the NDRC. The only remaining item under Pre- Condition is the SAFE approval.We hope ORG can accelerate the...

Xinyao (Criss) Wang

CPMC Holdings (906 HK): ORG Inching Towards the Launch of the Offer

The precondition is almost done as CPMC shareholder and NDRC approvals are secured. Only SAFE approval, which is a formality, is outstanding. This...

Arun George

CPMC Holdings (906.HK) Privatization Update - Will ORG Withdraw Midway?

ORG want 100% equity and kick SOE out because even if 50% acceptance hurdle can be cleared, the effect of acquisition is lower-than-expected if ORG...

Xinyao (Criss) Wang

CPMC Holdings (906.HK) Privatization Update - ORG Is Pushing Baosteel to Raise Its Offer

Baosteel failed to hit the 50% minimum acceptance condition and let the Offer lapse without taking any further actions. Now it's time to see ORG's...

Xinyao (Criss) Wang

CPMC Holdings (906.HK) Privatization Update- Due to Risk Behind ORG's Offer, Baosteel Is a Wiser Bet

​Baosteel's confidence in maintaining original Offer makes investors reconsider betting on ORG.Arbitrage return not attractive under Huarui...

Xinyao (Criss) Wang

Baosteel's confidence in maintaining original Offer makes investors reconsider betting on ORG.Arbitrage return not attractive under Huarui...