Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>Yesterday, <a href="https://www.smartkarma.com/entities/soho-china-ltd" target="_blank" data-smartkarma-citation="entities:4123:1" rel="noopener">SOHO China Ltd (410 HK)</a>'s shares were utterly cremated, ostensibly in response to a media report the pre-conditional Offer from the Blackstone Group faces regulatory obstacles.</p>
<p>At one stage, shares were down 31%, or 48% adrift of the $5.00/share offer price, and 13% below the undisturbed price, before recovering to close at $3.02/share.</p>
<p>Yet that media article was vague in context, and ultimately stopped short of saying the deal would be blocked. </p>
<p>As they say, "In for a penny, in for a pound."</p>
<p>More thoughts below the fold.</p>

Yesterday, SOHO China Ltd (410 HK)'s shares were utterly cremated, ostensibly in response to a media report the pre-conditional Offer from the Blackstone Group faces regulatory obstacles.
At one stage, shares were down 31%, or 48% adrift of the $5.00/share offer price, and 13% below the undisturbed price, before recovering to close at $3.02/share.
Yet that media article was vague in context, and ultimately stopped short of saying the deal would be blocked. 
As they say, "In for a penny, in for a pound."
More thoughts below the fold.

Nature Home Holding Company / Event-Driven

<div>
<p>After wood flooring manufacturer <a href="https://www.smartkarma.com/entities/nature-home-holding-company" target="_blank" data-smartkarma-citation="entities:20543:1" rel="noopener">Nature Home Holding Company (2083 HK)</a> was <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0719/2021071900227.pdf" target="_blank" rel="noopener">suspended</a> "<em>pursuant to the Code of Takeovers and Mergers</em>" on the 19 July, in <em><a href="https://skr.ma/cek8n" target="_blank" rel="noopener">Nature Home (2083 HK): Possible Takeover Target</a></em> I concluded if an Offer was to be tabled, it would likely be via a Scheme and at ~HK$1.70/share.</p>
<p>And this is exactly what transpired. </p>
<p>Late last night, Nature Home <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0727/2021072701813.pdf" target="_blank" rel="noopener">announced</a> an Offer from its founding shareholders, by way of a Scheme, at HK$1.70/share. The Offer Price will not be increased. Nature Home does not intend to declare any dividends during the Offer period. </p>
</div>
<div>
<a href="https://www.smartkarma.com/entities/dehua-tb-new-decoration-a" target="_blank" data-smartkarma-citation="entities:4444:1" rel="noopener">Dehua Tb New Decoration A (002043 CH)</a> has given an irrevocable rollover undertaking for its 19.6% stake. </div>
<div></div>
<div>
<p>Standard Scheme conditions apply. On account of the Rollover Agreement, Dehua does not form part of the independent shareholders who will vote on the merits of the Scheme.</p>
<p>This Offer looks done.</p>
</div>
<div>
<p>More below the fold.</p>
</div>


After wood flooring manufacturer Nature Home Holding Company (2083 HK) was suspended "pursuant to the Code of Takeovers and Mergers" on the 19 July, in Nature Home (2083 HK): Possible Takeover Target I concluded if an Offer was to be tabled, it would likely be via a Scheme and at ~HK$1.70/share.
And this is exactly what transpired. 
Late last night, Nature Home announced an Offer from its founding shareholders, by way of a Scheme, at HK$1.70/share. The Offer Price will not be increased. Nature Home does not intend to declare any dividends during the Offer period. 


Dehua Tb New Decoration A (002043 CH) has given an irrevocable rollover undertaking for its 19.6% stake. 


Standard Scheme conditions apply. On account of the Rollover Agreement, Dehua does not form part of the independent shareholders who will vote on the merits of the Scheme.
This Offer looks done.


More below the fold.


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.

<p><a href="https://www.smartkarma.com/entities/soho-china-ltd" target="_blank" data-smartkarma-citation="entities:4123:1" rel="noopener">Soho China Ltd (410 HK)</a> is a real estate company controlled by power couple Pan Shiyi and Zhang Xin. As a reminder on 16 June, SOHO China announced a pre-conditional voluntary conditional cash offer from <a href="https://www.smartkarma.com/entities/blackstone-group-inc" target="_blank" data-smartkarma-citation="entities:27166:1" rel="noopener">Blackstone Group (BX US)</a>. The offer of HK$5.00 in cash per share is a 31.6% premium over the closing price of HK$3.80 per share on the last trading day (11 June prior to the trading halt). The offer is conditional on the offeror holding more than 50% of the voting rights. The offer will meet the 50+% acceptance threshold as the offeror has secured irrevocables from Pan Shiyi and Zhang Xin representing 54.93% of the outstanding shares.</p><p>In <a href="https://www.smartkarma.com/insights/soho-china-blackstone-makes-its-offer" target="_blank" data-smartkarma-citation="insights:53191" rel="noopener">SOHO China: Blackstone Makes Its Offer</a>, we stated that Blackstone has driven a hard bargain and secured the irrecovables from Pan Shiyi and Zhang Xin at a relatively good price. Notably, Blackstone’s offer price of HK$5.00 per share is 17% below last year’s rumoured privatisation price of HK$6.00 per share. The lower price likely explains Blackstone’s move to pursue a conditional voluntary offer rather than privatisation via a scheme. While not a knockout offer, we concluded that the offer will resonate with some shareholders. </p><p>However, since the announcement of the offer, the spread has widened from 9% on the first trading day after the deal announcement to 21% at the last close price of HK$4.12. The high spread is due to concerns that the key pre-condition, which is approval by SAMR under the PRC anti-monopoly law, will not be forthcoming. Blackstone has made its submission to SAMR.  </p><div class="content-highlight"><p>We continue to think that the pre-condition will be satisfied as SOHO China will remain a listed entity, Pan Shiyi and Zhang Xin will continue to retain a meaningful holding, Blackstone has prior experience in closing Chinese real estate deals and SOHO China is a relatively small player in a fragmented commercial property market in China. Based on a deal break price of HK$2.45 per share, the deal probability has reached an all-time low of 65% at the last close price of HK$4.12. An 80% deal probability would imply a price of HK$4.50 per share and an 11% gross spread, which we view as reasonable.</p></div>

Soho China Ltd (410 HK) is a real estate company controlled by power couple Pan Shiyi and Zhang Xin. As a reminder on 16 June, SOHO China announced a pre-conditional voluntary conditional cash offer from Blackstone Group (BX US). The offer of HK$5.00 in cash per share is a 31.6% premium over the closing price of HK$3.80 per share on the last trading day (11 June prior to the trading halt). The offer is conditional on the offeror holding more than 50% of the voting rights. The offer will meet the 50+% acceptance threshold as the offeror has secured irrevocables from Pan Shiyi and Zhang Xin representing 54.93% of the outstanding shares.In SOHO China: Blackstone Makes Its Offer, we stated that Blackstone has driven a hard bargain and secured the irrecovables from Pan Shiyi and Zhang Xin at a relatively good price. Notably, Blackstone’s offer price of HK$5.00 per share is 17% below last year’s rumoured privatisation price of HK$6.00 per share. The lower price likely explains Blackstone’s move to pursue a conditional voluntary offer rather than privatisation via a scheme. While not a knockout offer, we concluded that the offer will resonate with some shareholders. However, since the announcement of the offer, the spread has widened from 9% on the first trading day after the deal announcement to 21% at the last close price of HK$4.12. The high spread is due to concerns that the key pre-condition, which is approval by SAMR under the PRC anti-monopoly law, will not be forthcoming. Blackstone has made its submission to SAMR.  We continue to think that the pre-condition will be satisfied as SOHO China will remain a listed entity, Pan Shiyi and Zhang Xin will continue to retain a meaningful holding, Blackstone has prior experience in closing Chinese real estate deals and SOHO China is a relatively small player in a fragmented commercial property market in China. Based on a deal break price of HK$2.45 per share, the deal probability has reached an all-time low of 65% at the last close price of HK$4.12. An 80% deal probability would imply a price of HK$4.50 per share and an 11% gross spread, which we view as reasonable.

Last Week in Event SPACE: SOHO China, Toshiba, Boral Ltd, Yageo/Chilisin, Microstrategy

<div>
<p>When PRC commercial property-play <a href="https://www.smartkarma.com/entities/soho-china-ltd" target="_blank" data-smartkarma-citation="entities:4123:1" rel="noopener">SOHO China Ltd (410 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0616/2021061600985.pdf" target="_blank" rel="noopener">announced</a> a pre-conditional Offer from the Blackstone Group at $5.00/share on the 16 June, my initial takeaway in <em><a href="https://skr.ma/1ZxiU" target="_blank" rel="noopener">SOHO China's (410 HK) Done &amp; Dusted VGO</a></em> was this was a super clean deal.</p>
<ul>
<li>It was a 31.6% premium to last close and a 57.6% premium over the average close of the last five trading days.</li>
<li>The pre-cons pertain to clearance from SAMR under PRC Anti-Monopoly Law, and a simplified procedure or simple case application was (is) expected.</li>
<li>The Offer was conditional on 50% of the voting rights tendered within the Offer period, and the irrevocables (from founders Pan Shiyi and his wife Zhang Xin) were 54.93%.</li>
</ul>
<p>Done &amp; dusted no? </p>
<p>Since closing at an initial 9% <em>gross</em> spread, this has continually widened and is now out to 20%. Something was decidedly amiss.</p>
</div>
<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/216/412/original/image_60616477431625191475938.png?1625191478" class="editor-image img-responsive" data-smartkarma-image-id="216412"></figure>
<p>Source: CapIQ</p>
</div>
<p>It is difficult to see the security risks at work here - SOHO has been offloading properties for years, like Sky SOHO to Gaw Capital Partners in <a href="https://www.mingtiandi.com/real-estate/finance-real-estate/gaw-closes-on-798m-purchase-of-sky-soho-in-shanghai/" target="_blank" rel="noopener">2018</a> for RMB5bn, none of which attracted security issues.</p>
<div>
<p>There are various media reports of Pan's son making disparaging comments at the time of the Chinese and India skirmish last year. This appears one area where the deal is perhaps getting politicised.</p>
<p>However Blackstone would have been aware of this development, and still proceeded with the proposal.'</p>
<p>What else is there?</p>
<p>Perhaps with the passing of former US Secretary of Defence Donald Rumsfield, it seems apt to apply his "known knowns" phrase as it relates to this transaction.</p>
<p>More below the fold. </p>
</div>
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<p></p>
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When PRC commercial property-play SOHO China Ltd (410 HK) announced a pre-conditional Offer from the Blackstone Group at $5.00/share on the 16 June, my initial takeaway in SOHO China's (410 HK) Done &amp; Dusted VGO was this was a super clean deal.

It was a 31.6% premium to last close and a 57.6% premium over the average close of the last five trading days.
The pre-cons pertain to clearance from SAMR under PRC Anti-Monopoly Law, and a simplified procedure or simple case application was (is) expected.
The Offer was conditional on 50% of the voting rights tendered within the Offer period, and the irrevocables (from founders Pan Shiyi and his wife Zhang Xin) were 54.93%.

Done &amp; dusted no? 
Since closing at an initial 9% gross spread, this has continually widened and is now out to 20%. Something was decidedly amiss.



Source: CapIQ

It is difficult to see the security risks at work here - SOHO has been offloading properties for years, like Sky SOHO to Gaw Capital Partners in 2018 for RMB5bn, none of which attracted security issues.

There are various media reports of Pan's son making disparaging comments at the time of the Chinese and India skirmish last year. This appears one area where the deal is perhaps getting politicised.
However Blackstone would have been aware of this development, and still proceeded with the proposal.'
What else is there?
Perhaps with the passing of former US Secretary of Defence Donald Rumsfield, it seems apt to apply his "known knowns" phrase as it relates to this transaction.
More below the fold. 





SOHO China (410 HK): Known Knowns As Spread Widens

China

Soho China Ltd. is a property developer. The Company develops properties in central Beijing and Shanghai. Soho China collaborates with internationally recognized architects, translating their designs into real estate which possesses strong appeal to property investors and the local businesses and customer bases they serve.

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Soho China (410 HK)

SOHO China (410 HK): In For a Penny ...

On balance, this deal should get up. There was clear adding/buying late yesterday on the pretext this widely circulated article was weak.

David Blennerhassett

Nature Home (2083 HK)'s Full Offer

Assuming this completes mid-Dec, the current gross/annualised spread is 9.7%/27.5%. That looks wide, although Asian arb spreads have widened...

David Blennerhassett

SOHO China’s Offer Spread Risk/Reward

Based on a break price of HK$2.45 per share, the deal probability has reached an all-time low of 65% at the last close price. An 80% deal...

Arun George

Last Week in Event SPACE: SOHO China, Toshiba, Boral Ltd, Yageo/Chilisin, Microstrategy

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

SOHO China (410 HK): Known Knowns As Spread Widens

There are various rumours out there, almost all lacking in detail. On balance, this deal should get up, but recent trading is likely a reflection...

David Blennerhassett

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