Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p>This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks.</p>
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<p>I number 36, mostly firm, deals around the region.</p>
</div>
<div>
<p>More below the fold.</p>
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This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks.


I number 36, mostly firm, deals around the region.


More below the fold.


Asia-Pac Weekly Risk Arb Summary: Sydney Airport, Aussie Pharma, Milton, Shinsei Bank

Australian Pharmaceutical Industries / Event-Driven

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<p>On the 12 July, wholesale and retail pharmacy health/beauty and lifestyle products 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.  Separately, Wesfarmers has 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.</p>
<p>There was a whiff of opportunism present, and the API board agreed and concluded in an announcement 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> that the proposal undervalued API, was not compelling, and was not in the best interest of shareholders. </p>
<h3>The New News</h3>
<p>After bumping the Offer by 12.3% to A$1.55/share, 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> yesterday. A fully franked dividend of A$0.05/share is permitted, which if paid will reduce the cash consideration.</p>
<p>WHSP remains supportive and will vote its 19.3% in favour of the revised proposal.</p>
<p>API has granted Wesfarmers exclusive due diligence until the 16 October. The deal is also subject to ACCC clearance.</p>
<p>This remains a non-binding Offer, and we have seen two Aussie deals break in the past fortnight, reinforcing the country's moniker as the non-binding graveyard.</p>
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<p>More below the fold.</p>
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On the 12 July, wholesale and retail pharmacy health/beauty and lifestyle products 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 has 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.
There was a whiff of opportunism present, and the API board agreed and concluded in an announcement on the 29 July that the proposal undervalued API, was not compelling, and was not in the best interest of shareholders. 
The New News
After bumping the Offer by 12.3% to A$1.55/share, Wesfarmers and API entered into a process deed yesterday. A fully franked dividend of A$0.05/share is permitted, which if paid will reduce the cash consideration.
WHSP remains supportive and will vote its 19.3% in favour of the revised proposal.
API has granted Wesfarmers exclusive due diligence until the 16 October. The deal is also subject to ACCC clearance.
This remains a non-binding Offer, and we have seen two Aussie deals break in the past fortnight, reinforcing the country's moniker as the non-binding graveyard.


More below the fold.


Aussie Pharma (API AU): Wesfarmer's Sweetened (Yet Indicative) Offer

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/australian-pharmaceutical-industries-limited" target="_blank" data-smartkarma-citation="entities:19399:1" rel="noopener">Australian Pharmaceutical Industries (API AU)</a> is a vertically integrated wholesaler, franchise owner and retailer. API has received a revised non-binding indicative offer of A$1.55 per share 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>. The revised indicative offer of A$1.55 per share is a 35.4% premium to the unaffected price of A$1.145 (9 July).</p><p>The proposal also allows the payment of fully franked dividends of up to 5 cents per share, including any final dividend, declared for the financial year ended 31 August. The cash consideration of the offer will be reduced by the cash component of any dividends. The revised indicative offer is also a 12.3% bump to the original offer of A$1.38 per share received from Wesfarmers on 12 July, which was rejected by the Board on 29 July. </p><p>As announced in the first offer, Washington H. Soul Pattinson (WHSP), the largest shareholder who represents 19.3% of the outstanding shares, will vote in favour of Wesfarmers’ revised offer. WHSP has also granted a call option on its API shares in favour of Wesfarmers.  </p><p>The Board intends to unanimously recommend the revised offer subject to the entry into a binding scheme implementation deed following the completion of confirmatory due diligence that will conclude by 16 October. The revised offer is conditional on receiving regulatory approvals and clearance from the Australian Competition and Consumer Commission (ACCC). We think that the ACCC will not have issues with the transaction. </p><div class="content-highlight"><p>Wesfarmers aims to make API the foundation of its new Healthcare division, which will be used as the springboard to grow its presence in the health, wealth and beauty sectors. For API shareholders, we think that indicative revised offer is attractive compared to historical P/E multiples. The offer will prove attractive to shareholders who are looking for valuation certainty in an environment where API’s earnings continue to be impacted by COVID-19 related restrictions. At the last close price of A$1.48, the shares are trading at a 4.7% gross spread to the indicative revised offer.</p></div>

Australian Pharmaceutical Industries (API AU) is a vertically integrated wholesaler, franchise owner and retailer. API has received a revised non-binding indicative offer of A$1.55 per share from Wesfarmers Ltd (WES AU). The revised indicative offer of A$1.55 per share is a 35.4% premium to the unaffected price of A$1.145 (9 July).The proposal also allows the payment of fully franked dividends of up to 5 cents per share, including any final dividend, declared for the financial year ended 31 August. The cash consideration of the offer will be reduced by the cash component of any dividends. The revised indicative offer is also a 12.3% bump to the original offer of A$1.38 per share received from Wesfarmers on 12 July, which was rejected by the Board on 29 July. As announced in the first offer, Washington H. Soul Pattinson (WHSP), the largest shareholder who represents 19.3% of the outstanding shares, will vote in favour of Wesfarmers’ revised offer. WHSP has also granted a call option on its API shares in favour of Wesfarmers.  The Board intends to unanimously recommend the revised offer subject to the entry into a binding scheme implementation deed following the completion of confirmatory due diligence that will conclude by 16 October. The revised offer is conditional on receiving regulatory approvals and clearance from the Australian Competition and Consumer Commission (ACCC). We think that the ACCC will not have issues with the transaction. Wesfarmers aims to make API the foundation of its new Healthcare division, which will be used as the springboard to grow its presence in the health, wealth and beauty sectors. For API shareholders, we think that indicative revised offer is attractive compared to historical P/E multiples. The offer will prove attractive to shareholders who are looking for valuation certainty in an environment where API’s earnings continue to be impacted by COVID-19 related restrictions. At the last close price of A$1.48, the shares are trading at a 4.7% gross spread to the indicative revised offer.

Wesfarmers’ Revised Bid for API Gains Due Diligence Access

Travis Lundy

<p>On 2 September at 7pm Australia time, the Marvelous Milton Merger Arb ratio was fixed, and just now it was <a href="https://www.asx.com.au/asxpdf/20210903/pdf/4504qbggnhgyc0.pdf" target="_blank" rel="noopener">announced</a>. </p><p>The ratio of <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> shares to <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> shares has been decided at 0.1863. Entitlements will be rounded up or down to the nearest share.</p><p>Those who have been following on my model would have the NAV at A$5.622 on 2 Sep at the close, or A$5.702/share including the A$0.08 of dividend which went ex- on August 31. That delivered me a number of 0.1864 but they started with A$5.70 rather than A$5.702.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/227/647/original/Screenshot+2021-09-03+at+12.18.13+PM.png?1630642709" class="editor-image img-responsive" data-smartkarma-image-id="227647"></figure></section><p>As reported in the <a href="https://www.afr.com/street-talk/milton-corp-s-4b-takeover-finds-proxy-firm-support-20210901-p58ntx" target="_blank" rel="noopener">AFR</a>, both major proxy services came out in favor of the deal saying advantages outweighed disadvantages, and noting the IE's "fair value" range said pricing was appropriate; in a good quote from the article, "there were no stones thrown", which usually results in an approval at the Scheme Meeting.</p><p>The schedule reported in the filing is unchanged from the schedule in the Scheme Booklet.</p><div>
<p>Today's announcement means the merger trade is "fixed" rather than floating and now the remaining "risks" are...</p>
<ul>
<li>a small and eminently arb-able risk arb spread (which is 3.56% less comms and borrow fees as I type (excluding any franking credit benefit)</li>
<li>the risk of whether this gets voted through at the Scheme Meeting on the 13th, and</li>
<li>the index impacts</li>
</ul>
<p>There is, as always, more below the fold.</p>
</div><hr><div><table class="table table-striped">
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<tr><td colspan="2" style="width: 539pt;"><h2>History of Insights on the Situation</h2></td></tr>
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<td><strong>Date</strong></td>
<td><strong>Title</strong></td>
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<td>22 Jun 21</td>
<td><a href="https://www.smartkarma.com/insights/milton-merger-is-a-most-marvelous-arb" target="_blank" rel="noopener">Milton Merger Is A Most Marvelous Arb</a></td>
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<td>24 Jun 21</td>
<td><a href="https://www.smartkarma.com/insights/milton-whsp-merger-index-implications-and-the-marvelous-arb" target="_blank" rel="noopener">Milton-WHSP Merger Index Implications and the Marvelous Arb</a></td>
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<td>21 Jul 21</td>
<td><a href="https://www.smartkarma.com/insights/milton-s-marvelous-arm-meanders-along-marvelously" target="_blank" rel="noopener">Milton’s Marvelous Arb Meanders Along... Marvelously</a></td>
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<td>5 Aug 21</td>
<td><a href="https://www.smartkarma.com/insights/the-still-marvelous-milton-arb-confirms-its-schedule-much-marvelousness-to-come" target="_blank" rel="noopener">The STILL MARVELOUS Milton Arb Confirms Its Schedule - Much Marvelousness to Come</a></td>
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<td>12 Aug 21</td>
<td><a href="https://www.smartkarma.com/insights/the-magnality-of-the-marvelous-milton-merger-makes-a-moribund-march-to-metaphysis-it-s-mirific" target="_blank" rel="noopener">The Magnality of the Marvelous Milton Merger Makes a Moribund March To Metaphysis (It’s Mirific!)</a></td>
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<td>25 Aug 21</td>
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<a href="https://www.smartkarma.com/insights/marvelous-milton-making-its-move-new-30yr-highs-on-both-stocks" target="_blank" data-smartkarma-citation="insights:56651" rel="noopener">Marvelous Milton Making Its Move - New 30yr Highs On Both Stocks</a> </td>
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</table></div><div><p></p></div>

On 2 September at 7pm Australia time, the Marvelous Milton Merger Arb ratio was fixed, and just now it was announced. The ratio of Milton Corp Ltd (MLT AU) shares to Washington H. Soul Pattinson and Co. Ltd (SOL AU) shares has been decided at 0.1863. Entitlements will be rounded up or down to the nearest share.Those who have been following on my model would have the NAV at A$5.622 on 2 Sep at the close, or A$5.702/share including the A$0.08 of dividend which went ex- on August 31. That delivered me a number of 0.1864 but they started with A$5.70 rather than A$5.702.As reported in the AFR, both major proxy services came out in favor of the deal saying advantages outweighed disadvantages, and noting the IE's "fair value" range said pricing was appropriate; in a good quote from the article, "there were no stones thrown", which usually results in an approval at the Scheme Meeting.The schedule reported in the filing is unchanged from the schedule in the Scheme Booklet.
Today's announcement means the merger trade is "fixed" rather than floating and now the remaining "risks" are...

a small and eminently arb-able risk arb spread (which is 3.56% less comms and borrow fees as I type (excluding any franking credit benefit)
the risk of whether this gets voted through at the Scheme Meeting on the 13th, and
the index impacts

There is, as always, more below the fold.






History of Insights on the Situation

Date
Title


22 Jun 21
Milton Merger Is A Most Marvelous Arb


24 Jun 21
Milton-WHSP Merger Index Implications and the Marvelous Arb


21 Jul 21
Milton’s Marvelous Arb Meanders Along... Marvelously


5 Aug 21
The STILL MARVELOUS Milton Arb Confirms Its Schedule - Much Marvelousness to Come


12 Aug 21
The Magnality of the Marvelous Milton Merger Makes a Moribund March To Metaphysis (It’s Mirific!)


25 Aug 21

Marvelous Milton Making Its Move - New 30yr Highs On Both Stocks 




Marvelous Milton Merger Mapping Mabbled: Ratio Done, Now For The Hard Part

<p>The <strong>Marvelous Milton Merger</strong> which is the proposed joining of two of Australia's longest-lived Listed Investment Companies - <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> to be absorbed in a share swap by <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") - is coming closer to its do-or-die date.</p><p>There is one week until the Reference Date which will decide the share swap ratio and there are 12 trading days until the Scheme Meeting. </p><p>I have not been shy in writing about this situation. </p><table class="table table-striped">
<colgroup>
<col>
<col>
</colgroup>
<tbody>
<tr><td colspan="2" style="text-align: left; width: 539pt;"><h2>History of Insights on the Situation</h2></td></tr>
<tr>
<td><strong>Date</strong></td>
<td><strong>Title</strong></td>
</tr>
<tr>
<td>22-Jun-21</td>
<td><a href="https://www.smartkarma.com/insights/milton-merger-is-a-most-marvelous-arb" target="_blank" rel="noopener">Milton Merger Is A Most Marvelous Arb</a></td>
</tr>
<tr>
<td>24-Jun-21</td>
<td><a href="https://www.smartkarma.com/insights/milton-whsp-merger-index-implications-and-the-marvelous-arb" target="_blank" rel="noopener">Milton-WHSP Merger Index Implications and the Marvelous Arb</a></td>
</tr>
<tr>
<td>21-Jul-21</td>
<td><a href="https://www.smartkarma.com/insights/milton-s-marvelous-arm-meanders-along-marvelously" target="_blank" rel="noopener">Milton’s Marvelous Arb Meanders Along... Marvelously</a></td>
</tr>
<tr>
<td>5-Aug-21</td>
<td><a href="https://www.smartkarma.com/insights/the-still-marvelous-milton-arb-confirms-its-schedule-much-marvelousness-to-come" target="_blank" rel="noopener">The STILL MARVELOUS Milton Arb Confirms Its Schedule - Much Marvelousness to Come</a></td>
</tr>
<tr>
<td>12-Aug-21</td>
<td><a href="https://www.smartkarma.com/insights/the-magnality-of-the-marvelous-milton-merger-makes-a-moribund-march-to-metaphysis-it-s-mirific" target="_blank" rel="noopener">The Magnality of the Marvelous Milton Merger Makes a Moribund March To Metaphysis (It’s Mirific!)</a></td>
</tr>
</tbody>
</table><p>As time has passed, and the situation has looked more and more attractive, my mafficking and multitarian mysteriosophy (and occasional mussitation) has led to longer titles with more and more Ms.</p><p>This time, I note that with both Milton and WHSP hitting new 30-year highs today, despite the merger arb spread remaining reasonably wide, there are signs that the situation has started "accruing value."</p><p>While I am far from being a martinet (I am indeed more a mobilist), my mathemancy suggests Milton is maturing. </p><p><em>More on how to Mind the Movement below the fold. </em></p>

The Marvelous Milton Merger which is the proposed joining of two of Australia's longest-lived Listed Investment Companies - Milton Corp Ltd (MLT AU) to be absorbed in a share swap by Washington H. Soul Pattinson and Co. Ltd (SOL AU) ("WHSP") - is coming closer to its do-or-die date.There is one week until the Reference Date which will decide the share swap ratio and there are 12 trading days until the Scheme Meeting. I have not been shy in writing about this situation. 





History of Insights on the Situation

Date
Title


22-Jun-21
Milton Merger Is A Most Marvelous Arb


24-Jun-21
Milton-WHSP Merger Index Implications and the Marvelous Arb


21-Jul-21
Milton’s Marvelous Arb Meanders Along... Marvelously


5-Aug-21
The STILL MARVELOUS Milton Arb Confirms Its Schedule - Much Marvelousness to Come


12-Aug-21
The Magnality of the Marvelous Milton Merger Makes a Moribund March To Metaphysis (It’s Mirific!)


As time has passed, and the situation has looked more and more attractive, my mafficking and multitarian mysteriosophy (and occasional mussitation) has led to longer titles with more and more Ms.This time, I note that with both Milton and WHSP hitting new 30-year highs today, despite the merger arb spread remaining reasonably wide, there are signs that the situation has started "accruing value."While I am far from being a martinet (I am indeed more a mobilist), my mathemancy suggests Milton is maturing. More on how to Mind the Movement below the fold. 

Marvelous Milton Making Its Move - New 30yr Highs On Both Stocks

Australia

Wesfarmers Ltd. owns retail chains, operates mines, writes insurance, manufactures and distributes industrial products, manufactures fertilizers and chemicals, and distributes liquefied petroleum gas and medical and industrial gases.

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Wesfarmers Ltd (WES AU)

Asia-Pac Weekly Risk Arb Summary: Sydney Airport, Aussie Pharma, Milton, Shinsei Bank

This insight provides a summary of gross/annualised spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and...

David Blennerhassett

Aussie Pharma (API AU): Wesfarmer's Sweetened (Yet Indicative) Offer

Trading at a 5.8%/15.8% gross/annualised spread, assuming mid-Feb completion. But it's not a super liquid arb situation. Plus this remains a non...

David Blennerhassett

Wesfarmers’ Revised Bid for API Gains Due Diligence Access

The revised indicative offer of A$1.55 per share is fair. At the last close price of A$1.48, the shares are trading at a 4.7% gross spread to the...

Arun George

Marvelous Milton Merger Mapping Mabbled: Ratio Done, Now For The Hard Part

Marvelous Milton Merger Mapping Mabbled. The ratio is settled at 0.1863 shares of WHSP for every share of Milton. Next is the index trade... But...

Travis Lundy

Marvelous Milton Making Its Move - New 30yr Highs On Both Stocks

Marvelous Milton and Superb SOL have just hit 30yr highs today. A magnality to be sure. 7 trading days left. Watch excess volume and the WHSP...

Travis Lundy

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