Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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>
<div>
<p></p>
</div>


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


For the month of June, 11 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$14.8bn.



Clicking on the company name in the table below will take you to the entity page where you can read the initial insight(s) written by Smartkarma contributors on these new deals and follow-up discussions, or simply click on the insight link(s) below the name.






New Deals


Industry


Size (US$bn)


Type


Premium




Australia




Altium Ltd (ALU AU) 
Software
3.7
Scheme
41.5%


Altium Ltd (ALU) Rebuffs Autodesk Offer



Hansen Technologies (HSN AU) 
Software
1.0
Scheme
25.0%


Hansen Technologies (HSN AU)'s Assured Deal With BGH



Milton Corp Ltd (MLT AU) 
Fund manager
3.1
Scheme
20.0%



WHSP's Proposed Merger With Milton Corp Milton Merger Is A Most Marvelous Arb Milton-WHSP Merger Index Implications and the Marvelous Arb



 



Hong Kong




Bestway Global Holding (3358 HK) 
Leisure products
0.1
Scheme
27.0%


Bestway Global (3358 HK): Scheme Proposal From Founder



Soho China Ltd (410 HK) 
Real estate
3.3
VGO
31.6%


SOHO China (410 HK) Suspended Pursuant To The Takeovers Code - Again SOHO China's (410 HK) Done &amp; Dusted VGO



WH Group (288 HK) 
Meat supplier
0.5
Buyback/Partial



WH Group (288 HK): Today's Pig Is Tomorrow's Bacon?  WH Group Buyback Offer Announced - Strong Accretion Creates Accretion Risk  WH Group Vs Peers - Too Many Piggies Going to Market?






Japan




Oliver Corp (7959 JP) 
Designer
0.1
Tender Offer
39.0%


Oliver (7959 JP) MBO - Please Sir, I Want Some More!



Sanshin Electronics (8150 JP) 
Electronics
1.5
Buyback Tender



Sanshin Electronics (8150 JP) BIG Buyback Tender - Not Designed For You










Malaysia




Ijm Plantations (IJMP MK) 
Palm Oil
0.7
SPA/MGO
56.19%


IJM Plantations' Potential MGO From KLK







MMC Corp Bhd (MMC MK) 
Infrastructure
0.7
SCR
70.94%


MMC Corp (MMC MK): Privatisation Offer From Syed Mokhtar  MMC Corp (MMC MK): Let's Talk About Timing










Singapore




Dutech Holdings (DTECH SP) 
Security 
0.1
Cash Offer
60.0%


Dutech Holdings (DTECH SP): A Safe Bet


Source: Smartkarma Insights






The average premium for the new deals announced (or first discussed) in June was ~41%, with a year-to-date average of ~32% (89 deals &amp; total deal size of US$161bn). This compares to the average premium for all deals in 2020 (158 deals) and 2019 (145 deals) of 31% and 31.5% respectively. 




Summary of News in June of Arb Situations On Smartkarma's Radar



(Again, click on the company names to take to you to the insights and/or discussion posts for a more comprehensive read-through on each situation)






Australia


Comments (with links to announcements &amp; insights)




APN Property Group (APD AU) 

16-Jun: APN Property (APD AU): Scheme Booklet Out. EGM Firmed




Asaleo Care Ltd (AHY AU) 

2-Jun: Asaleo (ASX: AHY): Essity’s Offer Gets Up




Bingo Industries (BIN AU) 

9-Jun: Bingo Industries (BIN AU)'s Scheme Booklet has been registered with ASIC. 
The board unanimously recommends MIRA's Offer. The Independent Expert also gives the thumbs up. The Scheme Meeting will take place on the 13 July with an expected implementation date of 5 August. 14-Jun: Bingo Industries (BIN AU): Scheme Booklet Out. EGM Tabled




Boral Ltd (BLD AU) 

4-Jun: Boral Ltd (BLD AU)'s Target Statement is expected to be released next week in response to Seven Group Holdings (SVW AU) Offer.   9-Jun: Not surprisingly, in the Target Statement,  Boral Ltd (BLD AU) has recommended shareholders reject Seven Group Holdings (SVW AU)'s Offer.  28-Jun: Boral Ltd (BLD AU) Rejects Seven's Bump




Crown Resorts (CWN AU) 

15-Jun: Crown Resorts (CWN AU): Oaktree's Intriguing Proposal




Galaxy Resources (GXY AU) 

No June update




Japara Healthcare (JHC AU) 

15-Jun: Japara Healthcare (JHC AU): Bolton Clarke Spoils Calvary's Charge




Mainstream Group Holdings Ltd (MAI AU) 

9-Jun: Mainstream (MAI AU): Apex on Top Again as Bidding War Continues.... 21-June: Mainstream Group Holdings Ltd (MAI AU) confirmed that SS&amp;C did not exercise their matching rights. Consequently, they are now in discussions with Apex. Apex's Offer was at A$2.80/share.  25-Jun: Mainstream Group Holdings Ltd (MAI AU) has confirmed that they have entered into a Scheme Implementation Deed with Apex. The Offer Price is A$2.80/share.




McPherson's Ltd (MCP AU) 

15-Jun: Arrotex walks - and McPherson's Ltd (MCP AU) tanks 15.22%




Mortgage Choice (MOC AU) 

No June update



Primewest Group Ltd (PWG AU)

3-Jun: Primewest (PWG AU): Centuria Offer Period Extended; Trading Wide 4-Jun: This Offer is now unconditional.




Think Childcare (TNK AU) 

No June update




Vitalharvest Freehold Trust (VTH AU) 

28-Jun: Vitalharvest Freehold Trust (VTH AU)'s shareholders approve MAFM's Scheme. 




Vocus Communications (VOC AU) 

22-Jun: Vocus Communications (VOC AU)'s shareholders overwhelmingly approve MIRA's Scheme.










Hong Kong


Comments (with links to announcements &amp; insights)




China Machinery Engineering (1829 HK) 

4-Jun:  CMEC (1829 HK): Clarity On Timing As Pre-Cons Fulfilled




China Traditional Chinese Medicine (570 HK) 

8-Jun: In its monthly update regarding a potential Offer, China Traditional Chinese Medicine (570 HK) says there is no update.




China Youzan Limited (8083 HK) 

18-Jun: China Youzan (8083 HK) has now extends the Scheme long stop date out to the 26 November 2021. 




Chong Hing Bank (1111 HK) 

8-Jun: As expected, Chong Hing Bank (1111 HK) delays the Scheme Doc to the 9 July. I had the 17 July in my indicative table  18-Jun: Chong Hing Bank (1111 HK) announced it has now pushed back the despatch of the Scheme Document to the 30 July, around two weeks past my prior estimate. 




Kerry Logistics Network (636 HK) 

7-Jun: The free float waiver has been received.  A bunch of other pre-cons still remain outstanding.  15-Jun: Shareholders of Kerry Logistics Network (636 HK) approve the partial Offer. Various pre-conditions have yet to be fulfilled.  29-Jun: CFIUS approval received. Various pre-conditions remain outstanding. 




Rivera Holdings (281 HK) 

30-Jun: Scheme Doc out. Scheme Meeting is the 23 July. Payment expected on the 30 August. 




Sichuan Languang Justbon Service Group (2606 HK) 

17-Jun: EGM gets up. Close of acceptances on the 2 July. This is done.










India


Comments (with links to insights)




Adani Power (ADANI IN) 

3-Jun: Not Much Time Left for Adani Power Delisting Offer




Mphasis Ltd (MPHL IN) 

No June update




Vedanta Ltd (VEDL IN) 

20-Jun: VEDL has continued to outperform peers while VEDL has underperformed HZL so the VEDL stub has underperformed. 










Japan


Comments (with links to announcements &amp; insights)




Aomori Bank (8342 JP) / Michinoku Bank (8350 JP) 
No June update



BeNEXT Group (2154 JP) 
No June update



EPS Holdings (4282 JP) 
1-Jun:  EPS MBO Is Cheap. Too Cheap. But Be Careful Of Your Assumptions




Fuji Kosan Company (5009 JP) 
15-Jun: Tender offer extended to the 9 July 25-Jun: Fuji Kosan Wins In Court, Aslead Walks Away




Hitachi Metals (5486 JP) 

No June update




Honshu Chemical Industry (4115 JP) 

14-Jun: The Tender Offer for Honshu Chemical Industry (4115 JP) was completed. The owners now control 84.6%.




Invesco Office J Reit (3298 JP) 

1-Jun: Starwood Bumps Invesco Office Price to Match But STILL Not a Done Deal. 11-Jun:  Invesco Real Estate Bumps Intended Tender Offer Price 16-Jun: Starwood Tender for Invesco Fails - Invesco Deal More Likely To Work But....  17-Jun: Invesco Real Estate have announced their Tender Offer for Invesco Office J Reit (3298 JP) from June 18 to July 27. JPY 22,750/share. If you own, now is the time to sell. 



Japan Asia (3751 JP)
15-Jun: CIE Boosts Its Japan Asia Group (3751) TOB Price - Hidden Implications




Locoguide (4497 JP) / Kufu (4399 JP)

No June update



Maruka Machinery (7594 JP) / Furusato Industries (8087 JP) 
No June update



Sawada Holdings (8699 JP) 

23-Jun: Sawada Holdings (8699 JP)announced that after Khan Bank applied to the Mongolian Central Bank in February for permission to pay a dividend for the year ended 31/12/2020, the MCB had responded on 18 June and so the company will receive a dividend of JPY 4.41bn and record it as operating revenue in the current fiscal year. IN ADDITION, Sawada announced that the MCB had asked for confirmation and documentation on the selldown by a Qualifying Shareholder. This was Tower. Tower sold. Tower reported they had sold. This should be open and shut.  In the meantime, J Trust Co Ltd (8508 JP) has 14.39% of Sawada. See the link.




Secom Co Ltd (9735 JP) 

1-Jun: The Tender Offer filing for Secom Co Ltd (9735 JP)'s tender offer for Secom Joshinetsu (4342 JP) was filed on 31 May.




Toshiba Corp (6502 JP) 

7-Jun: Toshiba Shareholder Return - A Little of This, A Little of That, But Sticky and Accretive 10-Jun: Toshiba's 2020 AGM Investigative Report Is Damning 11-Jun: Toshiba – Hands in the Cookie Jar 13-Jun: With Directors Under Fire, Toshiba Axes Two, May Need Another EGM 18-Jun: Toshiba – Who Should Stay and Who Should Go 22-Jun: Toshiba – A Tale of Two Investigative Reports 24-Jun: How Much of Toshiba Is Owned By "Activists"? The Answer 25-Jun: Toshiba Board in Disarray! Likely Need ANOTHER EGM 28-Jun: Toshiba – The Fallout




Yamada Denki (9831 JP) 

9-Jun: Yamada Denki and Otsuka Kagu Do The Deed - A Quick Merger









Malaysia


Comments 




Can-One Bhd (CAN MK) 
15-Jun: Offer closed on the 15 June.



IHH Healthcare (IHH MK) 
No June update











New Zealand


Comments (&amp; link to insight)




Tilt Renewables Ltd (TLT NZ) 

13-Jun: Tilt Renewables: Scheme Booklet Out. EGM Firmed










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)

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

(Mostly) Asia M&A: June 2021 Roundup

The average premium for the new deals announced (or first discussed) in June was ~41%, with a year-to-date average of ~32% (89 deals & total dal...

David Blennerhassett

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