Event-Driven

In 2019, it became apparent Fujitsu Ltd (6702 JP) wanted to sell down its stakes in non-core businesses (Shinko Electric, Fujitsu General, and FDK), and move on to better things.
In early January 2023, a Bloomberg article suggested a sale process. A 20 Jan 2023 article suggested Fujitsu General’s auction was imminent. I wrote a piece. It was not bullish.
The stock rose a bit, then fell 40+% through last week. Now another article suggests some urgency at Fujitsu. That changes things.

IJTT (7315 JP): Risk/Reward as SPARX Bumps to JPY850

IJTT Co., Ltd. (7315 JP) has recommended Sparx Group (8739 JP)’s revised tender offer of JPY850, 4.7% premium to its previous JPY812 offer. The revised offer has been declared final.
The Isuzu Motors (7202 JP) share repurchase price has risen 4.0% from JPY677 to JPY704. The tender closes on 15 January 2024. All other terms are unchanged.
The shares are trading above the revised terms. A final offer and no competing bidder points to an unfavourable risk/reward profile – a 21% downside on a deal break.

EQD | The LONG Case for the Hang Seng Index

By Nico Rosti

The HSI INDEX closed last week down (CC=-1) at 16340.41, it is now down 5 months in a row (CC=-5), very OVERSOLD.
If this week the index keeps going down, it may find support soon and bounce next week. The alternative scenario is a longer correction, 2 weeks.
Support for a LONG trade, possibly pushed by a MONTHLY reversal, should be found between 16200 and 15950: this is a highly speculative setup given the stubborn downtrend.

Namyang Dairy Products: Long Legal Dispute to Be Finally Decided by Supreme Court in January 2024

The Korean Supreme Court’s ruling on the stock transfer lawsuit between Hahn & Company private equity fund and Namyang Dairy’s Chairman Hong Won-Sik is confirmed for 4 January 2024.
The expectation of Hahn & Co winning this legal dispute has positively impacted the share price of Namyang Dairy Products.
The higher probability scenario is for the Korean Supreme Court to rule in favor of Hahn & Co, agreeing with the decisions of the two lower courts in Korea.

OreCorp: Silvercorp Switches To Off-Market Bid

On the 24 November, Silvercorp Metals (SVM CN) bumped its Scheme Offer for Orecorp Ltd (ORR AU) to A$0.19 in cash and 0.0967 new Silvercorp shares.
At a 40.1% premium to undisturbed and key shareholder Tim Goyder (5.14%) supportive, this looked done. Then Perseus (PRU AU) built a 19.9% stake and said it would vote no.
After postponing the Scheme meeting, Silvercorp and Orecorp have now agreed to an off-market takeover, on the same terms. The tendering threshold is 50.1%.

Quiddity Leaderboard ES50 Sep 24: Engie Close to US$1.2bn Index Flow

By Janaghan Jeyakumar, CFA

The ES50 Index is one of the most highly-tracked indices in Europe and the annual index review takes place in September every year.
This annual index review usually results in some of the most significant index flow events in Europe every year typically amounting to billions of dollars.
In this insight, we take an early look the names leading the race to become ADDs/DELs for the upcoming index review in September 2024.

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Dec 26

Daily Brief Event-Driven: IJTT (7315 JP) – Truly Offensive Takeover Price Gets Bumped and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

IJTT (7315 JP) – Truly Offensive Takeover Price Gets Bumped, Offensively
Japan – Increasing Shorts on Some Interesting Stocks
SBI To Buy Gumi (3903) Shares To Up Stake to Near 30% (And Try To Avoid Impairment)
Meldia DC (1739 JP) – Open House Group Cleans Up Sanei Architecture Sub in TOB.
ABB’s Offer For Symbio (SYM AU): 7th Feb Shareholder Vote
IRC Limited (1029 HK): A Wide Spread as the Conditional Offer Opens
Hollysys (HOLI US): Dazheng Ups the Ante with a US$29.00 Competing Offer
EQD | KOSPI 200 Shows a Bullish Pattern for the Upcoming Pullback

IJTT (7315 JP) – Truly Offensive Takeover Price Gets Bumped, Offensively

IJTT Co., Ltd. (7315 JP) was perhaps one of the lower-priced parent takeovers (Isuzu remains central to the bidder post-buyout) at 0.46x book. Today, the last day, it got bumped.
The new price is ¥850/share vs ¥812/share. +4.7% and a whopping 0.48x book now. ¥850 is where the stock traded just before the announcement. It immediately jumped to ¥875/share.
It appears Isuzu is not getting any more money out of this, but they should be OK. They are buying back in at 0.48x book. With leverage.

Japan – Increasing Shorts on Some Interesting Stocks

There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios early next year.
The deletion from passive portfolios will lead to a liquidity event at the end of February where passive trackers will need to sell multiple days of ADV.
Shorts have started to increase on some of the stocks and there will be further positioning as we near the liquidity event.

SBI To Buy Gumi (3903) Shares To Up Stake to Near 30% (And Try To Avoid Impairment)

Today after the close, SBI Holdings (8473 JP) made an announcement it would buy (up to) 3.0mm shares of Gumi Inc (3903 JP) shares between tomorrow and end-March 2024.
SBI already owns 8.8mm shares, and this would bring them close to 30.0%.
SBI did not specifically say they would buy on market, but the next 400,000 shares would require a large shareholder filing amendment.

Meldia DC (1739 JP) – Open House Group Cleans Up Sanei Architecture Sub in TOB.

Open House (3288 JP) took over Sanei Architecture Planning (3228 JP) this past autumn when banks forced the issue over the former CEO/owner’s mafia ties discovered in an investigation.
Seedheiwa (1739 JP) now better known as Meldia DC, is ~60% held by Sanei Architecture Planning, and 3% by Mr Koike. It has debt. So it needs cleaning up too.
This is too light for minorities, and even lighter for whole co, but it’s a done deal.

ABB’s Offer For Symbio (SYM AU): 7th Feb Shareholder Vote

On the 1st November, cloud communication software outfit Symbio Holdings (SYM AU) backed Aussie Broadband Pty Ltd (ABB AU)‘s reduced cash/scrip Offer of A$2.99-$3.04/share, and entered into a Scheme agreement.
Superloop Ltd (SLC AU), which had previously made two cash/scrip Offers for Symbio, promptly walked.
Symbio’s Scheme Meeting has now been tabled for the 7 Feb, with implementation expected on the 28 February. The IE is supportive. This is done – and trading tight.

IRC Limited (1029 HK): A Wide Spread as the Conditional Offer Opens

The Irc Ltd (1029 HK) IFA opines that a mandatory conditional offer from Nikolai Levitskii (Chairman and 30.61% shareholder) at HK$0.118 per share is fair and reasonable.
The offer is open, with the first closing date of 12 January 2024. The offer is conditional on the offeror and concert parties representing more than 50% of voting rights.
While the offer is light, satisfying the minimum acceptance condition is possible. The risk/reward profile is favourable as the upside (25.5% spread) outweighs the downside (5.3% to the undistributed price).

Hollysys (HOLI US): Dazheng Ups the Ante with a US$29.00 Competing Offer

Dazheng (without Recco) has returned with a revised US$29.00 offer for Hollysys Automation Technologies (HOLI US), 9.4% higher than Ascendent Capital’s US$26.50 binding offer.
While Dazheng’s proposal represents an all-time high, it would likely not be a superior proposal based on the Ascendent merger agreement due to the clauses on financing and due diligence.
Nevertheless, to avoid the high risk that shareholders vote down the Ascendent offer and/or there are substantial dissenting shareholders, the Board will likely ask Ascendent to match Dazheng’s offer.

EQD | KOSPI 200 Shows a Bullish Pattern for the Upcoming Pullback

By Nico Rosti

The KOSPI 200 INDEX closed up 8 weeks in a row and breached the Inner Fence resistance target at 349, the index is now very OVERBOUGHT.
The upcoming pullback could be an occasion to go LONG at better prices: based on pattern analysis there is a chance the correction may be a large one, albeit fast.
Support levels to buy are in the 346-336 price area.

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Dec 25

Daily Brief Event-Driven: A/H Premium Tracker (To 22 Dec 23): Wide Premia Narrow; Narrow Premia Widen. Stay Long Hs Vs As and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

A/H Premium Tracker (To 22 Dec 23): Wide Premia Narrow; Narrow Premia Widen. Stay Long Hs Vs As
Index Rebalance & ETF Flow Recap: STAR50, SET50, AMFI, KOSDAQ150
Merger Arb Mondays (25 Dec) – JSR, Benefit One, IRC, Adbri, Link, A2B, Probiotec, Lithium Power
KOSDAQ 150’s New Fast Entry Rule: Top 30 by Market Cap in 15 Trading Days Post-Listing

A/H Premium Tracker (To 22 Dec 23): Wide Premia Narrow; Narrow Premia Widen. Stay Long Hs Vs As

The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND and NORTHBOUND flows were both sells, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 100+bp. Liquidation by overseas investors feels finished.
STILL time to go long Hs vs As for the new year at 52wk wide discounts.

Index Rebalance & ETF Flow Recap: STAR50, SET50, AMFI, KOSDAQ150

The adhoc KOSDAQ 150 Index rebalance and the regular Nifty200 Momentum30 Index rebalance will be implemented on Thursday and the SET 50 Index rebalance will be implemented on Friday.
The review cutoff period for a whole bunch of indices ends on 29 December and the announcement of the results and implementation will take place early next year.
There were big inflows to China ETFs and to Emerging Market ETFs including iShares Core Emerging Mar (IEMG US), Vanguard Emerging Markets (VWO US) and iShares Emerging Markets (EMXC US).

Merger Arb Mondays (25 Dec) – JSR, Benefit One, IRC, Adbri, Link, A2B, Probiotec, Lithium Power

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – Irc Ltd (1029 HK), Orecorp Ltd (ORR AU), Shinko Electric Industries (6967 JP), JSR Corp (4185 JP), Adbri (ABC AU), Probiotec Ltd (PBP AU), Volpara Health.
Lowest spreads – Tietto Minerals Ltd (TIE AU), A2B Australia (A2B AU), IJTT Co., Ltd. (7315 JP), T&K Toka Co Ltd (4636 JP), Tokyo Rakutenchi (8842 JP), Pact Group.

KOSDAQ 150’s New Fast Entry Rule: Top 30 by Market Cap in 15 Trading Days Post-Listing

Fast entry is now permissible for KOSDAQ 150. Within 15 trading days post-listing, the average daily total market cap must rank among the top 30 ordinary stocks on KOSDAQ.
KOSDAQ 150 will also allow newly established entities in corporate spin-offs, following KOSPI 200’s model. Inclusion is granted if the subsidiary ranks within KOSDAQ 150’s top 160 (80%).
The ₩1.5T cutoff for KOSDAQ 150 fast entry suggests potential candidates nearing this threshold, like Oasis, Kurly (and maybe Kakao Entertainment).

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Dec 24

Daily Brief Event-Driven: Newmont’s Upcoming (March 2024) ASX Selldown and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Newmont’s Upcoming (March 2024) ASX Selldown
HK Connect SOUTHBOUND Flows (To 22Dec23); CNOOC/Energy To The Buy Side; Tencent Heavily Sold, Again.
Mainland Connect NORTHBOUND Flows (To 22 Dec 23): CATL Is the BIG BUY This Week
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Adbri, Link Admin, Azure Minerals, Lithium Power, JSR Corp
Last Week in Event SPACE: Benefit One, Hankook, Toyo Construction, Hanwha, Tsuruha, Livent/Allkem
Weekly Deals Digest (24 Dec) – Benefit One, JSR, Weiqiao Textile, A2B, Adbri, Azure, Link, Probiotec

Newmont’s Upcoming (March 2024) ASX Selldown

As warned in Newcrest-Newmont Merger: Fancy Index Shenanigans in October, the merger construct meant flowfront, index flowback, then later index flowback.
We are now between the second and third events. The data on the third is there, but it won’t be obvious to everyone.
There should be a large, not publicly announced, downweight on Newmont (NEM AU) in the March 2024 index review for the major local indices.

HK Connect SOUTHBOUND Flows (To 22Dec23); CNOOC/Energy To The Buy Side; Tencent Heavily Sold, Again.

SOUTHBOUND flows showing reversion tendencies still. Hs up vs As only slightly. Liquid Hs were down vs As.
SOUTHBOUND saw HK$144bn of net INflows on the week to 22 Dec, which was HK$4bn of Tencent net sales and net buying of a bunch of ETFs.
Some banks and energy names were top net inflows as a percentage of ADV. This week was heavy for SOUTHBOUND, quiet for foreigners, next week may be quiet for both.

Mainland Connect NORTHBOUND Flows (To 22 Dec 23): CATL Is the BIG BUY This Week

The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
Last week saw NORTHBOUND net sell RMB 2.2bn of A-shares on sharply lighter activity. Quieter all week.
Looking at the change in the weekly position charts over the last year is striking (easiest in the Sectors table to start). Still.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Adbri, Link Admin, Azure Minerals, Lithium Power, JSR Corp

I tally 50 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Six new deals discussed this week, all Down Under: Adbri (ABC AU), Link Administration (LNK AU), Pacific Smiles (PSQ AU), Probiotec (PBP AU), A2B Australia (A2B AU), and Whispir (WSP AU).
Key updates took place on: Azure Minerals (AZS AU), Lithium Power International (LPI AU), JSR Corp (4185 JP), Allkem Ltd (AKE AU), and Toyo Construction (1890 JP).

Last Week in Event SPACE: Benefit One, Hankook, Toyo Construction, Hanwha, Tsuruha, Livent/Allkem

Stay long Benefit One (2412 JP). Dai-Ichi Life can pay more, if pushed on pricing. May not be huge, but it could be a few percent or even 10%.
Hankook & Company (000240 KS)‘s family feud goes public. The public tender looks set to fail. Coal in stockings all-round.
If you had any Toyo Construction (1890 JP) left over from the rally up to ¥1,300+, get out. There may be a better opportunity later, but not here.

Weekly Deals Digest (24 Dec) – Benefit One, JSR, Weiqiao Textile, A2B, Adbri, Azure, Link, Probiotec

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Nothing of note in a quiet week.
Event-Driven developments – Benefit One Inc (2412 JP), JSR Corp (4185 JP), Weiqiao Textile Co (2698 HK), Adbri (ABC AU), Azure Minerals (AZS AU), Link Administration (LNK AU).

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Dec 23

Daily Brief Event-Driven: A2B (A2B AU): A$0.60 Fully Franked Divi + A$1.45/Share Offer From ComfortDelGro and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

A2B (A2B AU): A$0.60 Fully Franked Divi + A$1.45/Share Offer From ComfortDelGro
Probiotec (PBP AU) Agrees To Pyridam’s Bid
A2B Australia (A2B AU): ComfortDelGro’s Binding Proposal
Probiotec (PBP AU): Pyridam’s Binding Proposal

A2B (A2B AU): A$0.60 Fully Franked Divi + A$1.45/Share Offer From ComfortDelGro

Taxi-Related services operator A2B Australia (A2B AU) has completed a large property sale and subsequently entered into a Scheme with Singapore’s ComfortDelGro Corp (CD SP).
The property sale enabled a $0.60/share fully franked dividend. Separately, and in addition, ComfortDelGro is offering A$1.45/share. Or A$2.05/share all-in. Before franking credits, for those who can take advantage.
The special divi ex-date is the 12 January. It is not conditional on the Scheme. Implementation for the Scheme, assuming all approvals are met, is expected mid-April.

Probiotec (PBP AU) Agrees To Pyridam’s Bid

Drugs maker/packager group Probiotec Ltd (PBP AU) has entered into a Scheme with Indonesia’s Pyridam Farma (PYFA IJ).
Pyridam is offering Probiotec shareholders A$3.00/share (in cash, or a 19% premium to the undisturbed price). Interim and final dividends up to A$0.035/share and A$0.04/share, respectively, may be added.
It has not been declared final. The Offer has the board’s backing. A Scheme Meeting is expected to be held in May with possible completion in early June 2024.

A2B Australia (A2B AU): ComfortDelGro’s Binding Proposal

A2B Australia (A2B AU) has entered a scheme implementation deed with Comfortdelgro Corp (CD SP) at A$1.45 per share. Including the special dividend of A$0.60, the total offer is A$2.05.
ACCC approval should be forthcoming as ComfortDelGro is not a significant player in Australia. A2B has several substantial shareholders and a high retail shareholder base, posing a risk.
The shares are trading through terms. However, a bump is unlikely as the offer is attractive, and several substantial shareholders have sold down recently.

Probiotec (PBP AU): Pyridam’s Binding Proposal

Probiotec Ltd (PBP AU) has entered a scheme implementation deed with Pyridam Farma (PYFA IJ) at A$3.00 per share, a 19.0% premium to the undisturbed price (21 December).
Including potential dividends, the total potential offer price is A$3.075 per share. The scheme requires Probiotec shareholders, Pyridam shareholders, FIRB and Indonesia OJK approvals.
The offer is attractive and represents an all-time high. At the last close, the gross spread of the base offer and total potential offer is 3.1% and 5.7%, respectively.

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Dec 22

Daily Brief Event-Driven: Dai-Ichi Life “Decides” Tender Offer Price and Buyback Price at ¥2 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Dai-Ichi Life “Decides” Tender Offer Price and Buyback Price at ¥2,123 and ¥1,491/Share
Benefit One (2412 JP): Dai-Ichi Life’s Tender Offer at JPY2,123
StubWorld: Hanwha Corp Is “Cheap”
KOSDAQ150 Adhoc Index Rebalance: TEMC Added; Short Covering Expected in PoscoDX
Buy Pasona As Dai-Ichi Life Amends Benefit One’s Tender Offer & Buyback Price
HLB: Approves to Switch Listing from KOSDAQ to KOSPI in an Extraordinary General Meeting
SEPI/Telefonica: Acquisition of a 10% Stake

Dai-Ichi Life “Decides” Tender Offer Price and Buyback Price at ¥2,123 and ¥1,491/Share

Today, Dai Ichi Life Insurance (8750 JP) came out with a cover letter and an amended Announcement of Intention to Commence a Tender Offer on Benefit One Inc (2412 JP).
The cover letter says they have obtained information from Pasona Group (2168 JP) and Benefit One allowing them to calculate a Tender Offer of ¥2,123/share for minorities, and buyback at ¥1,491/share.
Now we wait. Again. Dai-Ichi Life “intends” to start a tender in mid-Jan 2024 (19 Jan likely earliest start possible) but it is not clear timing will come that early.

Benefit One (2412 JP): Dai-Ichi Life’s Tender Offer at JPY2,123

Dai Ichi Life Insurance (8750 JP)‘s pre-conditional tender offer for Benefit One Inc (2412 JP) is JPY2,123 per share, a 32.7% premium to M3 Inc (2413 JP)’s offer.
The other terms are unchanged. The pre-conditions relate to board recommendation, Pasona Group (2168 JP) support, and the M3 offer not being completed. The tender offer starts in mid-January 2024.
While M3 has extended its offer period to 17 January 2024, it will unlikely engage in a bidding war. Expect the Board and Pasona to support the Dai-ichi Life proposal.

StubWorld: Hanwha Corp Is “Cheap”

A double dose of StubWorld this week as Hanwha Corporation (000880 KS) comes up “cheap” on my monitor.
Preceding my comments on Hanwha are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

KOSDAQ150 Adhoc Index Rebalance: TEMC Added; Short Covering Expected in PoscoDX

Posco DX (022100 KS) will move from the KOSDAQ Market to the KOSPI Market on 2 January. That means KOSDAQ150 Index (KOSDQ150 INDEX) deletion at the close on 28 December.
In line with our forecast, Temc (425040 KS) will be added to the KOSDAQ 150 Index (KOSDQ150 INDEX) as a replacement.
Short interest increased in Posco DX (022100 KS) following its inclusion in a global index and there should continue to be unwinding over the next week.

Buy Pasona As Dai-Ichi Life Amends Benefit One’s Tender Offer & Buyback Price

Earlier this month, Dai Ichi Life (8750 JP) countered M3 with an unsolicited ¥1,800/share Offer of Equity Value TOB; followed by a Benefit One buyback to mop up Pasona‘s stake.
Dai-Ichi has now amended the TOB Price for minorities in Benefit One to ¥2,123/share, and the tax-equivalent price of ¥1,800/share for Pasona would be ¥1,491 on the Buyback Tender, post-squeezeout.
That price appears a bit higher for Pasona than expected, and therefore a bit lower for Benefit One minorities. Terms can still be bumped.

HLB: Approves to Switch Listing from KOSDAQ to KOSPI in an Extraordinary General Meeting

HLB Inc (028300 KS) announced that it has decided to transfer listing from KOSDAQ exchange to KOSPI exchange.
HLB currently has a market cap of 6.5 trillion won and HLB is likely to be included in KOSPI 200 in 2024.
One of the key reasons why the company has a large market cap is due to its Rivoceranib liver cancer drug which is being reviewed by the U.S. FDA.

SEPI/Telefonica: Acquisition of a 10% Stake

By Jesus Rodriguez Aguilar

The Spanish Cabinet has agreed on the acquisition of up to 10% of the share capital of Telefonica SA (TEF SM) (c.€2.2 billion), higher than the 5% initially mentioned.
This should move the market as it represents 48 trading days. This also means that the Government will likely authorise the purchase of up to 9.9% by STC.
The Kingdom of Spain 10-y benchmark bond yield is 2.9%, while the 24e dividend yield of Telefonica is 8% (source: IBES), therefore the operation makes financial sense.

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Dec 21

Daily Brief Event-Driven: Allkem+Livent=Arcadium : Expected Index Flows and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Allkem+Livent=Arcadium : Expected Index Flows
Arb Trading with Stock Rights in Korea: A Basic Guide Featuring LG Display Offering
Toyo Construction (1890) – Everyone Hits Pause
Japan Bumpitrage Potential: T&K Toka, IJTT, Taisho, Shidax, Benesse, Tokyo Rakutenchi
Nippon Steel/United States Steel Corp: Knock-Out Offer
Whispir (WSP AU): Soprano & Pendula Jostle for Control
STAR50 Index Rebalance Preview: Four High Impact Changes in March
Quiddity Leaderboard ASX Mar 24: Allkem, Newmont, Costa, and Many More

Allkem+Livent=Arcadium : Expected Index Flows

Yesterday during the day, Allkem Ltd (AKE AU) shareholders approved the Scheme and Livent (LTHM US) shareholders approved the merger. The deal is done. Allkem last trades 21 Dec.
NEWCO starts trading 4 January in the US but the Arcadium Lithium CDIs start trading 22 Dec in Australia. S&P/ASX announced they will replace Allkem in the ASX200.
But I have been asked for a breakdown of flows and timing again, so I have put it into a handy table which I hope makes it less confusing.

Arb Trading with Stock Rights in Korea: A Basic Guide Featuring LG Display Offering

Unlike typical Korean stock rights arbitrage, LG Display’s significant equity offering and active stock futures trading anticipate a spread opening, akin to the recent Hanwha Ocean scenario.
In contrast to Hanwha Ocean, the absence of major sellers, like KDB, sets this event apart. LG Electronics, the major shareholder with a 37.9% stake, intends to participate.
Despite differences from Hanwha Ocean, LG Display’s high retail shareholder presence implies a substantial likelihood of stock rights overhang, even without players like KDB.

Toyo Construction (1890) – Everyone Hits Pause

In September, YFO (Yamauchi Family Office) upped its Tender Offer proposal to ¥1,255/share. YFO presented. The Toyo Special Committee met, interviewed, examined, deliberated, then last week rejected YFO’s proposal.
The rejection was a three-parter. First, they rejected YFO for not bringing management/ownership experience. Second, they said the proposal didn’t add enough value. Third, the price was too low.
There were no metrics against which to measure anything. And now Toyo has apparently decided to withdraw its Tender Offer Proposal.

Japan Bumpitrage Potential: T&K Toka, IJTT, Taisho, Shidax, Benesse, Tokyo Rakutenchi

Japan’s merger arb is facing an unusual situation: six merger arb situations (>US$100 million market cap) where the shares have consistently traded through terms.
We evaluate the bumpitrage potential of these six Japanese merger arb situations on qualitative and quantitative metrics.
Based on our analysis, the ranking as measured by the highest bumpitrage potential in descending order are T&K Toka, IJTT, Taisho, Shidax, Benesse and Tokyo Rakutenchi.

Nippon Steel/United States Steel Corp: Knock-Out Offer

By Jesus Rodriguez Aguilar

Nippon Steel Corporation (5401 JP) and United States Steel (X US) have agreed an all-cash $55.00/share offer, 142% premium to where X traded before Cliff’s approach, a very generous 7x EV/24e EBITDA.
A determined buyer seeks market share in the lucrative US market, with no meaningful synergies expected and willingness to keep all US Steel jobs and (greener) growth projects.
Although unions and some lawmakers are voicing concerns, CFIUS shouldn’t pose a big hurdle. Spread is 12.04%/17.93% (gross/annualised, assuming late settlement by end of Q3 2024). Long.

Whispir (WSP AU): Soprano & Pendula Jostle for Control

On the 6 November, cloud communication outfit Whispir (WSP AU) announced a A$0.46/share unconditional Offer, in cash, from mobile messaging software play Soprano Design.
The Offer price was a 92% premium to Whispir’s recent private placement, and a 60% premium to the undisturbed price. Whispir rejected the Offer.
Pendula subsequently emerged with a A$0.57/share NBIO. Soprano “countered” with A$0.52/share. Pendula upped its indicative Offer to A$0.60/share. An independent expert’s fair value is between A$0.486/share-A$0.565/share.

STAR50 Index Rebalance Preview: Four High Impact Changes in March

The review period for the March rebalance ends 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
We expect the index committee to continue using a 6-month minimum listing history resulting in four changes to the index.
One way turnover is estimated at 3.3% resulting in a one-way trade of CNY 4,717m. The impact on the deletions will be much larger than that on the inclusions.

Quiddity Leaderboard ASX Mar 24: Allkem, Newmont, Costa, and Many More

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential index changes for ASX 300, 200, 100, 50, and 20 in the run-up to the March 2024 index review.
I expect one change for ASX 20, one change for ASX 100, and four changes for ASX 200 during the March 2024 index rebal event.
Separately, there could also be one intra-review change for ASX 200 in February 2024.

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Dec 20

Daily Brief Event-Driven: JSR (4185) – Deal Approval Unexpectedly Delayed and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JSR (4185) – Deal Approval Unexpectedly Delayed, As Expected
Pan Ocean Considering on a Rights Offering Capital Raise of Nearly 3 Trillion Won for the HMM Deal
Gina Joins SQM In Bid For Azure (AZS AU)
SET50 Index Rebalance: KCE Replaces TIDLOR
Azure Minerals (AZS AU): SQM/Hancock Team up for a New Offer
Kurabo (3106) – Bigly Buyback And Share Cancellation for A Valueful Value Trap With Hidden Value
Quiddity Leaderboard NIFTY Mar 24: Bharat Electronics Trade Successful; Change Hedge and Let It Run
Lithium Power (LPI AU): Scheme Vote on 23 January
StubWorld: Hankook’s Bothersome Brothers
AMFI Stock Reclassification Preview (Dec 2023): MidCap to LargeCap Migrations Outperforming

JSR (4185) – Deal Approval Unexpectedly Delayed, As Expected

Today after the close, JSR Corp (4185 JP) announced that the expected “end-December” commencement of JIC’s Tender Offer to take the company private would be delayed.
This was somewhat expected to widely expected based on initial FUD which then gave way to “specialised reporting” a couple of weeks ago which indicated as much.
Here I look at potential implications, spreads, and risks. And it still looks like one has to let it run (and buy a dip).

Pan Ocean Considering on a Rights Offering Capital Raise of Nearly 3 Trillion Won for the HMM Deal

A consortium led by the Harim Group and JKL Partners has been chosen as the preferred bidder to acquire a 57.9% stake in HMM.
Korea Development Bank (KDB) and the Korea Ocean Business Corporation (KOBC) are the main creditors of HMM, which is the largest shipping company in Korea.
Pan Ocean is expected to complete a rights offering of nearly 3 trillion won which is 136% of its current market cap. This is excessive and negative for Pan Ocean.

Gina Joins SQM In Bid For Azure (AZS AU)

This makes life a lot simpler. Gina Rinehart’s Hancock Prospecting will now team up with Chile’s SQM to take control of lithium play Azure Minerals (AZS AU).
In a binding Offer, by way of a Scheme, the joint bidders (collectively holding ~37.79%) are offering A$3.70/share, a 5.1% bump in terms to SQM’s prior Scheme Offer.
An off-market takeover at A$3.65/share unfolds IF this Scheme were to fail. If both fail/lapse, SQM will, “in certain circumstances”, be required to proceed with its off-market transaction of A$3.50/share.

SET50 Index Rebalance: KCE Replaces TIDLOR

KCE Electronics PCL (KCE TB) will replace Ngern Tid Lor (TIDLOR TB) in the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at the close on 29 December.
Estimated one-way turnover is 0.55% and will result in a one-way trade of THB 455m. There is nearly zero funding flow on the other index members.
Passive trackers will need to buy close to 1.2% of KCE Electronics PCL (KCE TB)‘s free float while selling around 1.6% of float in Ngern Tid Lor (TIDLOR TB).

Azure Minerals (AZS AU): SQM/Hancock Team up for a New Offer

Azure Minerals (AZS AU) has entered a new transaction implementation deed with Sociedad Quimica y Minera de Chile (SQM US) and Hancock at A$3.70, a 51.6% premium to the undisturbed price.
The emergence of Hancock and Mineral Resources (MIN AU) as substantial shareholders necessitated the new offer. The off-market takeover offer is A$3.65 per share if the scheme fails.
The scheme’s completion hinges on MinRes’ acceptance. MinRes could potentially block the scheme but has a history of selling into Hancock offers.

Kurabo (3106) – Bigly Buyback And Share Cancellation for A Valueful Value Trap With Hidden Value

Kurabo announced a bigly buyback on Tuesday. At last price it is equivalent to 8+% of shares out. Most likely to target buybacks from cross-holders.
The company is not cash-rich, but it is financial asset and real estate-rich. And it trades at cheap multiples without even thinking about those assets (themselves worth the market cap).
The TSE’s “PBR1 OR BUST” movement combined with starting low valuation, high payout, excess assets, mean this value trap has room to move.

Quiddity Leaderboard NIFTY Mar 24: Bharat Electronics Trade Successful; Change Hedge and Let It Run

By Janaghan Jeyakumar, CFA

NIFTY 50 represents the 50 largest stocks listed in the National Stock Exchange (NSE) of India and the NIFTY Next 50 index tracks the next 50 largest names.
In this insight, we take a look at the names leading the race to become ADDs/DELs for the NIFTY 50 and NIFTY Next 50 indices in the March 2024 rebalance.
There could be multiple changes for NIFTY 50 and separately, there could be five changes for NIFTY Next 50. The NIFTY 50 changes could have high impact.

Lithium Power (LPI AU): Scheme Vote on 23 January

The Lithium Power International (LPI AU) IE considers Codelco’s A$0.57 offer fair and reasonable as it is above the midpoint of its A$0.30-0.68 per share valuation range.
The scheme is conditional on FIRB approval, which should be forthcoming as LPI’s assets are outside Australia in Chile.
Irrevocables represent 32.05% of outstanding shares. At the last close and for the 16 February payment, the gross/annualised spread was 3.6%/26.3%.

StubWorld: Hankook’s Bothersome Brothers

The Cho brothers are currently sparring over control of Hankook & Company (000240 KS), and in turn, its 30.7% stake in Hankook Tire (161390 KS).
After the honorary chairman of Hankook backed the younger son (& chairman of Hankook), PE-outfit MBK, aligned with the elder son, bumped its public tender Offer by 20% to ₩24,000/share.
Hankook is currently trading 27.3% adrift of the revised terms. That pretty much sums up the situation. The public tender closes on December 25. However, December 23-25 are holidays.

AMFI Stock Reclassification Preview (Dec 2023): MidCap to LargeCap Migrations Outperforming

We see 8 stocks moving from MidCap to LargeCap, 8 stocks moving from LargeCap to MidCap, 11 stocks from SmallCap to MidCap, and 14 stocks from MidCap to SmallCap.
Some stocks were added to global indices last month while some could be added in February. There are potential index implications for the NIFTY Index and Nifty Next 50 Index too.
The upward migrations have continued to outperform the downward migrations. The largest recent outperformance has come from stocks expected to move from the Mid Cap to the Large Cap segment.

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Dec 19

Daily Brief Event-Driven: Allkem/Livent Merger Vote Tomorrow: Will Vote Get Past? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Allkem/Livent Merger Vote Tomorrow: Will Vote Get Past?
Link Admin (LNK AU): Mitsubishi UFJ’s Bittersweet Scheme
LG Display: Announces a Rights Offering Capital Raise of 1.36 Trillion Won
Link Admin (LNK AU): MUFG’s Underwhelming Binding Offer
Adbri (ABC AU): CRH and Barro’s Non-Binding A$3.20 Offer
Pacific Smiles (PSQ AU) Frowns On Genesis’ Offer
Comprehensive List: 359 Companies on KOSPI & KOSDAQ Deferring Yearend Dividend Record Dates
EQD | NIFTY WEEKLY Pullback: Where to Re-Enter LONG?
Taihan Electric Wire: Rights Offering of 50% of Outstanding Shares

Allkem/Livent Merger Vote Tomorrow: Will Vote Get Past?

The vote is tomorrow. It is slightly contested. Shareholder proxies have recommended approving. Some others say Allkem is going too cheap.
It probably should get done because of scale benefits, and if it breaks, it might be good for Allkem, which is “good risk arb risk”
But the trade here is some combination of lithium rebound and index event, with index impact details here.

Link Admin (LNK AU): Mitsubishi UFJ’s Bittersweet Scheme

Link Administration (LNK AU), the largest provider of services in Australia’s superannuation administration industry, has entered into a Scheme with Mitsubishi UFJ Financial Group.
MUFJ is offering long-suffering Link shareholders A$2.10/share (in cash) plus a A$0.16/share dividend (25% franked), or a 32.9% premium, all-in, to the undisturbed price. It has not been declared final.
The Offer has the board’s backing. A Scheme Meeting is expected to be held in May with possible completion in June 2024.

LG Display: Announces a Rights Offering Capital Raise of 1.36 Trillion Won

LG Display announced today that it will conduct a rights offering capital raise worth 1.36 trillion won.
The rights offering capital raise involves 142 million shares, which represent 39.7% of its existing outstanding shares.
We believe this rights offering will have a negative impact on LG Display’s share price as it will significantly dilute existing shareholders.

Link Admin (LNK AU): MUFG’s Underwhelming Binding Offer

Link Administration (LNK AU) has entered a SID with Mitsubishi UFJ Financial (MUFG) (8306 JP) at A$2.26 (A$2.10 scheme consideration + A$0.16 dividend), a 32.9% premium to the undisturbed price.
The presence of several substantial shareholders, lack of irrevocables, a light offer, recent derisking of the business and a long-dated offer pose a challenge for the scheme to get up.
MUFG’s offer could spark a rival offer, but Link’s long-suffering shareholders have endured a history of failed bids. At the last close, the risk/reward is unfavourable.

Adbri (ABC AU): CRH and Barro’s Non-Binding A$3.20 Offer

Adbri (ABC AU) has disclosed a non-binding proposal from CRH (CRH LN) and Barro at A$3.20 per share, a 41.0% premium to the undisturbed price of A$2.27 (13 December).
The offer is the best and final offer. The Board has granted an exclusive due diligence period, which ends on 28 February 2024.
The Board intends to recommend a binding proposal. The offer requires FIRB approval (ACCC approval is not mentioned). The offer is attractive vs. peer multiples and historical ranges.

Pacific Smiles (PSQ AU) Frowns On Genesis’ Offer

Pacific Smiles (PSQ AU), an operator of dental centers, has announced – and immediately rejected – a non-binding proposal from Genesis Capital Manager.
Genesis, holder of 18.75% of shares out, has offered A$1.40/share, by way of a Scheme. That’s a less-than-inspiring 17.1% premium to last close.
PSQ calls the Offer “opportunistically timed”. That has merit, after the share price recently touched a multi-year low. Separately, PSQ is seeking a new CEO after Mckenzie resigned in August.

Comprehensive List: 359 Companies on KOSPI & KOSDAQ Deferring Yearend Dividend Record Dates

The data is crucial for year-end dividend arbitrage. We can strategically target Single-stock futures’ spread basis widening due to information timeliness disparities, focusing on companies with high dividend yields.
Furthermore, it offers valuable insights into assessing the December-March spread levels, potentially leading to a rollover distortion in KOSPI 200 futures’ calendar spread trading.
Postponed yearend dividend record dates to March may clash with first-quarter dividends, offering a new trading opportunity. this unique situation could significantly impact spot and futures prices.

EQD | NIFTY WEEKLY Pullback: Where to Re-Enter LONG?

By Nico Rosti

7 weeks up in a row and very overbought, the NIFTY Index could pullback from its highs this week and/or the next.
A pullback to the 21008-20542 support area could be an occasion to enter LONG, profitable if the index rebounds from there and continues to rally into January.
The potential pullback appears to be a short-lived retracement down, based on MRM pattern readings.

Taihan Electric Wire: Rights Offering of 50% of Outstanding Shares

Last week, Taihan Electric Wire announced a rights offering of 50% of its outstanding shares. The company is expected to raise 526 billion won.
Taihan Electric Wire is expected to use the rights offering proceeds to mostly expand its submarine cable production.
With the share price falling 21% since the announcement of the rights offering last week, Taihan Electric Wire looks more attractive.

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Dec 18

Daily Brief Event-Driven: A/H Premium Tracker (To 15 Dec 23): Time To Go Long Hs Vs As. and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

A/H Premium Tracker (To 15 Dec 23): Time To Go Long Hs Vs As.
Tomony Holdings (8600 JP) – Regional Bank NEW SHARE Issue – Not What You Want To See, But Buy Anyway
Merger Arb Mondays (18 Dec) – Shinko Electric, Benefit One, Toyo, CPMC, Vinda, Costa, Volpara
Yuanta/P-Shares Taiwan Div+ ETF: Day 1 Flows & Stock Moves
Hankook & Company (000240 KS): MBK Raises Partial Offer to KRW24,000
HK Connect SOUTHBOUND Flows (To 15Dec23); CNOOC/Telecom/Mobile All Now To The Buy Side, Tencent NOT
Hankook & Co Tender: Clues to Gauge Cancellation Risk Obtained Through Local Channels So Far
Mainland Connect NORTHBOUND Flows (To 15 Dec 23): Mindray Consistently Bought, Midea Sold
Adbri (ABC AU) Warms To CRH/Barro’s Offer
Liquid Universe of European Ordinary and Preferred Shares: December‘23 Report

A/H Premium Tracker (To 15 Dec 23): Time To Go Long Hs Vs As.

The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND and NORTHBOUND flows were both sells, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 100+bp. Liquidation by overseas investors feels finished.
Time to go long Hs vs As for the new year at 52wk wide discounts. 3 Short H/A pairs now switched to long. 3 new pairs long this week.

Tomony Holdings (8600 JP) – Regional Bank NEW SHARE Issue – Not What You Want To See, But Buy Anyway

On 5 December, Tomony Holdings (8600 JP) – a holding company for two regional banks based in Tokushima Prefecture and Kagawa Prefecture – announced (gasp!) a NEW SHARE OFFERING.
It offered 28mm shares + 4.2mm greenshoe – a share count increase of 20%. At 0.27x book. This IS unusual. Especially when banks are being asked to produce better ROC.
The deal priced at ¥366. We’re there now. Banks have been sold. It is worth looking at where we are and what could happen next. It’s cheap.

Merger Arb Mondays (18 Dec) – Shinko Electric, Benefit One, Toyo, CPMC, Vinda, Costa, Volpara

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – Irc Ltd (1029 HK), Orecorp Ltd (ORR AU), Shinko Electric Industries (6967 JP), JSR Corp (4185 JP), Lithium Power International (LPI AU), Benefit One Inc (2412 JP).
Lowest spreads Tietto Minerals Ltd (TIE AU), Azure Minerals (AZS AU), IJTT Co., Ltd. (7315 JP), T&K Toka Co Ltd (4636 JP), Tokyo Rakutenchi (8842 JP), Shidax Corp (4837 JP).

Yuanta/P-Shares Taiwan Div+ ETF: Day 1 Flows & Stock Moves

The Yuanta/P-shares Dividend Plus ETF (0056 TT) started to rebalance its holdings on Friday and will continue to do so for the next 4 trading days.
Stocks with buy flows dropped 0.51% on average on Friday while the stocks with sell flows dropped 0.92%. On a flow weighted basis, the numbers were -0.21% vs -0.75%.
Since the start of November, the adds have outperformed the deletes and the TWSE INDEX. There has been significant outperformance in just the last week.

Hankook & Company (000240 KS): MBK Raises Partial Offer to KRW24,000

MBK Partners has increased its Hankook & Company (000240 KS) partial tender offer to KRW24,000 per share, 20.0% and 51.4% above its previous offer and the last close, respectively.
While the offer is attractive, we estimate that the minimum acceptance condition of 19.3 million shares (20.35% of outstanding shares) requires an 84.3% minority acceptance rate.
The minority acceptance rate is challenging unless MBK can secure a ruling preventing share purchases from Cho Yang-rai, who disclosed a 2.72% stake on 14 December and opposes the tender.

HK Connect SOUTHBOUND Flows (To 15Dec23); CNOOC/Telecom/Mobile All Now To The Buy Side, Tencent NOT

SOUTHBOUND flows showing reversion tendencies continues for a fourth week. Hs rebound vs their As on the week – especially the liquid ones.
SOUTHBOUND saw HK$9.9bn of OUTflows on the week to 15 Dec, ALL of which was net sales of Tracker Fund of Hong Kong (2800 HK) and Tencent (700 HK).
High-Div SOEs again saw action. This time with both CNOOC Ltd (883 HK) and China Telecom (728 HK) seeing net buying as a percentage of volume.

Hankook & Co Tender: Clues to Gauge Cancellation Risk Obtained Through Local Channels So Far

Critical now is estimating MBK’s achievable volume in the tender offer, a key indicator for assessing cancellation risk. Evidence suggests few allies for Cho Hyun-beom, prompting MBK’s strategic persistence.
MBK can secure 23.58%, but NPS’s involvement is pivotal. If neutral, MBK aims for 19.55%, below the minimum. MBK proceeds with a revised offering price, anticipating NPS participation.
Though the FSS investigation may favor MBK, a successful tender offer depends on achieving 87% participation. The higher-than-expected likelihood of success hints at a strong upward stock adjustment from Monday.

Mainland Connect NORTHBOUND Flows (To 15 Dec 23): Mindray Consistently Bought, Midea Sold

The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts to play with.
Last week saw NORTHBOUND net sell RMB 18.6bn of A-shares on slightly lighter activity. Friday saw large NORTHBOUND net buys early in the day but ended a net sell.
Looking at the change in the weekly position charts over the last year is striking (easiest in the Sectors table to start). Still.

Adbri (ABC AU) Warms To CRH/Barro’s Offer