Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Australian Pharmaceutical Industries / Event-Driven

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<p>On the 12 July, wholesale and retail pharmacy operator <a href="https://www.smartkarma.com/entities/19399" target="_blank" data-smartkarma-citation="entities:19399:1" rel="noopener">Australian Pharmaceutical Industries (API AU)</a> (API) <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02394187-3A570533?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> an indicative, non-binding Offer from <a href="https://www.smartkarma.com/entities/wesfarmers-ltd" target="_blank" data-smartkarma-citation="entities:1104:1" rel="noopener">Wesfarmers Ltd (WES AU)</a> by way of a Scheme at $1.38/share,  a 20.5% premium to last close. </p>
<p>Separately, Wesfarmers entered into an agreement with API's largest shareholder <a href="https://www.smartkarma.com/entities/washington-h-soul-pattinson-and-co-ltd" target="_blank" data-smartkarma-citation="entities:6054:1" rel="noopener">Washington H. Soul Pattinson and Co. Ltd (SOL AU)</a> (WHSP), such that WHSP will vote its 19.3% interest in favour of Wesfarmers' proposal, in the absence of a superior Offer. Additionally, the agreement also included an option for Wesfarmers to acquire WHSP’s shares in the event Wesfarmers intended to match or exceed any competing proposal which API received.</p>
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<p>The proposal appeared opportunistic and the API board agreed and rejected the proposed Offer on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02400478-3A571605?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">29 July</a> on grounds it undervalued API, was not compelling, and was not in the best interest of shareholders. </p>
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<p>On the 16 September Wesfarmers and API entered into a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02422163-3A575967?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">process deed</a> after Wesfarmers bumped the Offer by 12.3% to A$1.55/share. A fully franked dividend of A$0.05/share was permitted (including the A$0.02/share final dividend <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02442833-3A579494?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">declared</a> by API for the financial year ended 31 August 2021), which will reduce the cash consideration if paid. WHSP remained supportive. API granted Wesfarmers exclusive due diligence until the 16 October. The proposal was also subject to ACCC clearance.</p>
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<p>API then <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02426356-3A576689?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> on the 27 September it had received a non-binding proposal from <a href="https://www.smartkarma.com/entities/sigma-healthcare-ltd" target="_blank" data-smartkarma-citation="entities:15966:1" rel="noopener">Sigma Healthcare (SIG AU)</a>. API shareholders would receive an implied A$1.57/share under Sigma’s cash-and-stock proposal. A similar franked dividend, to the one in the Wesfarmers' proposal, was also permitted. Confirmatory due diligence was afforded. Of interest, this was the third attempt by Australia's two largest pharmaceutical distributors to merge: the first was rejected by the ACCC in 2002, and the second was rejected by Sigma (when API was the acquiror) in 2019 (<em><a href="https://skr.ma/araq7" target="_blank" rel="noopener">API Tilts at Sigma Healthcare: Expect More</a></em>).</p>
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<p>Pursuant to the undertaking agreement with WHSP, Wesfarmers acquired a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02432448-6A1054678?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">19.3% stake</a> in API on 7 October. Sigma subsequently dropped its proposal on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02448000-3A580348?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">5 November</a>. </p>
<p>That left Wesfarmers in the driving seat. DD was expected to expire on the 16 October.  In its FY21 results API <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02442841-3A579496?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">said</a> it not received and agreed to a final offer with Wesfarmers. But I couldn't see Wesfarmers simply sitting on a 19.3% stake. It's not their MO to make small acquisitions and sit tight. </p>
<p><strong>The New News</strong></p>
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<p>Today Wesfarmers entered into a Scheme Implementation Deed (SID) with API for a cash consideration of $1.55/share, including the payment of fully franked dividends up to a maximum of A$0.05/share per API share.</p>
<p>The transaction has unanimous API board support. The Scheme is subject to API shareholder approval, ACCC approval, no material adverse change, and no prescribed occurrences.</p>
<p>The Scheme is expected to be wrapped up in the 1Q22.</p>
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<p>More below the fold.</p>
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On the 12 July, wholesale and retail pharmacy operator Australian Pharmaceutical Industries (API AU) (API) announced an indicative, non-binding Offer from Wesfarmers Ltd (WES AU) by way of a Scheme at $1.38/share,  a 20.5% premium to last close. 
Separately, Wesfarmers entered into an agreement with API's largest shareholder Washington H. Soul Pattinson and Co. Ltd (SOL AU) (WHSP), such that WHSP will vote its 19.3% interest in favour of Wesfarmers' proposal, in the absence of a superior Offer. Additionally, the agreement also included an option for Wesfarmers to acquire WHSP’s shares in the event Wesfarmers intended to match or exceed any competing proposal which API received.


The proposal appeared opportunistic and the API board agreed and rejected the proposed Offer on the 29 July on grounds it undervalued API, was not compelling, and was not in the best interest of shareholders. 


On the 16 September Wesfarmers and API entered into a process deed after Wesfarmers bumped the Offer by 12.3% to A$1.55/share. A fully franked dividend of A$0.05/share was permitted (including the A$0.02/share final dividend declared by API for the financial year ended 31 August 2021), which will reduce the cash consideration if paid. WHSP remained supportive. API granted Wesfarmers exclusive due diligence until the 16 October. The proposal was also subject to ACCC clearance.

API then announced on the 27 September it had received a non-binding proposal from Sigma Healthcare (SIG AU). API shareholders would receive an implied A$1.57/share under Sigma’s cash-and-stock proposal. A similar franked dividend, to the one in the Wesfarmers' proposal, was also permitted. Confirmatory due diligence was afforded. Of interest, this was the third attempt by Australia's two largest pharmaceutical distributors to merge: the first was rejected by the ACCC in 2002, and the second was rejected by Sigma (when API was the acquiror) in 2019 (API Tilts at Sigma Healthcare: Expect More).





Pursuant to the undertaking agreement with WHSP, Wesfarmers acquired a 19.3% stake in API on 7 October. Sigma subsequently dropped its proposal on the 5 November. 
That left Wesfarmers in the driving seat. DD was expected to expire on the 16 October.  In its FY21 results API said it not received and agreed to a final offer with Wesfarmers. But I couldn't see Wesfarmers simply sitting on a 19.3% stake. It's not their MO to make small acquisitions and sit tight. 
The New News






Today Wesfarmers entered into a Scheme Implementation Deed (SID) with API for a cash consideration of $1.55/share, including the payment of fully franked dividends up to a maximum of A$0.05/share per API share.
The transaction has unanimous API board support. The Scheme is subject to API shareholder approval, ACCC approval, no material adverse change, and no prescribed occurrences.
The Scheme is expected to be wrapped up in the 1Q22.


More below the fold.


Aussie Pharm (API AU) Enters Into Scheme With Wesfarmers

<p><a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a> granted the Sydney Aviation Alliance (SAA) non-exclusive due diligence on the 13 September after receiving an <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02420402-2A1322873?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">A$8.75/share conditional proposal</a> - a 51% premium to the undisturbed price on the 4 July 2021. This followed rejections from SYD of an $8.25/share proposal on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02395613-2A1310027?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">15 July</a>, and an $8.45 bid on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02407025-2A1315596?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">16 August.</a></p>
<p>That due diligence was expected to take 4 weeks from entry into the Non-Disclosure Agreement. On the 18 October, SYD <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02437044-2A1331673?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">said</a> the DD period had concluded and that it continues "<em>to negotiate the relevant transaction documents with a view to the parties seeking their respective internal approvals over the coming week</em>s". </p>
<p><strong>The New News</strong></p>
<p>This morning SYD <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02448561-2A1337052?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">entered into</a> a Scheme Implementation Agreement (SID) with SAA. The offer consideration is unchanged at A$8.75/share. As previously indicated, UniSuper (SYD's largest shareholder with 15.01%) will roll over its equity stake into the Consortium, rather than receive the cash consideration.</p>
<p>The bid values SYD’s equity at $23.6bn. It is the largest ever cash-bid for an Aussie-listed company.</p>
<p>In addition to the Scheme vote, the key condition to the deal is ACCC approval, in which an informal review kicked off last month. </p>
<p>More below the fold. </p>

Sydney Airport (SYD AU) granted the Sydney Aviation Alliance (SAA) non-exclusive due diligence on the 13 September after receiving an A$8.75/share conditional proposal - a 51% premium to the undisturbed price on the 4 July 2021. This followed rejections from SYD of an $8.25/share proposal on the 15 July, and an $8.45 bid on the 16 August.
That due diligence was expected to take 4 weeks from entry into the Non-Disclosure Agreement. On the 18 October, SYD said the DD period had concluded and that it continues "to negotiate the relevant transaction documents with a view to the parties seeking their respective internal approvals over the coming weeks". 
The New News
This morning SYD entered into a Scheme Implementation Agreement (SID) with SAA. The offer consideration is unchanged at A$8.75/share. As previously indicated, UniSuper (SYD's largest shareholder with 15.01%) will roll over its equity stake into the Consortium, rather than receive the cash consideration.
The bid values SYD’s equity at $23.6bn. It is the largest ever cash-bid for an Aussie-listed company.
In addition to the Scheme vote, the key condition to the deal is ACCC approval, in which an informal review kicked off last month. 
More below the fold. 

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<p>Earlier today, <a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a> announced that it had entered into a Scheme Implementation Deed with a consortium of investors including IFM, AustralianSuper, QSuper and Global Infrastructure Partners.</p><p><a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a> shareholders will receive A$8.75 in cash, except for UniSuper where its 15.01% shareholding will be converted into an equivalent interest in the holding structure of the consortium.</p><p>The <a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a> Board has unanimously recommended that shareholders vote in favour of the Schemes at the Scheme Meetings that are expected to be held in January with the scheme becoming effective at the end of that month.</p><p>The implementation of the Scheme depends on an Independent Expert concluding that the Scheme is in the best interest of <a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a> shareholders, ACCC approval, FIRB approval, European Union merger clearance, approval of <a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a> shareholders and the Supreme Court of NSW, MAC clauses and other customary conditions.</p><p>We feel the scheme is highly likely to go through and the stock will trade higher today and near the offer price as we move closer to the effective date.</p>

Earlier today, Sydney Airport (SYD AU) announced that it had entered into a Scheme Implementation Deed with a consortium of investors including IFM, AustralianSuper, QSuper and Global Infrastructure Partners.Sydney Airport (SYD AU) shareholders will receive A$8.75 in cash, except for UniSuper where its 15.01% shareholding will be converted into an equivalent interest in the holding structure of the consortium.The Sydney Airport (SYD AU) Board has unanimously recommended that shareholders vote in favour of the Schemes at the Scheme Meetings that are expected to be held in January with the scheme becoming effective at the end of that month.The implementation of the Scheme depends on an Independent Expert concluding that the Scheme is in the best interest of Sydney Airport (SYD AU) shareholders, ACCC approval, FIRB approval, European Union merger clearance, approval of Sydney Airport (SYD AU) shareholders and the Supreme Court of NSW, MAC clauses and other customary conditions.We feel the scheme is highly likely to go through and the stock will trade higher today and near the offer price as we move closer to the effective date.

Sydney Airport (SYD AU): Scheme Implementation Deed Out; Index Impact

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<p>Back on the 2 August, <a href="https://www.smartkarma.com/entities/square-inc" target="_blank" data-smartkarma-citation="entities:23755:1" rel="noopener">Square Inc (SQ US)</a> and <a href="https://www.smartkarma.com/entities/afterpay-limited" target="_blank" data-smartkarma-citation="entities:26940:1" rel="noopener">Afterpay (APT AU)</a> <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02402191-3A571915?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> a firm merger, the completion of which will create Australia's largest-ever buyout. Under the terms of the Offer, by way of a Scheme, Afterpay shareholders will receive a fixed exchange ratio of 0.375 shares of Square Class A common stock for each Afterpay ordinary share. Based on Square’s closing price of US$247.26 on July 30, 2021, this represented an implied transaction price of ~A$126.21 per Afterpay share, or a premium of ~30.6%.</p>
<p>Yesterday Square's shareholders <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02447292-3A580232?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">approved</a> the issuance of Square shares for the acquisition of Afterpay.  This was shortly followed by the dispatch of the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02448085-3A580361?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">Scheme Booklet</a>.</p>
<p>The Scheme Meeting will be held on the 6 December with expected implementation on the 18 January. The Independent Expert reckons the Offer is fair and reasonable. </p>
<p>More below the fold.</p>
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Back on the 2 August, Square Inc (SQ US) and Afterpay (APT AU) announced a firm merger, the completion of which will create Australia's largest-ever buyout. Under the terms of the Offer, by way of a Scheme, Afterpay shareholders will receive a fixed exchange ratio of 0.375 shares of Square Class A common stock for each Afterpay ordinary share. Based on Square’s closing price of US$247.26 on July 30, 2021, this represented an implied transaction price of ~A$126.21 per Afterpay share, or a premium of ~30.6%.
Yesterday Square's shareholders approved the issuance of Square shares for the acquisition of Afterpay.  This was shortly followed by the dispatch of the Scheme Booklet.
The Scheme Meeting will be held on the 6 December with expected implementation on the 18 January. The Independent Expert reckons the Offer is fair and reasonable. 
More below the fold.


Afterpay Ltd (APT AU)/Square (SQ US) Merger: Scheme Meeting Convened

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<p>Ventia, an infrastructure services provider, aims to raise up to US$821m via a mix of selling primary and secondary shares, in its Australian IPO. Capital Group has already signed up as a cornerstone.</p><p>Ventia is an essential infrastructure services provider in Australia and New Zealand. It is one of the largest providers of maintenance services for critical public and private infrastructure.</p>

Ventia, an infrastructure services provider, aims to raise up to US$821m via a mix of selling primary and secondary shares, in its Australian IPO. Capital Group has already signed up as a cornerstone.Ventia is an essential infrastructure services provider in Australia and New Zealand. It is one of the largest providers of maintenance services for critical public and private infrastructure.

Australia

Sydney Airport operates the Sydney, Australia airport. The Company develops and maintains the airport infrastructure and leases terminal space to airlines and retailers.

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Sydney Airport (SYD AU)

Aussie Pharm (API AU) Enters Into Scheme With Wesfarmers

Trading at a 0.6%/2.3% gross/annualised spread, assuming late February completion. Unless you are a zero-rate or a low-rate taxpayer who can...

David Blennerhassett

Sydney Airport's (SYD AU) SID With SAA

Trading at a 6.1%/22.7% gross/annualised spread. That looks reasonable. ACCC is a risk. However, the Consortium's lawyer and bankers believe the...

David Blennerhassett