Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

In this note, <a href="https://www.smartkarma.com/entities/618" target="_blank" data-smartkarma-citation="entities:618:1">CWT Ltd (CWT SP)</a>’s deal completion probability <a href="https://www.smartkarma.com/insights/cwt-limited-deal-risk-looms" target="_blank">slides</a> on HNA Group's alleged oversight; <a href="https://www.smartkarma.com/entities/873" target="_blank" data-smartkarma-citation="entities:873:1">PCCW Ltd (8 HK)</a>’s net cash stub looks <a href="https://www.smartkarma.com/insights/pccw-armed-with-a-warchest-there-is-a-potential-for-stub-re-rate" target="_blank">attractive</a>; <a href="https://www.smartkarma.com/entities/3144" target="_blank" data-smartkarma-citation="entities:3144:1">Bloomage Biotechnology (963 HK)</a>'s founder makes an <a href="https://www.smartkarma.com/insights/bloomage-biotechnology-is-the-offer-only-skin-deep" target="_blank">unconvincing</a> offer; <a href="https://www.smartkarma.com/entities/21085" target="_blank" data-smartkarma-citation="entities:21085:1">Naspers Ltd (NPN SJ)</a> networked network deserves a reassessment; while <a href="https://www.smartkarma.com/entities/1451" target="_blank" data-smartkarma-citation="entities:1451:1">Spectranetics Corp (SPNC US)</a> may be <a href="https://www.smartkarma.com/insights/spectranetics-nearing-expected-fda-approval-of-stellarex" target="_blank">wild</a> at heart.<div style="text-align: left;" class="content-caption">(Market capitalisation and liquidity discussed below are in US$. Liquidity is assessed on a 3-month average) </div><h2>Stubs/Holdcos </h2><ul class=""><li><a href="https://www.smartkarma.com/entities/873" target="_blank" data-smartkarma-citation="entities:873">PCCW Ltd (8 HK)</a>  (Mkt Cap: $4.4bn; Liq: $5.4mn) <ul><li>With PCCW’s discount to NAV back out to -2X STD levels, <a href="https://www.smartkarma.com/profiles/673" target="_blank">Toh Zhen Zhou</a><a href="https://www.smartkarma.com/insights/pccw-armed-with-a-warchest-there-is-a-potential-for-stub-re-rate" target="_blank">discussed</a> setting up a long stub trade.</li><li>PCCW’s stub ops have been challenging to embrace. Though the solutions segment has consistently returned decent earnings, stub EBITDA has been negative since 1H16.</li><li>The key negative contributor to that EBITDA has been PCCW’s UK broadband provider, a bonfire for money in recent years as illustrated in the chart in TZZ’s insight.</li><li>The good news is that PCCW <a href="http://www.hkexnews.hk/listedco/listconews/SEHK/2017/0206/LTN201702061696.pdf" target="_blank">sold</a> the business to <a href="https://www.smartkarma.com/entities/ck-hutchison-holdings-ltd/insights" target="_blank">Dad</a> for HK$2.9bn in March.</li><li>A month later, PCCW <a href="http://www.hkexnews.hk/listedco/listconews/SEHK/2017/0213/LTN20170213003.pdf" target="_blank">reduced</a> its stake in HKT to 52% from 63.07%. PCCW is estimated to be net cash of $5.4bn after the two transactions.</li><li>Even assigning a benchmark 25% holdco discount into HKT, the market is assigning no value for the net cash on hand - worth ~$0.70/share or 16% of PCCW's mkt cap and 8.9% of NAV - and the stub ops.</li><li>Interim results are due out during the 2nd week of August, which should provide clarity on solutions' continued growth trajectory and perhaps a gradual turnaround in the media ops (OTT biz), the latter of which has faced increasing competition and evolving viewer habits. Current levels would suggest going long the stub.</li></ul></li><li><a href="https://www.smartkarma.com/entities/9898" target="_blank" data-smartkarma-citation="entities:9898">Haw Par Corp Ltd (HPAR SP)</a>  (Mkt Cap: $1.8bn; Liq: $0.6mn) <ul><li>HPAR <a href="http://infopub.sgx.com/FileOpen/Proposed_transaction_ann..ashx?App=Announcement&amp;FileID=458818" target="_blank">announced</a> it is reducing its stake in <a href="https://www.smartkarma.com/entities/12891" target="_blank" data-smartkarma-citation="entities:12891">United Industrial Corp Ltd (UIC SP)</a> to 0.67% from 4.9%, via the sale of shares to <a href="https://www.smartkarma.com/entities/142" target="_blank" data-smartkarma-citation="entities:142">Uol Group Ltd (UOL SP)</a>. In consideration, UOL will issue 27.27mn new UOL shares to HPAR, bumping HPAR’s stake to 7.5% on an FD basis, from 5.51% currently. UOL’s stake in UIC increases to 48.94% from 44.71%.</li><li>The transaction requires some rather generic approvals from HPAR and UOL's independent shareholders. UOL has received a waiver from the SIC not to launch an MGO, provided it does not go over 49%.</li><li>Applying the last closing prices for both UIC &amp; UOL, this transaction adds around S$50mn to HPAR, far less than the S$180mn in mkt cap HPAR's stock has gained in the past month.</li><li>HPAR looks rich, trading at a 28.4% discount to NAV, at the upper end of its 12-month range.</li></ul></li><li><a href="https://www.smartkarma.com/entities/21085" target="_blank" data-smartkarma-citation="entities:21085">Naspers Ltd (NPN SJ)</a>(Mkt Cap: $89.6bn; Liq: $223mn)   <a href="https://www.smartkarma.com/entities/26" target="_blank" data-smartkarma-citation="entities:26">Tencent Holdings Ltd (700 HK)</a>(Mkt Cap: $340bn; Liq: $679mn) <ul><li>As discussed in last week's summary <a href="https://www.smartkarma.com/insights/last-week-in-event-space-17-june-2017" target="_blank">note</a>, Naspers was/is the stand-out holdco in set-up extreme (i.e. long the stub) in our <a href="https://www.smartkarma.com/tools/holdcos/JSE:NPN" target="_blank">monitor</a>.</li><li>Naspers <a href="https://www.naspers.com/NaspersPortal/media/Naspers/Pdf/financials/integrated-annual-reports/FY17-Results-Call-Final.pdf?ext=.pdf" target="_blank">announced</a> its FY17 (Mar Y/E) results on Friday. Core headline earnings grew 41% and profitable media units increased to 21 from 16 last year, delivering US$229mn in profit, up from US$122mn. Revenue from businesses outside of Africa now accounts for 80%, up from 77% a year ago.</li><li>Net debt (excluding satellite lease liabilities [US$1.2bn] &amp; non-interesting bearing debt [US$153mn]) stood at US$1.1bn vs. (US$1.2bn) a year ago.  In January this year, Naspers <a href="http://www.naspers.com/investors/news/naspers-limited-(jse-npn)-today-announced-its-(2)" target="_blank">disposed</a> of Allegro and Ceneo, generating net proceeds of US$3.2bn</li><li>Naspers was up 2.6% on the day which accounts for that uptick in the holdco chart. I estimate a discount to NAV of 32% (having just bounced off its -2xSTD) vs. a 12-mth average of 28%. The market continues to assign a negative value to the media units and net cash. Naspers looks attractive here as an outright long.</li></ul></li></ul><h2>Arbs/M&amp;A</h2>Hong Kong<ul><li><a href="https://www.smartkarma.com/entities/3144" target="_blank" data-smartkarma-citation="entities:3144">Bloomage Biotechnology (963 HK)</a>  (Mkt Cap: $724mn; Liq: $1.7mn) <ul><li><a href="https://www.smartkarma.com/profiles/263" target="_blank" data-smartkarma-citation="accounts:263">Pranav Rao</a><a href="https://www.smartkarma.com/insights/bloomage-biotechnology-is-the-offer-only-skin-deep" target="_blank">revisited</a> Bloomage after the tepid $16.30 offer from founder Zhao Yan versus Pranav’s earlier takeover estimate of $20.</li><li>The offer is by way of a scheme. GIC, with 11.84% of the company, is somewhat in agreeance on the offer; it has given an undertaking not to convert its CBs equivalent to around 6.9% on FD basis.</li><li>Either Franklin Resources (8.01%) or Macquarie Investment Management (4.79%) could effectively block the deal. Franklin is estimated to be in the money (just), while Macquarie is not.</li><li>Gross spread is 5.71% which seems about right. The offer is final and won’t be increased. </li></ul></li></ul>Australia<ul class=""><li><a href="https://www.smartkarma.com/entities/14615" target="_blank" data-smartkarma-citation="entities:14615">Tatts Group Ltd (TTS AU)</a> / <a href="https://www.smartkarma.com/entities/6837" target="_blank" data-smartkarma-citation="entities:6837">Tabcorp Holdings Ltd (TAH AU)</a> (Mkt Cap: $4.7bn; Liq: $11.9mn)/ (Mkt Cap: $2.9bn; Liq: $16.6mn) <ul><li><a href="https://www.smartkarma.com/companies/146" target="_blank" data-smartkarma-citation="companies:146">Morningstar</a><a href="https://www.smartkarma.com/insights/australian-competition-tribunal-gives-the-green-light-for-tatts-tabcorp-merger-fves-adjusted" target="_blank">addressed</a> the ACT <a href="http://www.asx.com.au/asxpdf/20170620/pdf/43k1rpdj8byxvj.pdf" target="_blank">approval</a>, for this gaming merger.</li><li>Apart from Tabcorp selling Odyssey, which was <a href="http://www.asx.com.au/asxpdf/20170418/pdf/43hkqppts06174.pdf" target="_blank">announced</a> in April, the scheme booklet (along with an independent expert’s report) is expected to be issued to Tatt’s shareholders in July, with a scheme meeting to take place sometime in August 2017.</li><li>According to Pranav: "This deal redefines the industry - if TTS vote it down, I would be very surprised".</li></ul></li></ul>Singapore<ul><li><a href="https://www.smartkarma.com/entities/618" target="_blank" data-smartkarma-citation="entities:618">CWT Ltd (CWT SP)</a>  (Mkt Cap: $944mn; Liq: $3.1mn) <ul><li>Pranav <a href="https://www.smartkarma.com/insights/cwt-limited-deal-risk-looms" target="_blank">briefly</a> reassessed CWT after acquirer HNA was one of several large Chinese groups apparently under investigation by the CBRC in regards to credit and debt financing.</li><li>Pranav has now lowered his deal completion probability to 45% from 60% previously.</li><li>This is a pre-conditional deal with approvals required, inter alia, from Mofcom.</li><li>The gross spread widened out to 6.88% from 2.64% following HNA’s alleged investigation.</li></ul></li></ul><ul><li><a href="https://www.smartkarma.com/entities/21820" target="_blank" data-smartkarma-citation="entities:21820">WS Atkins PLC (ATK LN)</a> / SNC-Lavalin Group (Mkt Cap: $2.6bn; Liq: $22.7mn)/ (Mkt Cap: $6.9bn; Liq: $26.8mn) <ul><li><a href="https://www.smartkarma.com/profiles/784" target="_blank">Roderick Manalo</a><a href="https://www.smartkarma.com/insights/ws-atkins-snc-lavalin-group-few-if-any-deal-impediments" target="_blank">discussed</a> the Atkins deal and doesn’t see any foreseeable roadblocks.</li><li>The scheme vote (75%, majority in number) takes place on the 26 June with the last settlement date of 17 July 2017. A spread of 5p (&amp; implied probability of completion of 99%) suggests shareholders will accept the 35.1% takeover premium.</li><li>There are outstanding antitrust approvals from Africa (Botswana, Kenya, Tanzania), having already received the US’ HSR approval on 15-May-17. However, Roderick is not aware of any competition issues raised. And given the fast-tracked long stop date of 31 July, the advisors/bankers involved clearly see no obstacles in this relatively straightforward merger.</li></ul></li></ul><ul><li>Spectranetics (Mkt Cap: $1.3bn; Liq: $11mn) <ul><li><a href="https://www.smartkarma.com/companies/93" target="_blank" data-smartkarma-citation="companies:93">CTFN</a><a href="https://www.smartkarma.com/insights/spectranetics-nearing-expected-fda-approval-of-stellarex" target="_blank">discussed</a> Spectranetics' forthcoming approval (July expected) from the FDA of its catheter device to treat a specific artery disease.</li><li>Such approval – and there are rumours about that it may occur in July - would elevate Spectranetics in the eyes of possible suitors.</li><li>Possible acquirers include Abbot, which is juggling a couple of recent acquisitions. Also Terumo Medical Corp., Philips, and Cardinal Health. Spectranetics is up 22.45% this year and trading around 10% below consensus target estimates.</li></ul></li></ul>

In this note, CWT Ltd (CWT SP)’s deal completion probability slides on HNA Group's alleged oversight; PCCW Ltd (8 HK)’s net cash stub looks attractive; Bloomage Biotechnology (963 HK)'s founder makes an unconvincing offer; Naspers Ltd (NPN SJ) networked network deserves a reassessment; while Spectranetics Corp (SPNC US) may be wild at heart.(Market capitalisation and liquidity discussed below are in US$. Liquidity is assessed on a 3-month average) Stubs/Holdcos PCCW Ltd (8 HK)  (Mkt Cap: $4.4bn; Liq: $5.4mn) With PCCW’s discount to NAV back out to -2X STD levels, Toh Zhen Zhoudiscussed setting up a long stub trade.PCCW’s stub ops have been challenging to embrace. Though the solutions segment has consistently returned decent earnings, stub EBITDA has been negative since 1H16.The key negative contributor to that EBITDA has been PCCW’s UK broadband provider, a bonfire for money in recent years as illustrated in the chart in TZZ’s insight.The good news is that PCCW sold the business to Dad for HK$2.9bn in March.A month later, PCCW reduced its stake in HKT to 52% from 63.07%. PCCW is estimated to be net cash of $5.4bn after the two transactions.Even assigning a benchmark 25% holdco discount into HKT, the market is assigning no value for the net cash on hand - worth ~$0.70/share or 16% of PCCW's mkt cap and 8.9% of NAV - and the stub ops.Interim results are due out during the 2nd week of August, which should provide clarity on solutions' continued growth trajectory and perhaps a gradual turnaround in the media ops (OTT biz), the latter of which has faced increasing competition and evolving viewer habits. Current levels would suggest going long the stub.Haw Par Corp Ltd (HPAR SP)  (Mkt Cap: $1.8bn; Liq: $0.6mn) HPAR announced it is reducing its stake in United Industrial Corp Ltd (UIC SP) to 0.67% from 4.9%, via the sale of shares to Uol Group Ltd (UOL SP). In consideration, UOL will issue 27.27mn new UOL shares to HPAR, bumping HPAR’s stake to 7.5% on an FD basis, from 5.51% currently. UOL’s stake in UIC increases to 48.94% from 44.71%.The transaction requires some rather generic approvals from HPAR and UOL's independent shareholders. UOL has received a waiver from the SIC not to launch an MGO, provided it does not go over 49%.Applying the last closing prices for both UIC &amp; UOL, this transaction adds around S$50mn to HPAR, far less than the S$180mn in mkt cap HPAR's stock has gained in the past month.HPAR looks rich, trading at a 28.4% discount to NAV, at the upper end of its 12-month range.Naspers Ltd (NPN SJ)(Mkt Cap: $89.6bn; Liq: $223mn)   Tencent Holdings Ltd (700 HK)(Mkt Cap: $340bn; Liq: $679mn) As discussed in last week's summary note, Naspers was/is the stand-out holdco in set-up extreme (i.e. long the stub) in our monitor.Naspers announced its FY17 (Mar Y/E) results on Friday. Core headline earnings grew 41% and profitable media units increased to 21 from 16 last year, delivering US$229mn in profit, up from US$122mn. Revenue from businesses outside of Africa now accounts for 80%, up from 77% a year ago.Net debt (excluding satellite lease liabilities [US$1.2bn] &amp; non-interesting bearing debt [US$153mn]) stood at US$1.1bn vs. (US$1.2bn) a year ago.  In January this year, Naspers disposed of Allegro and Ceneo, generating net proceeds of US$3.2bnNaspers was up 2.6% on the day which accounts for that uptick in the holdco chart. I estimate a discount to NAV of 32% (having just bounced off its -2xSTD) vs. a 12-mth average of 28%. The market continues to assign a negative value to the media units and net cash. Naspers looks attractive here as an outright long.Arbs/M&amp;AHong KongBloomage Biotechnology (963 HK)  (Mkt Cap: $724mn; Liq: $1.7mn) Pranav Raorevisited Bloomage after the tepid $16.30 offer from founder Zhao Yan versus Pranav’s earlier takeover estimate of $20.The offer is by way of a scheme. GIC, with 11.84% of the company, is somewhat in agreeance on the offer; it has given an undertaking not to convert its CBs equivalent to around 6.9% on FD basis.Either Franklin Resources (8.01%) or Macquarie Investment Management (4.79%) could effectively block the deal. Franklin is estimated to be in the money (just), while Macquarie is not.Gross spread is 5.71% which seems about right. The offer is final and won’t be increased. AustraliaTatts Group Ltd (TTS AU) / Tabcorp Holdings Ltd (TAH AU) (Mkt Cap: $4.7bn; Liq: $11.9mn)/ (Mkt Cap: $2.9bn; Liq: $16.6mn) Morningstaraddressed the ACT approval, for this gaming merger.Apart from Tabcorp selling Odyssey, which was announced in April, the scheme booklet (along with an independent expert’s report) is expected to be issued to Tatt’s shareholders in July, with a scheme meeting to take place sometime in August 2017.According to Pranav: "This deal redefines the industry - if TTS vote it down, I would be very surprised".SingaporeCWT Ltd (CWT SP)  (Mkt Cap: $944mn; Liq: $3.1mn) Pranav briefly reassessed CWT after acquirer HNA was one of several large Chinese groups apparently under investigation by the CBRC in regards to credit and debt financing.Pranav has now lowered his deal completion probability to 45% from 60% previously.This is a pre-conditional deal with approvals required, inter alia, from Mofcom.The gross spread widened out to 6.88% from 2.64% following HNA’s alleged investigation.WS Atkins PLC (ATK LN) / SNC-Lavalin Group (Mkt Cap: $2.6bn; Liq: $22.7mn)/ (Mkt Cap: $6.9bn; Liq: $26.8mn) Roderick Manalodiscussed the Atkins deal and doesn’t see any foreseeable roadblocks.The scheme vote (75%, majority in number) takes place on the 26 June with the last settlement date of 17 July 2017. A spread of 5p (&amp; implied probability of completion of 99%) suggests shareholders will accept the 35.1% takeover premium.There are outstanding antitrust approvals from Africa (Botswana, Kenya, Tanzania), having already received the US’ HSR approval on 15-May-17. However, Roderick is not aware of any competition issues raised. And given the fast-tracked long stop date of 31 July, the advisors/bankers involved clearly see no obstacles in this relatively straightforward merger.Spectranetics (Mkt Cap: $1.3bn; Liq: $11mn) CTFNdiscussed Spectranetics' forthcoming approval (July expected) from the FDA of its catheter device to treat a specific artery disease.Such approval – and there are rumours about that it may occur in July - would elevate Spectranetics in the eyes of possible suitors.Possible acquirers include Abbot, which is juggling a couple of recent acquisitions. Also Terumo Medical Corp., Philips, and Cardinal Health. Spectranetics is up 22.45% this year and trading around 10% below consensus target estimates.

M&A Reporting, CTFN

Jonathan Spitzer

M&A Reporting

CTFN

Bringing the marketplace leading coverage of mergers, events, and major corporate actions, CTFN has a team of seasoned reporters from Los Angeles to London, publishing news that advances stories that matter to event-driven investors and deal professionals.

Spectranetics Corp. is expected to receive Food and Drug Administration approval this summer for its drug-coated balloon catheter used to treat peripheral artery disease (PAD), makingthe company an attractive takeover target, sources told CTFN.

Spectranetics Corp. is expected to receive Food and Drug Administration approval this summer for its drug-coated balloon catheter used to treat peripheral artery disease (PAD), makingthe company an attractive takeover target, sources told CTFN.

Spectranetics Nearing Expected FDA Approval of Stellarex

United States

The Spectranetics Corporation develops, manufactures, markets, and distributes its technology for interventional cardiovascular therapy.  The Company's CVX-300 excimer laser system is used in applications such as coronary angioplasty and the removal of pacemaker leads.  Spectranetics is also developing other applications in restenosis stents and peripheral vascular applications.

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Spectranetics Corp (SPNC US)

Last Week, in Event SPACE (24 June 2017)

In this note, CWT Ltd (CWT SP)’s deal completion probability slides on HNA Group's alleged oversight; PCCW Ltd (8 HK)’s net cash stub looks...

David Blennerhassett

Spectranetics Nearing Expected FDA Approval of Stellarex

Spectranetics Corp. is expected to receive Food and Drug Administration approval this summer for its drug-coated balloon catheter used to treat...

CTFN

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