Australia

• AUB Group Limited (AUB AU) is looking to raise up to AUD150m (US$100m) in its primary placement. The proceeds will be used to strengthen its balance sheet.
• The deal would be a large one to digest at 24 days of three month ADV and dilution of 6.2%.  
• In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

Incannex has announced that it has entered into a lease for its first ‘psychedelic clinic’ in Melbourne, following the announcement of plans for commercializing its psychedelic-assisted psychotherapy business in March 2023. In collaboration with Australian psychedelic clinical experts, Incannex will set up these clinics through its subsidiary, Clarion Clinics Group, using psilocybin for treatment-resistant depression (TRD) and MDMA for post-traumatic stress disorder (PTSD). The first ‘model’ clinic is expected to open and take patients from September 2023. If sound operations are observed, Incannex intends rapidly to expand to larger clinics across Australia. While we recognize that this has the potential to provide a future stream of revenue for the company, we await further details before updating our valuation.

• The review period for the June rebalance of the S&P/ASX family of indices ends tomorrow and we expect two changes for the S&P/ASX 200 (AS51 INDEX). 
• Impact of passive trading on the stocks varies between 4.3-11 days of ADV. Short interest on the potential adds is small while there are significant shorts on the potential deletes.
• We expect there is pre-positioning on at least three of the four stocks. In some cases that is small, while it could be a lot larger in other stocks.

• Kinatico Ltd (ASX:KYP) is a ‘Know Your People” regtech company providing workforce compliance monitoring and management technology and services.
• The company recently reported Q3 NPAT of $0.4m and positive cash flow of $0.2m, excluding buyback expenditure.
• Q3 sales were a record $7.0m, including $1.5m of SaaS revenue, which was up 143% on the previous corresponding period (pcp) and 51% on the prior quarter.

• We do not expect any constituent changes in June (that could change though!). The only flows are likely to be from capping the constituents at 10% of the index weight.
• Capping changes will lead to a one-way turnover of 2.15% resulting in a one-way trade of A$14m. There are two stocks with over A$5m to trade.
• Stockland (SGP AU) will be the most affected stock with passive trackers needing to sell over 1 day of ADV. The stock has run up and shorts are increasing.

• On the 11 April, Newmont Mining (NEM US) bumped the all-scrip terms for Newcrest Mining (NCM AU) to 0.400 Newmont shares – from 0.380 – for each Newcrest share held. 
• Exclusive due diligence was granted and now a firm Offer, by way of a Scheme, has been agreed.
• The Offer permits Newcrest to pay a special franked dividend of up to $US1.10/share on top of the Offer terms. 

• There are unlikely to be any inclusions to the index in June while there are three stocks that are close to the deletion threshold.
• Even if there are no constituent changes, there will be capping changes that will result in one-way turnover of over 4% and a one-way trade of A$78m.
• Short interest on AMP Ltd (AMP AU) has been increasing as the stock has dropped and a further decline in the stock could lead to deletion.

• Newcrest Mining (NCM AU) has entered a SID with Newmont Mining (NEM US) at 0.400 Newmont shares per Newcrest share + US$1.10 special dividend + ordinary dividends (FY2023 dividend of US$0.20).
• The proposal is subject to shareholder approval from both sets of shareholders along with regulatory approvals (FIRB, US, Canada, Papua New Guinea).
• The offer is attractive in terms of historical prices and VWAP exchange ratios but carries the volatility risk around Newmont shares and FX rates.  

• On the 7 March, PE outfit TPG took a 17.8% stake in InvoCare (IVC AU), Australia’s leading funeral services provider, and also pitched a A$12.65/share non-binding Offer via a Scheme.
• The Indicative proposal was subject to the completion of due diligence. InvoCare rejected the proposal on the 27 March. On the 24 April, TPG withdrew its NBIO.
• TPG has returned with a revised A$13/share, inclusive of a A$0.60/share fully franked dividend. If the proposal becomes a binding transaction, InvoCare’s Board intends to unanimously recommend it.

• Invocare Ltd (IVC AU) disclosed a revised non-binding indicative proposal from TPG at A$13.00 per share, a mere 2.8% above the previously rejected proposal of A$12.65 per share.
• TPG Inc (TPG US) has secured a five-week exclusive due diligence. The Board intend to unanimously recommend a binding proposal at no less than A$13.00 per share. 
• The Board’s capitulation for a marginal bump reflects the lack of a Plan B. While, not a knockout bid, the offer is reasonable. The gross spread stands at 4.6%. 

• On the 7 March, PE outfit TPG took a 17.8% stake in InvoCare (IVC AU), Australia’s leading funeral services provider, and also pitched a A$12.65/share non-binding Offer via a Scheme.
• The Indicative proposal was subject to the completion of due diligence. InvoCare rejected the proposal on the 27 March. On the 24 April, TPG withdrew its NBIO.
• TPG has returned with a revised A$13/share, inclusive of a A$0.60/share fully franked dividend. If the proposal becomes a binding transaction, InvoCare’s Board intends to unanimously recommend it.

• There are 39 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Three new deals were discussed on Smartkarma this past week: the Allkem (AKE AU)/Livent (LTHM US)‘s merger; Yitai Coal (3948 HK)‘s H-share buyback;  Networks Corp (4423 JP)‘s tender offer. 
• Key updates took place forSt Barbara Ltd (SBM AU), AAG Energy Holdings (2686 HK), and Toshiba Corp (6502 JP).

• After abandoning its reverse merger, St Barbara (SBM AU) confirmed it will sell its flagship Leonora gold project to Genesis Minerals (GMD AU) for $600mn (cash and GMD scrip).
• That transaction appeared all stitched up, until Silver Lake Resources (SLR AU) gatecrashed the party with a non-binding proposal for the Leonara asset. SBM’s board rejected the competing proposal. 
• SLR has now tweaked terms to address SBM concerns. Back in SBM’s court. GMD has matching rights if SBM sides with SLR.

• Aussie lithium miner Allkem Ltd (AKE AU) has inked a $US10bn+ merger with Livent (LTHM US) to form the world’s fifth largest lithium producer.
• Travis Lundy tackled this “merger-of-equals” and the index implications in Allkem/Livent (AKE AU | LTHM US) Merger Of Lithium Equals Has Index Surprises. 
• The spoils of ongoing lithium demand for electric vehicle batteries will ostensibly go to the prevalent, low-cost producer. Yet Livent shareholders may question the lack of premium in the transaction. 

• A battle is brewing between Genesis Minerals (GMD AU) and Silver Lake Resources (SLR AU) for St Barbara Ltd (SBM AU)’s Leonora assets. SLR’s revised proposal addresses some Board’s concerns.
• SLR’s revised offer which shortens the completion timeline, is fully funded and higher than GMD’s offer, pressures the Board to engage to create a bidding war. 
• Irrespective of the winning bidder, SBM is attractive, and the shares offer a free option on realising value from its remaining assets and investment portfolio.    

SenSen Networks (SNS) reported its ninth consecutive quarter of year-on-year record cash receipts in Q323, with growth across all key verticals and no customer churn. The company has also introduced further measures to achieve cash flow positivity and profitability from Q423, focusing on upselling to existing customers and introducing a salary sacrifice scheme for senior staff. We moderate our revenue growth forecasts to reflect these measures but upgrade our profitability and cash forecasts as a result. The short to medium term is likely to see greater focus on the smart cities segment, where the company has established a promising international market presence and where it has considerable scope to expand its engagements in its existing customer base. This positions SenSen well to scale more profitably in the mid-term.

• Today, after the close, ASX-listed Allkem Ltd (AKE AU) (formerly known as Orocobre, which merged with Galaxy Resources in 2021) announced it would merge with Livent (LTHM US). 
• At US$10bn, this “merger-of-equals” NEWCO (pro-forma US$1.9bn revenue, US$1.2bn EBITDA), with NYSE primary listing and foreign entity listing on the ASX, would be a global lithium player. Deal closing end-2023.
• The doc (243 pages) and presentation (42p) are worth reading. There are interesting index effects, and there may be “Lithium Risk” in this deal for arbs, but it looks good.

• Allkem Ltd (AKE AU) and Livent (LTHM US) are combining in an all-stock merger of equals to create a global lithium chemicals producer.
• Allkem Ltd (AKE AU) shareholders will receive 1 NewCo share for each Allkem share held while Livent (LTHM US) shareholders will receive 2.406 NewCo shares for each Livent share held.
• The merger will have implications for the stocks in the MSCI, S&P/ASX, thematic, and other global indices at the time of implementation.

• Allkem Ltd (AKE AU) and Livent (LTHM US) announced a merger of equals. AKE shareholders receive 1 NewCo share per AKE share, LTHM shareholders get 2.406 NewCo shares per LTHM share.
• The transaction is expected to close by the end of calendar year 2023 subject to shareholder (AKM and LTHM) and regulatory approvals. 
• The merger is sensible as NewCo will have scale, synergies and capital efficiency. AKE shareholders benefit from an attractive merger ratio and potential rerating from a US listing. 

• In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run up to the June 2023 Rebalance.
• Ventia (VNT AU) has appeared as a “surprise” potential addition to the ASX 200 index in June 2023 after recent block sales by top shareholders.
• Including Ventia, we currently expect two ADDs and two DELs for the ASX 200 index in June 2023.