HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Event-Driven

<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

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>Changping Industrial’s 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> opens at an unchanged HK$6.87, 4.7% below <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>’s competing HK$7.21 offer. </li>
<li>Changping Industrial thinks deal fatigue may tip the balance in its favour. However, minorities will call Changping's bluff, as the offer at current terms has a low chance of success. </li>
<li>Despite the current posturing, Changping Industrial will likely need to bump above ORG’s offer marginally to succeed. Expect more twists and turns in this contested battle. </li>
</ul>


Changping Industrial’s offer for CPMC Holdings (906 HK) opens at an unchanged HK$6.87, 4.7% below ORG Technology Co., Ltd. A (002701 CH)’s competing HK$7.21 offer. 
Changping Industrial thinks deal fatigue may tip the balance in its favour. However, minorities will call Changping's bluff, as the offer at current terms has a low chance of success. 
Despite the current posturing, Changping Industrial will likely need to bump above ORG’s offer marginally to succeed. Expect more twists and turns in this contested battle. 


CPMC Holdings (906 HK): Poker Face off as Changping Industrial Launches Offer at Unchanged Terms

<ul>
<li>Since all the Pre-Conditions have been fulfilled, Baosteel has taken a solid step towards the successful acquisition of CPMC. Comparatively, ORG could encounter resistance and uncertainties in the upcoming process.</li>
<li>The acquisition of CPMC by ORG cannot be completed by ORG and Zhang Wei alone.Without the “nod” of COFCO/SASAC, what ORG's going to do is equivalent to a “hostile takeover”. </li>
<li>ORG's acquisition of control of CPMC could go against the national strategy of "building strong alliances between SOEs". In fact, what ORG wants is for Baosteel to raise its Offer.</li>
</ul>


Since all the Pre-Conditions have been fulfilled, Baosteel has taken a solid step towards the successful acquisition of CPMC. Comparatively, ORG could encounter resistance and uncertainties in the upcoming process.
The acquisition of CPMC by ORG cannot be completed by ORG and Zhang Wei alone.Without the “nod” of COFCO/SASAC, what ORG's going to do is equivalent to a “hostile takeover”. 
ORG's acquisition of control of CPMC could go against the national strategy of "building strong alliances between SOEs". In fact, what ORG wants is for Baosteel to raise its Offer.


CPMC Holdings (906.HK) Privatization Update - The Story Behind the Delay of Offer Document Despatch

<ul>
<li>ORG purchased 27% of CPMC's shares at HK$6/share in 2015.After about eight years, Baosteel's Offer Price was only HK$6.87/share. The annualized return rate was low, which obviously cannot satisfy ORG.</li>
<li>Baosteel and CPMC have been in talks for a long time - There may have been some "tacit agreement" between the two parties. The approval process is smooth so far.</li>
<li>For acquisitions/consolidation between SOEs, private enterprises usually have limited chances of winning.ORG has financial pressure and the approval process face uncertainties. There would be more negotiations among CPMC, ORG, Baosteel.</li>
</ul>


ORG purchased 27% of CPMC's shares at HK$6/share in 2015.After about eight years, Baosteel's Offer Price was only HK$6.87/share. The annualized return rate was low, which obviously cannot satisfy ORG.
Baosteel and CPMC have been in talks for a long time - There may have been some "tacit agreement" between the two parties. The approval process is smooth so far.
For acquisitions/consolidation between SOEs, private enterprises usually have limited chances of winning.ORG has financial pressure and the approval process face uncertainties. There would be more negotiations among CPMC, ORG, Baosteel.


CPMC Holdings (906.HK) Privatization - Some New Information Worth the Attention

<ul>
<li>Baosteel’s SOE background helps bring more advantages- This deal is a consolidation of assets under SASAC, which may involve some strategic intent at national level. Baosteel has an upper hand. </li>
<li>ORG cannot afford to fail considering the strategic significance of CMPC for ORG. Major shareholder of CPMC Zhang Wei has picked ORG side, making it maintain the hope of winning.</li>
<li>For arbitrageurs, the good news is CPMC would be acquired by either Changping Industrial or ORG, with high certainty.Baosteel is also worth watching since it could be a new leader. </li>
</ul>


Baosteel’s SOE background helps bring more advantages- This deal is a consolidation of assets under SASAC, which may involve some strategic intent at national level. Baosteel has an upper hand. 
ORG cannot afford to fail considering the strategic significance of CMPC for ORG. Major shareholder of CPMC Zhang Wei has picked ORG side, making it maintain the hope of winning.
For arbitrageurs, the good news is CPMC would be acquired by either Changping Industrial or ORG, with high certainty.Baosteel is also worth watching since it could be a new leader. 


CPMC Holdings (906.HK) - ORG Can't Afford to Lose, But Baosteel Is a Step Ahead

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)

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Shanghai Baosteel Packaging-A (601968 CH)

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

CPMC Holdings (906 HK): Poker Face off as Changping Industrial Launches Offer at Unchanged Terms

Despite the current posturing, Changping Industrial will likely need to bump above ORG’s offer marginally, to succeed. Expect more twists and turns...

Arun George

CPMC Holdings (906.HK) Privatization Update - The Story Behind the Delay of Offer Document Despatch

Baosteel makes solid progress in acquiring CPMC, and this type of merger is in line with the idea of integration of SOEs. Comparatively, ORG may...

Xinyao (Criss) Wang

CPMC Holdings (906.HK) Privatization - Some New Information Worth the Attention

Baosteel's Offer Price was too low to generate good returns for ORG, leading to dissatisfaction and negotiations among all parties.ORG faces...

Xinyao (Criss) Wang

CPMC Holdings (906.HK) - ORG Can't Afford to Lose, But Baosteel Is a Step Ahead

Baosteel's SOE background gives it an advantage in acquiring CPMC, while ORG offers a higher price and has major shareholder support in bid for...

Xinyao (Criss) Wang

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

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

CPMC Holdings (906 HK): Poker Face off as Changping Industrial Launches Offer at Unchanged Terms

Despite the current posturing, Changping Industrial will likely need to bump above ORG’s offer marginally, to succeed. Expect more twists and turns...

Arun George

CPMC Holdings (906.HK) Privatization Update - The Story Behind the Delay of Offer Document Despatch

​Baosteel makes solid progress in acquiring CPMC, and this type of merger is in line with the idea of integration of SOEs. Comparatively, ORG may...

Xinyao (Criss) Wang

CPMC Holdings (906.HK) Privatization - Some New Information Worth the Attention

Baosteel's Offer Price was too low to generate good returns for ORG, leading to dissatisfaction and negotiations among all parties.ORG faces...

Xinyao (Criss) Wang

CPMC Holdings (906.HK) - ORG Can't Afford to Lose, But Baosteel Is a Step Ahead

​Baosteel's SOE background gives it an advantage in acquiring CPMC, while ORG offers a higher price and has major shareholder support in bid for...

Xinyao (Criss) Wang

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

Baosteel makes solid progress in acquiring CPMC, and this type of merger is in line with the idea of integration of SOEs. Comparatively, ORG may...

Baosteel's SOE background gives it an advantage in acquiring CPMC, while ORG offers a higher price and has major shareholder support in bid for...