Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>The data in this insight is collated from the "shareholding disclosure" link on the HKEx website.</li>
<li>Often there is a corresponding HKEx announcement on the increase - or decrease - in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.</li>
<li>The key stock mentioned in this regular insight is <a href="https://www.smartkarma.com/entities/china-feihe-ltd" target="_blank" data-smartkarma-citation="entities:24413:1" rel="noopener">China Feihe (6186 HK)</a>
</li>
</ul>


The data in this insight is collated from the "shareholding disclosure" link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase - or decrease - in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
The key stock mentioned in this regular insight is China Feihe (6186 HK)



Hong Kong CEO & Director Dealings (21 June): China Feihe's CFO Sells Around All-Time Low

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.

Yashili International Holdings / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/danone-sa" target="_blank" data-smartkarma-citation="entities:21403:1" rel="noopener">Danone SA (BN FP)</a> will sell to <a href="https://www.smartkarma.com/entities/china-mengniu-dairy-co" target="_blank" data-smartkarma-citation="entities:354:1" rel="noopener">China Mengniu Dairy Co (2319 HK)</a> its 25% Yashili stake for HK$1.20 per share. Post-completion, Mengniu will launch a privatisation offer at HK$1.20.  </li>
<li>The privatisation is subject to several pre-conditions, which carry low risk in our view. The key conditions are the headcount test and rejections by &lt;10% of all disinterested shareholders.</li>
<li>The offer for <a href="https://www.smartkarma.com/entities/yashili-international-holdings-ltd" target="_blank" data-smartkarma-citation="entities:3397:1" rel="noopener">Yashili International Holdings (1230 HK)</a> is attractive. At the last close, the gross spread to the offer is 30.4%. Buy up to HK$1.09 (implies an 85% deal probability).</li>
</ul>



Danone SA (BN FP) will sell to China Mengniu Dairy Co (2319 HK) its 25% Yashili stake for HK$1.20 per share. Post-completion, Mengniu will launch a privatisation offer at HK$1.20.  
The privatisation is subject to several pre-conditions, which carry low risk in our view. The key conditions are the headcount test and rejections by &lt;10% of all disinterested shareholders.
The offer for Yashili International Holdings (1230 HK) is attractive. At the last close, the gross spread to the offer is 30.4%. Buy up to HK$1.09 (implies an 85% deal probability).


Yashili’s HK$1.20 Privatisation Offer from Mengniu

Lanzhou Zhuangyuan Pasture / Event-Driven

<ul>
<li>PRC dairy farmer <a href="https://www.smartkarma.com/entities/lanzhou-zhuangyuan-pasture-co-ltd" target="_blank" data-smartkarma-citation="entities:10174:1" rel="noopener">Lanzhou Zhuangyuan Pasture (1533 HK)</a> has announced a Conditional Cash Offer for all H-shares at $10.89/share.</li>
<li>The Offer is being done via a Voluntary Cash Offer, therefore an onerous 90% tendering condition is present.</li>
<li>This transaction could potentially be wrapped up late-July. The FY21 dividend may also be added to terms. </li>
</ul>


PRC dairy farmer Lanzhou Zhuangyuan Pasture (1533 HK) has announced a Conditional Cash Offer for all H-shares at $10.89/share.
The Offer is being done via a Voluntary Cash Offer, therefore an onerous 90% tendering condition is present.
This transaction could potentially be wrapped up late-July. The FY21 dividend may also be added to terms. 


Zhuangyuan Pasture (1533 HK): H-Share Offer Via Buyback

<ul>
<li>
<a href="https://www.smartkarma.com/entities/yashili-international-holdings-ltd" target="_blank" data-smartkarma-citation="entities:3397:1" rel="noopener">Yashili International Holdings (1230 HK)</a> announced its controlling shareholder, <a href="https://www.smartkarma.com/entities/china-mengniu-dairy-co" target="_blank" data-smartkarma-citation="entities:354:1" rel="noopener">China Mengniu Dairy Co (2319 HK)</a>, is in discussions regarding its holdings in Yashili and several potential transactions.</li>
<li>If the transactions proceed, the potential privatisation offer is HK$1.20 per Yashili share, a 31.9% premium to the last close price of HK$0.91 (prior to the trading halt).</li>
<li>The potential transactions are subject to a number of pre-conditions and conditions. We think the potential offer is attractive.  </li>
</ul>



Yashili International Holdings (1230 HK) announced its controlling shareholder, China Mengniu Dairy Co (2319 HK), is in discussions regarding its holdings in Yashili and several potential transactions.
If the transactions proceed, the potential privatisation offer is HK$1.20 per Yashili share, a 31.9% premium to the last close price of HK$0.91 (prior to the trading halt).
The potential transactions are subject to a number of pre-conditions and conditions. We think the potential offer is attractive.  


Yashili’s Potential Pre-Conditional Privatisation Offer from Mengniu

<div>
<div class="content-highlight">
Corrigenda: There is an error in this Insight. Please note the correction.
Correction: I initially took the view the MGO was conditional on the Offeror (Yili) and parties acting in concert with it holding more than 50% of the voting rights – and that the Vendors were acting in concert given the SPAs and irrevocables.   In hindsight, this is the wrong interpretation - otherwise, the MGO would be obligated by Yili AND the Vendors.   This changes how you view the outcome of the MGO. The MGO needs 15.67% of shares out to turn unconditional. ~24.27% won’t tender. Therefore  ~37.8% of the remaining  register needs to tender. Given the light premium, this MGO turning unconditional is by no means a certainty.
</div>
On the 12 October, infant-formula firm <a href="https://www.smartkarma.com/entities/ausnutria-dairy-corp-ltd" target="_blank" data-smartkarma-citation="entities:13799:1" rel="noopener">Ausnutria Dairy Corp (1717 HK)</a> was <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1012/2021101200109.pdf" target="_blank" rel="noopener">suspended</a> ahead of morning trading "pursuant to The Hong Kong Code on Takeovers and Mergers". But not before shares had gained 7.8% the day before on the largest volume since November of last year. 
</div>
<div>
The rumour was that China’s biggest dairy producer <a href="https://www.smartkarma.com/entities/inner-mongolia-yili-indus-a" target="_blank" data-smartkarma-citation="entities:3220:1" rel="noopener">Inner Mongolia Yili Industrial Group (A) (600887 CH)</a> was set to make a proposal. As I wrote in <a href="https://skr.ma/Ft2Ss" target="_blank" rel="noopener">Will Yili Gulp Down Ausnutria (1717 HK)?</a>, a possible Offer could be structured by way of a Scheme - if Yili wanted to take Ausnutria private -  or Yili secures a majority stake via a sale and purchase agreement (SPA) and then a follow-on mandatory general offer (MGO).
Turns out to be the latter.
Late yesterday afternoon (the 27 October), Ausnutria <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1027/2021102700542.pdf" target="_blank" rel="noopener">announced</a> Yili had entered into various SPAs with major shareholders CITIC, <a href="https://www.smartkarma.com/entities/center-laboratories-inc" target="_blank" data-smartkarma-citation="entities:10778:1" rel="noopener">Center Laboratories (4123 TT)</a>, and CEO van der Meer with a collective ownership in Ausnutria of 30.89%. Concurrently, Ausnutria entered into a subscription agreement with Yili for 90mn new shares or 5.24% of issued shares (4.98% on a fully diluted basis).
All told, should the agreements complete - and the SPA and subscription agreement are subject to various PRC regulatory approvals -  Yili would hold 34.33% of shares out on a fully diluted basis, and would then be obligated to make an MGO.
The MGO price is $10.06/share, a 13.67% premium to last close. The MGO is conditional on Yili and concert parties holding 50% of the voting rights. No irrevocables have been given to tender into the Offer. But Yili and concert parties would hold 51.93%.
This looks done. It's just a question of timing.
</div>



Corrigenda: There is an error in this Insight. Please note the correction.
Correction: I initially took the view the MGO was conditional on the Offeror (Yili) and parties acting in concert with it holding more than 50% of the voting rights – and that the Vendors were acting in concert given the SPAs and irrevocables.   In hindsight, this is the wrong interpretation - otherwise, the MGO would be obligated by Yili AND the Vendors.   This changes how you view the outcome of the MGO. The MGO needs 15.67% of shares out to turn unconditional. ~24.27% won’t tender. Therefore  ~37.8% of the remaining  register needs to tender. Given the light premium, this MGO turning unconditional is by no means a certainty.

On the 12 October, infant-formula firm Ausnutria Dairy Corp (1717 HK) was suspended ahead of morning trading "pursuant to The Hong Kong Code on Takeovers and Mergers". But not before shares had gained 7.8% the day before on the largest volume since November of last year. 


The rumour was that China’s biggest dairy producer Inner Mongolia Yili Industrial Group (A) (600887 CH) was set to make a proposal. As I wrote in Will Yili Gulp Down Ausnutria (1717 HK)?, a possible Offer could be structured by way of a Scheme - if Yili wanted to take Ausnutria private -  or Yili secures a majority stake via a sale and purchase agreement (SPA) and then a follow-on mandatory general offer (MGO).
Turns out to be the latter.
Late yesterday afternoon (the 27 October), Ausnutria announced Yili had entered into various SPAs with major shareholders CITIC, Center Laboratories (4123 TT), and CEO van der Meer with a collective ownership in Ausnutria of 30.89%. Concurrently, Ausnutria entered into a subscription agreement with Yili for 90mn new shares or 5.24% of issued shares (4.98% on a fully diluted basis).
All told, should the agreements complete - and the SPA and subscription agreement are subject to various PRC regulatory approvals -  Yili would hold 34.33% of shares out on a fully diluted basis, and would then be obligated to make an MGO.
The MGO price is $10.06/share, a 13.67% premium to last close. The MGO is conditional on Yili and concert parties holding 50% of the voting rights. No irrevocables have been given to tender into the Offer. But Yili and concert parties would hold 51.93%.
This looks done. It's just a question of timing.


Yili's Pre-Conditional Offer & Ausnutria (1717 HK)'s Crowded Register

China

YuanShengTai Dairy Farm Limited operates dairy farms. The Company produces raw milk through the breeding, feed management and living conditions of its dairy cow herds.

Price Gauge
52-week Range	0.00 - 0.00
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YuanShengTai Dairy Farm (1431 HK)

Hong Kong CEO & Director Dealings (21 June): China Feihe's CFO Sells Around All-Time Low

Feihe is cheap. It's not at all clear why Lin Hua would opt to kick out a chunk of his stake at these levels. Valuation-wise, I'd be getting some...

David Blennerhassett

Yashili’s HK$1.20 Privatisation Offer from Mengniu

Mengniu will launch a pre-conditional privatisation offer at HK$1.20. The risk around the pre-conditions is low. At the last close, the gross...

Arun George

Yashili’s Potential Pre-Conditional Privatisation Offer from Mengniu

Yashili announced that Mengniu is in discussions regarding its holdings in Yashili and several potential transactions, which could lead to a...

Arun George

Yili's Pre-Conditional Offer & Ausnutria (1717 HK)'s Crowded Register

At HK$9.39/share, Ausnutura is currently trading at a gross/annualised spread of 7.1%/17.9%, assuming late 1Q22 completion (~ 5 months). That looks...

David Blennerhassett

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52-week Range

Market Cap (USDm)

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Hong Kong CEO & Director Dealings (21 June): China Feihe's CFO Sells Around All-Time Low

Feihe is cheap. It's not at all clear why Lin Hua would opt to kick out a chunk of his stake at these levels. Valuation-wise, I'd be getting some...

David Blennerhassett

Yashili’s HK$1.20 Privatisation Offer from Mengniu

Mengniu will launch a pre-conditional privatisation offer at HK$1.20. The risk around the pre-conditions is low. At the last close, the gross...

Arun George

Zhuangyuan Pasture (1533 HK): H-Share Offer Via Buyback

Assuming late July payment, and inclusive of the FY21 dividend of RMB0.047/share, then I suggest buying up to ~HK$10.50/share or a gross/annualised...

David Blennerhassett

Yashili’s Potential Pre-Conditional Privatisation Offer from Mengniu

Yashili announced that Mengniu is in discussions regarding its holdings in Yashili and several potential transactions, which could lead to a...

Arun George

Yili's Pre-Conditional Offer & Ausnutria (1717 HK)'s Crowded Register

At HK$9.39/share, Ausnutura is currently trading at a gross/annualised spread of 7.1%/17.9%, assuming late 1Q22 completion (~ 5 months). That looks...

David Blennerhassett