Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a> covered the basics of the proposed merger between <a href="https://www.smartkarma.com/entities/milton-corp-ltd" target="_blank" data-smartkarma-citation="entities:29090:1" rel="noopener">Milton Corp Ltd (MLT AU)</a> and <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. (SOL AU)</a> as it was announced earlier this morning which would deliver Milton shareholders cash in the form of dividends, some franking credits, and then consideration in the form of WHSP shares. His insight is <a href="https://www.smartkarma.com/insights/whsp-s-proposed-merger-with-milton-corp" target="_blank" data-smartkarma-citation="insights:53422" rel="noopener">WHSP's Proposed Merger With Milton Corp</a>. Today Milton closed up 16.00% at A$5.80 and WHSP closed 0.83% higher at A$30.50/share.The basic concept is that two of the oldest listed investment companies in Australia would merge to form a A$11bn Listed Investment Company with a more diverse mandate. Some of the commentary surrounding the merger does not seem to make a lot of sense, but I expect allowances/excuses can be made. What IS interesting is the contents (and risks) of the Consideration proposed.It is much more interesting and much more complex than it first appears. It is as Fernando Lama might have said.... maahhvelous.

David Blennerhassett covered the basics of the proposed merger between Milton Corp Ltd (MLT AU) and Washington H. Soul Pattinson and Co. (SOL AU) as it was announced earlier this morning which would deliver Milton shareholders cash in the form of dividends, some franking credits, and then consideration in the form of WHSP shares. His insight is WHSP's Proposed Merger With Milton Corp. Today Milton closed up 16.00% at A$5.80 and WHSP closed 0.83% higher at A$30.50/share.The basic concept is that two of the oldest listed investment companies in Australia would merge to form a A$11bn Listed Investment Company with a more diverse mandate. Some of the commentary surrounding the merger does not seem to make a lot of sense, but I expect allowances/excuses can be made. What IS interesting is the contents (and risks) of the Consideration proposed.It is much more interesting and much more complex than it first appears. It is as Fernando Lama might have said.... maahhvelous. 

David Blennerhassett

Investment houses <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. (SOL AU)</a> (WHSP) and <a href="https://www.smartkarma.com/entities/milton-corp-ltd" target="_blank" data-smartkarma-citation="entities:29090:1" rel="noopener">Milton Corp Ltd (MLT AU)</a> have <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02386623-2A1304538?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> a merger by way of a Scheme via a scrip consideration.
The proposal implies Milton shareholders will receive a total consideration of $6.00/share, a 20% premium to last close and a 9.9% premium to the pre-tax NTA, comprising:
<ul>
<li>new WHSP shares;</li>
<li>a fully franked special dividend from Milton of up A$0.37/share;</li>
<li>a fully franked final dividend from Milton of A$.08/share (estimated); and</li>
</ul>
There is also a fully franked final dividend from WHSP of A$0.36 which when applying the scrip ratio will be worth A$0.07/share (estimated) to MLT holders if they hold WHSP as of the record date. 
As such, an additional A$0.22/share in franking credits (including 3c for the ~7c distribution from the WHSP shares) will be distributed for those Milton shareholders who can take advantage.
The merger has limited conditionality - that being the approval by independent Milton shareholders at a Scheme Meeting, tentatively scheduled for mid-September.
Provided all goes to plan, the Scheme is expected to be implemented late October. 
The independent directors of Milton unanimously recommend the proposal.
More below the fold.

Investment houses Washington H. Soul Pattinson and Co. (SOL AU) (WHSP) and Milton Corp Ltd (MLT AU) have announced a merger by way of a Scheme via a scrip consideration.
The proposal implies Milton shareholders will receive a total consideration of $6.00/share, a 20% premium to last close and a 9.9% premium to the pre-tax NTA, comprising:

new WHSP shares;
a fully franked special dividend from Milton of up A$0.37/share;
a fully franked final dividend from Milton of A$.08/share (estimated); and

There is also a fully franked final dividend from WHSP of A$0.36 which when applying the scrip ratio will be worth A$0.07/share (estimated) to MLT holders if they hold WHSP as of the record date. 
As such, an additional A$0.22/share in franking credits (including 3c for the ~7c distribution from the WHSP shares) will be distributed for those Milton shareholders who can take advantage.
The merger has limited conditionality - that being the approval by independent Milton shareholders at a Scheme Meeting, tentatively scheduled for mid-September.
Provided all goes to plan, the Scheme is expected to be implemented late October. 
The independent directors of Milton unanimously recommend the proposal.
More below the fold.

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Back on the 30 April, aged-care Aussie listed operator <a href="https://www.smartkarma.com/entities/japara-healthcare-ltd" target="_blank" data-smartkarma-citation="entities:14760:1" rel="noopener">Japara Healthcare (JHC AU)</a> made an <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02369261-3A566260?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announcement</a> it had received an unsolicited, indicative, conditional, and non-binding Offer from Little Company of Mary Health Care - otherwise known as Calvary - by way of a Scheme, at A$1.04/share.
On the 5 June, Calvary <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02382224-3A568448?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">bumped</a> the indicative Offer price to A$1.20/share.  JHC's board concluded it was appropriate to Offer Calvary due diligence access.
Now the Bolton Clarke Group has <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02384417-3A568803?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">made</a> a conditional, non-binding indicative proposal by way of a Scheme, at A$1.22/share. The Offer is subject to due diligence, financing, unanimous support from JHC's directors, and final approval from the Bolton Clarke board. 
Due diligence access, consistent with that afforded to Calvary, has been provided.
Shares jumped 8% on the news and closed at A$1.275/share.
<div>More below the fold.</div>
</div>
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Back on the 30 April, aged-care Aussie listed operator Japara Healthcare (JHC AU) made an announcement it had received an unsolicited, indicative, conditional, and non-binding Offer from Little Company of Mary Health Care - otherwise known as Calvary - by way of a Scheme, at A$1.04/share.
On the 5 June, Calvary bumped the indicative Offer price to A$1.20/share.  JHC's board concluded it was appropriate to Offer Calvary due diligence access.
Now the Bolton Clarke Group has made a conditional, non-binding indicative proposal by way of a Scheme, at A$1.22/share. The Offer is subject to due diligence, financing, unanimous support from JHC's directors, and final approval from the Bolton Clarke board. 
Due diligence access, consistent with that afforded to Calvary, has been provided.
Shares jumped 8% on the news and closed at A$1.275/share.
More below the fold.





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

Last Week in Event SPACE:  Swire, Hitachi Metal, Jardine, Softbank, Bingo, Japan Asia, Mainstream

An Australian Royal Commission on aged care providers was <a href="https://agedcare.royalcommission.gov.au/sites/default/files/2021-03/final-report-volume-1_0.pdf" target="_blank" rel="noopener">issued</a> on the 26 February 2021 with 148 recommendations to address what was deemed a weak and ineffective regulatory arrangement, including a new aged care act, the introduction of a system of star rating system for facilities, and some form of aged care levy for the funding of the system. The government also made an initial pledged of $452mn in additional funding.
The share price reaction to the report from the three key aged-care Aussie listed operators - <a href="https://www.smartkarma.com/entities/regis-healthcare-ltd" target="_blank" data-smartkarma-citation="entities:2086:1" rel="noopener">Regis Healthcare (REG AU)</a>, <a href="https://www.smartkarma.com/entities/estia-health-ltd" target="_blank" data-smartkarma-citation="entities:77:1" rel="noopener">Estia Health (EHE AU)</a>, and <a href="https://www.smartkarma.com/entities/japara-healthcare-ltd" target="_blank" data-smartkarma-citation="entities:14760:1" rel="noopener">Japara Healthcare (JHC AU)</a> - was largely one of "meh". Nevertheless, the ongoing speculation as to the Royal Commission findings, in tandem with COVID, had resulted in Japara's shares trading down 75% in the last five, and ~60% a-piece for Regis and Estia in the same time frame, at that time.
Neither company, to date, has comprehensively addressed the conclusions of the report.
<h3>The New News</h3>
JHC <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02369261-3A566260?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> this morning it had received an unsolicited, indicative, conditional, and non-binding Offer from Little Company of Mary Health Care - otherwise known as Calvary - by way of a Scheme, at A$1.04/share.
JHC said it is reviewing its options.
My initial reaction is that this is an opportunistic bid. This is the third Offer in this space in the last year. <a href="https://www.smartkarma.com/entities/metlifecare-ltd" target="_blank" data-smartkarma-citation="entities:19219:1" rel="noopener">Metlifecare Ltd (MET NZ)</a> was eventually taken private.  Regis fielded an Offer from its co-founder and <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. (SOL AU)</a> in September last year, which was subsequently withdrawn, despite a bump in terms. Regis has outperformed the market since.
<div id="ember5524">
<div>More below the fold.</div>
</div>

An Australian Royal Commission on aged care providers was issued on the 26 February 2021 with 148 recommendations to address what was deemed a weak and ineffective regulatory arrangement, including a new aged care act, the introduction of a system of star rating system for facilities, and some form of aged care levy for the funding of the system. The government also made an initial pledged of $452mn in additional funding.
The share price reaction to the report from the three key aged-care Aussie listed operators - Regis Healthcare (REG AU), Estia Health (EHE AU), and Japara Healthcare (JHC AU) - was largely one of "meh". Nevertheless, the ongoing speculation as to the Royal Commission findings, in tandem with COVID, had resulted in Japara's shares trading down 75% in the last five, and ~60% a-piece for Regis and Estia in the same time frame, at that time.
Neither company, to date, has comprehensively addressed the conclusions of the report.
The New News
JHC announced this morning it had received an unsolicited, indicative, conditional, and non-binding Offer from Little Company of Mary Health Care - otherwise known as Calvary - by way of a Scheme, at A$1.04/share.
JHC said it is reviewing its options.
My initial reaction is that this is an opportunistic bid. This is the third Offer in this space in the last year. Metlifecare Ltd (MET NZ) was eventually taken private.  Regis fielded an Offer from its co-founder and Washington H. Soul Pattinson And Co. (SOL AU) in September last year, which was subsequently withdrawn, despite a bump in terms. Regis has outperformed the market since.

More below the fold.


Japara Healthcare (JHC AU): Here Comes The Calvary

Australia

Washington H. Soul Pattinson & Company Limited is an investment holding company. The Company owns shares and properties, coal mining, bulk handling, commercial television licensee, telecommunications carrier, merchant banking, funds management, pharmaceutical retailing, manufacture, processing and marketing of biscuits and cakes.

Washington H. Soul Pattinson and Co. Ltd (SOL AU)

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Washington H. Soul Pattinson and Co. Ltd (SOL AU)

Milton Merger Is A Most Marvelous Arb

The Milton vs WHSP merger consideration construct offers interesting but complex arbitrage opportunities. There is long and short optionality. It...

Travis Lundy

WHSP's Proposed Merger With Milton Corp

Pretty tight for what has a three and half month expected timeline. Plus terms fluctuate with the market. If the NTA, for example, falls 5% and...

David Blennerhassett

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

Despite the potential for a bidding war, JHC looks fully priced here at ~A$1.28/share. I wouldn't chase it. And if you entered around the time of...

David Blennerhassett

Last Week in Event SPACE: Swire, Hitachi Metal, Jardine, Softbank, Bingo, Japan Asia, Mainstream

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

Japara Healthcare (JHC AU): Here Comes The Calvary

For what is likely a sector in recovery mode, one in which the Commission overhang is largely removed, and a comprehensive reform package to be...

David Blennerhassett

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