Event-Driven

I tally 46 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Four new deals discussed this week: Sigma Healthcare (SIG AU)‘s reverse takeover; Tanotos’ tilt for Vinda (3331 HK); and Tender offers for Shinko Electric (6967 JP) and Outsourcing (2427 JP).
Key updates took place on: Pact Group Holdings (PGH AU), Allkem (AKE AU), Costa Group Holdings (CGC AU), T&K Toka Co Ltd (4636 JP) and Hollysys Automation Technologies (HOLI US).

Index Rebalance & ETF Flow Recap: HSTECH, SIG/CWG, KQ150, REPT BATTERO

It was a busy week with rebalance implementations at the close of trading on Thursday in Korea and then across the region on Friday.
The SET 50 Index changes should be announced this week and the Yuanta TW Div+ ETF will continue to implement the changes till Thursday.
There were inflows to China ETFs during the week while there were big outflows from Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) ETFs.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-And Pivot!

By Simon Harris

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

Last Week in Event SPACE: Benefit One, CPMC, Samsung C&T, Sands China, Shinko Electric, Hankook & Co

M3 extends its Tender Offer for Benefit One (2412 JP). M3 can match Dai-Ichi Life proposal, financially, if backed. And Dai Ichi Life Insurance (8750 JP) can probably bump further.
Haier Electronics Group Co (1169 HK)‘s CEO and ORG Technology Co., Ltd. A (002701 CH) reckon they can trump SASAC’s Offer for CPMC Holdings (906 HK).
First City of London Investment Management, then Palliser Capital and now Whitebox, urge Samsung C&T (028260 KS) to improve its cash spending, improve governance and communications and simplify its corporate structure

Weekly Deals Digest (17 Dec) – Benefit One, Shinko Electric, Toyo, CPMC, Vinda, Hollysys, Rept

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 – REPT BATTERO Energy (1998104D CH) IPO and Denso Corp (6902 JP)‘s US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback.
Event-Driven developments – Benefit One Inc (2412 JP), Shinko Electric Industries (6967 JP), Toyo Construction (1890 JP), CPMC Holdings (906 HK), Vinda International (3331 HK), Hollysys Automation Technologies (HOLI US).

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Dec 16

Daily Brief Event-Driven: StubWorld: LVS To Up Stake In Sands. Melco Back To Square One and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

StubWorld: LVS To Up Stake In Sands. Melco Back To Square One
Investigating Float Rate Issues of Ecopro Materials & Doosan Robotics for Global Index Feb Review
Vinda International (3331 HK): Pre-Conditional Voluntary Offer at HK$23.50
MBK Partners Raises Tender Offer Price of Hankook and Co to 24,000 Won

StubWorld: LVS To Up Stake In Sands. Melco Back To Square One

Las Vegas Sands (LVS US) announced it will buy ~1% of Sands China (1928 HK). Melco International Development (200 HK) mean reverts after a roller coaster out/under-performance.
Preceding my comments on Las Vegas Sands and Melco 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%.

Investigating Float Rate Issues of Ecopro Materials & Doosan Robotics for Global Index Feb Review

With recent surges in EcoPro Materials and Doosan Robotics, it’s crucial for their potential inclusion in the February Global Index review. No other names approach the threshold.
Depending on classification, Ecopro Materials may get a free-float rate from 15% to 20%, while Doosan Robotics may receive a rate from 20% to 30%.
With max free-float rates (20% and 30%), both meet Cutoffs. At minimum rates, Doosan Robotics needs over a 20% increase, while Ecopro Materials slightly exceeds Cutoffs.

Vinda International (3331 HK): Pre-Conditional Voluntary Offer at HK$23.50

Vinda International (3331 HK) has announced a pre-conditional voluntary offer from Sukanto Tanoto at HK$23.50 per scheme share, a 7.8% premium to the undisturbed price (26 April).
The pre-condition relates to China SAMR and Japan Fair Trade Commission approval. The offer is conditional on the offeror and concert parties representing more than 50% of voting rights.
Irrevocables ensure the satisfaction of the minimum acceptance condition but also rule out a competing proposal. The timing of China SAMR approval is the key risk.

MBK Partners Raises Tender Offer Price of Hankook and Co to 24,000 Won

By Douglas Kim

After market close on 15 December, MBK Partners raised the tender offer price of Hankook & Company by 20% to 24,000 won, which is now 51.4% higher than current price.
With Cho Yang-Rae’s recent acquisition of shares, Cho Hyun-beom, Cho Yang-rae, and related parties now own about 45.6% of Hankook & Co, up from 42.9% previously.
MBK Partners has requested an official investigation by the FSS, claiming that Cho Yang-rae and HY have violated the Capital Markets Act by recently purchasing shares of Hankook & Co.

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Dec 15

Daily Brief Event-Driven: Shinko Electric (6967) Takeover: Initial Break/Gap Risk Analysis and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Shinko Electric (6967) Takeover: Initial Break/Gap Risk Analysis
Whitebox Goes Activist on Samsung C&T
Vinda (3331 HK): Tanoto’s Firm Offer
Quiddity Leaderboard STAR 50 Mar 24: Four High-Impact Changes Likely; Some Interesting Trade Ideas
Toyo Construction (1890 JP): Déjà Vu as YFO’s Proposal Rejected
Volpara Health/Lunit: Bosom Buddies
Volpara Health (VHT AU): Lunit’s Binding A$1.15 Offer
EQD | ULTRAOVERBOUGHT APAC Markets, SHORT Targets

Shinko Electric (6967) Takeover: Initial Break/Gap Risk Analysis

The JIC Deal for Shinko Electric Industries (6967 JP) has been announced and is, as expected, trading wide.
There is FUD. There are Flows. Just like JSR (4185). Some of that FUD can be explained by “gap risk” on deal break…. or can it? We look at risks.
There’s more positioning risk than fundamental risk at this point. And the FUD and Flows have specific timing in this case which makes thing different than JSR. Worth thinking about.

Whitebox Goes Activist on Samsung C&T

By Douglas Kim

On 14 December, it was reported that US based Whitebox Advisors has started an activist campaign on Samsung C&T (028260 KS).
Whitebox estimates that Samsung C&T’s stock price is about 68% undervalued compared to its NAV.
In addition to Whitebox, there are two other foreign investors including Palliser Capital and City of London Investment Management that have requested Samsung C&T to improve corporate governance.

Vinda (3331 HK): Tanoto’s Firm Offer

Back on the 27 April, personal hygiene play Vinda International (3331 HK) announced its controlling shareholder Essity (ESSITYB SS) would commence a strategic review of its 51.59% ownership.
That spurred, allegedly, a variety of suitors including Brazil’s Suzano, the world’s largest hardwood pulp producer, Bain Capital, CVC Capital, DCP Capital, and Indonesia’s Tanoto family.
And the Tanoto’s have now emerged with a HK$23.50 pre-conditional Offer. The key risk is PRC regulatory approval . Elsewhere, this is a done deal.

Quiddity Leaderboard STAR 50 Mar 24: Four High-Impact Changes Likely; Some Interesting Trade Ideas

STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the March 2024 index rebal event.
There could be up to four index changes. Some of these are high-conviction changes and some are low-conviction changes.

Toyo Construction (1890 JP): Déjà Vu as YFO’s Proposal Rejected

The Toyo Construction (1890 JP) Board has opposed YFO’s potential tender offer price of JPY1,255 per share but has kept the door open for an improved offer.
YFO is running out of options as a YFO candidate-heavy special committee opposed its proposal, and the share price is trading through terms.
YFO has three options: a hostile offer at an unchanged price, an improved price, or exit its position. Each option has issues suggesting a lack of short-term share price support.

Volpara Health/Lunit: Bosom Buddies

Volpara Health (VHT AU), which makes software enabling the early detection of breast cancer, has announced it has entered into a Scheme Implementation Deed with South Korea’s Lunit (328130 KS).
Lunit is offering Volpara shareholders A$1.15/share, in cash, a 47.4% premium to last close. Cornerstone investors with 25.92% of shares out are supportive. As is Volpara’s board.
The Scheme Meeting is expected to be held in 2Q24. The transaction requires NZ’s OIO approval.

Volpara Health (VHT AU): Lunit’s Binding A$1.15 Offer

Volpara Health Technologies (VHT AU) has entered a scheme implementation deed with Lunit (328130 KS) at A$1.15 per share, a 48.4% premium to the undisturbed price of A$0.775 (13 December).
The offer is subject to several conditions, such as shareholder and OIO approval. Irrevocables and directors represent 33.30% of outstanding shares.
Barring a competing offer, this is a done deal, as the offer is attractive. At the last close and for the end of May payment, the gross/annualised spread is 5.0%/11.6%.

EQD | ULTRAOVERBOUGHT APAC Markets, SHORT Targets

By Nico Rosti

3 main APAC markets (Nifty, Kospi 200 and ASX200) are very OVERBOUGHT.
A WEEKLY pullback (1 week down) is expected this coming week, or the next.
The pullback should be short-lived and last just 1 week, then the rally should resume.

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Dec 14

Daily Brief Event-Driven: JIC Deal For Shinko Electric Is LIGHT and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JIC Deal For Shinko Electric Is LIGHT, and There’s Room To Complain, But Will Trade Wide
NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade
Recruit (6098 JP) Buyback – It’s Big But Not THAT Big; Value Act Effect Vs Corp Selldown Vs Multiple
Hollysys (HOLI US): Merger Agreement Leaves the Door Ajar for a Higher Recco Offer
Quiddity Leaderboard CSI 300/500 Jun 24: 109 Flow Names; US$2.3bn One-Way
Toyota Cross-Shareholding – To Say a Whole Lot Is Left Would Be a US$26bn Understatement
KOSDAQ150 Index Rebalance Preview: Posco DX Listing Transfer
Quiddity Leaderboard SSE50/180 Jun 24: US$1bn+ Index Flows Possible
Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: Early Preview; US$863mn One-Way Index Flows

JIC Deal For Shinko Electric Is LIGHT, and There’s Room To Complain, But Will Trade Wide

29 minutes after I published a long, musing piece on the possibilities of structure and announcement later this week, JIC and Shinko Electric announced 5 minutes before midnight.
A warning for the future: The Nikkei and every other media outlet got the number wrong. It is NOT a total acquisition cost of “around ¥800bn”. It is under ¥700bn.
It IS a split deal. And if JIC won with that price, it tells you something about the state of the market and future deals in the space.

NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade

There were 6 inclusions and 6 exclusions for the Nasdaq-100 Stock Index (NDX INDEX) at the annual December reconstitution. Then another ad hoc change was added on top of that.
Impact on the inclusions ranges from 1-8 days of ADV to buy, while the impact on the deletions varies from 0.7-2.6 days of ADV to sell.
Apart from the constituent changes, there are expected to be inflows in Tesla Motors and Broadcom and outflows from Apple, Microsoft, Amazon.com and NVIDIA.

Recruit (6098 JP) Buyback – It’s Big But Not THAT Big; Value Act Effect Vs Corp Selldown Vs Multiple

Last month, Reuters reported that activist-ish investor Value Act Capital Management had bought a stake in Recruit Holdings (6098 JP) and separately in Expedia Group, Inc. (EXPE US)).
It was “revealed” in a letter to its clients. And there were reasons stated why Value Act thought Recruit was worth a lot more than it was trading for.
Today, Recruit announced an on-market buyback for ¥200bn. That’s nice. But it is not enormous, and it may signal other info, and it is worth understanding details and context.

Hollysys (HOLI US): Merger Agreement Leaves the Door Ajar for a Higher Recco Offer

Bloomberg reports that the Recco consortium is considering “a significantly higher” Hollysys Automation Technologies (HOLI US) offer than Ascendent’s US$26.50 binding offer.
The Hollysys 6-K filling outlines the closing conditions – a simple majority YES vote, regulatory approvals, minimum net cash (waivable) and a 10% maximum dissent condition (waivable).
Recco is a committed suitor and will not easily give up. The merger agreement clauses point to a Recco offer floor of US$27.03 and a ceiling of US$30.48.

Quiddity Leaderboard CSI 300/500 Jun 24: 109 Flow Names; US$2.3bn One-Way

CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
In this insight, we take a look at the potential ADDs/DELs for the CSI 300 and CSI 500 rebalance in June 2024.
At present, I see 10 ADDs/DELs for the CSI 300 index and 50 ADDs/DELs for the CSI 500 index.

Toyota Cross-Shareholding – To Say a Whole Lot Is Left Would Be a US$26bn Understatement

By Sumeet Singh

With Toyota (7203 JP) having sold some of its stake in Denso, KDDI and Harmonic Drive this year, it has firmly set the ball rolling for unwinding some of its cross-shareholding.
Toyota has a shareholding in around 60 listed companies, with its combined disposable stake worth over US$26bn.
In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

KOSDAQ150 Index Rebalance Preview: Posco DX Listing Transfer

The KRX has preliminarily approved Posco DX (022100 KS)‘s listing transfer from the KOSDAQ Market to the KOSPI Market.
Posco DX (022100 KS) has announced that its stock will start trading on the KOSPI Market from the open on 2 January.
We expect Temc (425040 KS) to replace Posco DX (022100 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 28 December.

Quiddity Leaderboard SSE50/180 Jun 24: US$1bn+ Index Flows Possible

SSE 50 and SSE180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
In this insight, we take a look at our expectations for potential index changes for SSE 50 and SSE 180 during the June 2024 index rebal event.
There could be five changes for the SSE 50 index and 18 changes for the SSE 180 index in June 2024.

Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: Early Preview; US$863mn One-Way Index Flows

The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
In this insight, we take a look at the names leading the race to become ADDs and DELs in the June 2024 index rebal event.

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Dec 13

Daily Brief Event-Driven: Benefit One (2412): M3 Extends For a Full Month and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Benefit One (2412): M3 Extends For a Full Month
JIC Consortium Possibly In Line to Win Shinko At “¥800bn”, Which Makes You Go 🤔…
Shinko Electric (6967 JP): JIC’s Pre-Conditional Tender Offer at JPY5,920
CPMC (906 HK): SASAC Usurper?
CPMC Holdings (906 HK): Possible Scenarios as ORG Mulls a Competing Offer
Hollysys Gives Ascendent Capital The Nod. Agnostic Shareholders Will Approve
HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)
Identifying KOSPI Size Migration Candidates & Assessing Proactive Setup Feasibility
MarketVector Vietnam Local Index Rebalance: One Add & Other Changes
The Week Ahead: US Inflation, Fed, Quarterly Rebalancing

Benefit One (2412): M3 Extends For a Full Month

Today after the close, Benefit One Inc (2412 JP) amended its Tender Offer Target Opinion Statement to note that Dai Ichi Life had made a proposal to acquire 100%.
To allow the Board time to evaluate this proposal, the Company requested a Tender extension. Bidder M3 Inc (2413 JP) was obliged to extend 10 days. They extended 20 days.
This tells us a bunch of things. It is worth thinking about what happened to get here.

JIC Consortium Possibly In Line to Win Shinko At “¥800bn”, Which Makes You Go 🤔…

A Nikkei article today suggested that Fujitsu had granted preferential negotiating rights to buy Shinko Electric Industries (6967 JP) to a JIC-led consortium (including DNP and Mitsui Chem) for ~¥800bn.
This happened late in the afternoon session. Shares spiked 5+%, then were halted. A gray market ensued.
A Bloomberg article provided more info, and the same info nuanced slightly differently. The wording in yet other articles was interesting enough that it is worth discussing.

Shinko Electric (6967 JP): JIC’s Pre-Conditional Tender Offer at JPY5,920

After months of speculation, Shinko Electric Industries (6967 JP) has recommended the JIC alliance’s preconditional tender offer of JPY5,920 per share, an 18.9% premium to the undisturbed price (31 May).
The pre-condition relates to regulatory approvals in Japan, China, Korea, and possibly Vietnam. The offeror may waive the pre-condition. The offer is long-dated and expected to start in August 2024.
The minimum acceptance condition requires a 33.3% minority acceptance rate. Despite the low 7.1% premium to the last close, the offer resulted from a competing bidding process.

CPMC (906 HK): SASAC Usurper?

In what I viewed as one of the cleaner deals, CPMC Holdings (906 HK) announced a pre-conditional Offer from SASAC and the National Council for Social Security Fund of China.
A decent premium to undisturbed, a low tendering threshold, and a large shareholder giving an irrevocable – this looked done.
Now ORG Development Limited/ORG Technology Co., Ltd. A (002701 CH), holding 24.4% of shares out, is mulling a competing conditional general cash Offer. One of these Offers will get up.

CPMC Holdings (906 HK): Possible Scenarios as ORG Mulls a Competing Offer

CPMC Holdings (906 HK) disclosed that ORG Technology Co., Ltd. A (002701 CH), the second-largest shareholder, is considering a competing voluntary conditional general cash offer.
It is rare to bid against an SOE bidder. ORG likely has implicit SOE support to launch a competing offer due to the need for Chinese regulatory approvals.
The possible scenarios suggest Mr Zhang Wei is the winning bid’s kingmaker. Mr Wei sold down 260K shares at HK$6.35 on 8 December, indicating a willingness to exit.

Hollysys Gives Ascendent Capital The Nod. Agnostic Shareholders Will Approve

Hollysys Automation Technologies (HOLI US)‘s board persistent stonewalling was effectively terminated after the its court injunction was dismissed last month. An SGM will now take place sometime next month.
A firm merger agreement was expected this month, and Hollysys announced yesterday Ascendent Capital has emerged as the preferred suitor with a (revised) US$26.50/share Offer.
This looks to be (finally) all stitched up. Trading wide-ish to terms. Get involved.

HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)

Tongcheng Travel Holdings (780 HK) is expected to replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the March review.
Constituent changes and capping changes will result in a one-way turnover of 2.32% and that will result in a round-trip trade of US$628m.
Short interest on Tongcheng Travel Holdings (780 HK) is near its lows while there has been some recent short covering in GDS Holdings (9698 HK).

Identifying KOSPI Size Migration Candidates & Assessing Proactive Setup Feasibility

EcoPro Materials and Doosan Robotics, recent IPOs, join the Large category. Their inclusion signals at least two Large stocks, CS Wind Corp and BGF Retail, shifting to Mid.
There’s a chance three Mid-stocks will transition to Large: Ssangyong Cement, Hyundai Electric, and LOTTE Corp. Conversely, LS Corp, Hotel Shilla, and Kepco E&C will move from Large to Mid.
With ample time left in the screening period, cautious monitoring is essential. Still, Large→Mid candidates, with a notable gap from the ₩2.95T cutoff, warrant a focus on proactive setups.

MarketVector Vietnam Local Index Rebalance: One Add & Other Changes

CEO Group JSC (CEO VN) will be added to the MarketVector Vietnam Local Index at the close on 15 December.
Estimated one-way turnover is 5.24% and that results in a one-way trade of US$30m. There are a couple of stocks with more than 1x ADV to buy from passives.
The largest passive inflows will be in Vingroup Jsc (VIC VN), Vietnam Dairy Products JSC (VNM VN), CEO Group JSC (CEO VN) and Vinhomes (VHM VN).

The Week Ahead: US Inflation, Fed, Quarterly Rebalancing

By Charlotte van Tiddens, CFA

JSE indices get rebalanced in the closing auction on Thursday.
No constituent changes will be made to the ALSI, Top 40, Top 40 SWIX, FINI, FINDI or INDI. HAR will enter the RESI and AMS will fall out.
Largest buys: BTI, MNP, BHG, APN.

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Dec 12

Daily Brief Event-Driven: Denso Corp Placement – Quick Update – In Better Shape Now and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Denso Corp Placement – Quick Update – In Better Shape Now, Size Concern Remains
A Review of Tender Offers of Korean Companies in 2023
Exploring the Possibility of an LG Energy Solution Block Deal
Softbank (9984 JP): Adding a Strengthening JPY to the Mix
SIG/CWG Merger: Back Door Entry to the ASX200; Other Index Implications
Sigma Healthcare (SIG AU): Chemist Warehouse’s Reverse Takeover
Costa Group (CGC AU): Wide Spread Ahead of the 30 January Vote
Hollysys (HOLI US): Questionable Process Results in Ascendent’s Winning US$26.50 Bid
Costa Group’s Shareholder Vote Set. Get Involved
KKR/Smart Metering Systems: Agreed Cheap Offer

Denso Corp Placement – Quick Update – In Better Shape Now, Size Concern Remains

By Sumeet Singh

On 28th Nov 2023, Toyota Motor (7203 JP) announced that it would sell around 9.4% of Denso Corp (6902 JP) in order to reduce its cross-shareholding.
The shares hadn’t corrected much till our last note on 7th Dec 2023, they have since corrected by 6% .
We have covered the deal background and deal dynamics in our earlier notes. In this note, we talk about the recent share price movement, as compared to prior deals.

A Review of Tender Offers of Korean Companies in 2023

By Douglas Kim

We review the major tender offers of Korean companies in 2023. Some of the major M&A tender offers that have closed this year include Osstem Implant and SM Entertainment.
Among the 15 companies targeted for tender offers, there are 5 companies including Osstem Implant, SM Entertainment, Lutronic Corp where the purpose of the tender offers is for M&A.
There were a total of 18 companies that submitted tender offer results announcements in 2023 (as of 11 December), up 157% YoY.

Exploring the Possibility of an LG Energy Solution Block Deal

The prevailing sentiment in Yeouido signals a shift of companies, originally preparing for EB issuances, toward block deals. Local brokerages are competing to identify potential block deals involving major issuers.
The local market anticipates LG Chem opting for a short-term block deal, considering the potential reduction of the LG Energy stake below 80% to alleviate global minimum corporate tax burdens.
Timing is a challenge, but based on corrections before July’s EB issuance, we could proactively plan for January. Abundant liquidity in LG Energy’s futures eases trading instrument concerns.

Softbank (9984 JP): Adding a Strengthening JPY to the Mix

By Victor Galliano

In 1HFY23, a weak JPY – with it having depreciated from JPY132 to JPY149 to the USD – has actively supported the group’s valuation, contributing 12% to SoftBank group’s NAV
The BoJ is looking to tighten monetary policy, whilst all other major central banks are set to cut rates; under this scenario, it is likely for the JPY to strengthen
Softbank shares trade at a 51%+ stated NAV discount yet we believe that there is downside risk to at least Arm’s high valuations, which could tighten the discount significantly

SIG/CWG Merger: Back Door Entry to the ASX200; Other Index Implications

Sigma Healthcare (SIG AU) has announced a potential merger with Chemist Warehouse Group (CWG) to create a leading healthcare wholesaler, distributor and retail pharmacy franchisor.
With a market cap of ~A$8.5bn and a free float market cap of ~A$4bn, the merged company will make the cut for inclusion in the S&P/ASX 200 (AS51 INDEX).
Inclusion in the S&P/ASX 100 Index looks just out of reach at the moment as does inclusion in some large global indices.

Sigma Healthcare (SIG AU): Chemist Warehouse’s Reverse Takeover

Privately-Held Chemist Warehouse’s (CWG) “transformational merger” with pharmaceutical wholesaler and franchisor Sigma Healthcare (SIG AU) will result in CWG’s shareholders holding 85.75% of the merged company.
CWG shareholders will receive A$700mn in cash plus new Sigma shares. Sigma will also undertake a $400mn equity raising to fund working capital needs.
Sigma has the backing of its largest shareholder HMC. The risk to completion pivots off ACCC approval.

Costa Group (CGC AU): Wide Spread Ahead of the 30 January Vote

The Costa Group Holdings (CGC AU) IE considers Paine Schwartz Partners’ A$3.20 offer fair and reasonable as it is towards the upper end of its A$2.62-3.28 valuation range.
The scheme requires China SAMR and European Commission approvals. SAMR approval poses a timing risk but the scheduling of the scheme meeting reflects PSP’s confidence in securing the approvals.
While not a knockout bid, the profit warning should help sway the retail vote in favour of the scheme. At the last close, the gross spread was 8.1%.

Hollysys (HOLI US): Questionable Process Results in Ascendent’s Winning US$26.50 Bid

Hollysys Automation Technologies (HOLI US) has agreed to be acquired by Ascendent Capital, the largest shareholder, for US$26.50, a 16.7% premium to the last close.
The Board’s claims of realising the highest shareholder value are not credible. The Board fails to explain why Ascendent’s offer is superior to Recco’s, although both have the same value.
Deal fatigue (the process first started in December 2020) and the 42% premium to the undisturbed price suggests meeting the simple majority threshold for a statutory merger is achievable.

Costa Group’s Shareholder Vote Set. Get Involved

On the 22 September, Costa Group Holdings (CGC AU) backed Paine Schwartz Partners’ (PSP) revised (and reduced) A$3.20/share best and final Offer.
Costa’s Scheme Meeting has now been tabled for the 30 December, with implementation expected on the 26 February. The IE is supportive and Costa’s board unanimously recommends the transaction.
This appears done. Key conditions are Costa’s shareholder vote and SAMR approval. I can’t see SAMR getting into a bind over berries.

KKR/Smart Metering Systems: Agreed Cheap Offer

By Jesus Rodriguez Aguilar

KKR takes advantage of a the depressed share price of Smart Metering Systems (SMS LN) that operates a stable, cash generating and misunderstood defensive business with revenues linked to inflation.
KKR offers 955p (+8.31875p/share declared divi), a 40% premium 40%, 15x EV/24e EBITDA. 0.1% irrevocable undertakings is negligible (top ten shareholders own c.54%). A counteroffer and/or sweetening is possible.
Spread is 0.45%/1.52% (gross/annualised, assuming settlement by 29 March, including declared dividend). Turnover has been high since announcement. Risk/return seems attractive. Recommendation is long SMS LN.

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Dec 11

Daily Brief Event-Driven: Outsourcing (2427 JP): Bain-Backed Preconditional MBO Tender Offer at JPY1 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Outsourcing (2427 JP): Bain-Backed Preconditional MBO Tender Offer at JPY1,755
TOPIX Inclusions: Who Is Ready (Dec 2023)
MVIS Global Junior Gold Miners Index Rebalance: Few Large Weight Changes
MVIS US Listed Semiconductor 25 Index Rebalance: TSMC Is the Big Sell
MVIS Global Rare Earth/Strategic Metals Index Rebalance: Albermarle (ALB US) Finally Added
Merger Arb Mondays (11 Dec) – Benefit One, Outsourcing, Tokyo Rakutenchi, CPMC, Weiqiao Textile
HK Connect SOUTHBOUND Flows (To 8Dec23); CNOOC & China Mobile Both Now To The Buy Side, Tencent Not
A/H Premium Tracker (To 8 Dec 23): H Down Vs A, Again, Despite SOUTHBOUND Buying; Pharmas Weak
Bain Deal for Outsourcing (2427): Cheeky, Opportunistic, Too Low
MVIS Australia Equal Weight Index Rebalance: Three Deletions & Other Changes

Outsourcing (2427 JP): Bain-Backed Preconditional MBO Tender Offer at JPY1,755

Outsourcing Inc (2427 JP) has recommended a Bain-backed preconditional MBO tender offer of JPY1,755 per share, a 52.1% premium to the undisturbed (8 December).
The offer is light vs. peer and historical multiples and opportunistically takes advantage of the 20% price fall due to the disclosure of employment adjustment subsidies issues on 1 August.
Based on the irrevocables, the minimum acceptance condition requires a 61.9% minority acceptance rate. The acceptance rate could prove challenging. The tender offer is to start by late January 2024.

TOPIX Inclusions: Who Is Ready (Dec 2023)

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
One of our TOPIX Inclusion Pre-event names Visional (4194 JP) confirmed it has received approval to move to the Prime Market in December 2023.
Currently, we are expecting one TOPIX Inclusion at the end of December 2023 and two more at the end of January 2024 (including Visional).

MVIS Global Junior Gold Miners Index Rebalance: Few Large Weight Changes

There are no constituent changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in December, but there are float and capping changes for some stocks.
Estimated one-way turnover is 2.8% and that leads to a one-way trade of US$122m.
There are 13 stocks with over US$5m to trade from passive trackers, though the impact is not very big on the stocks.

MVIS US Listed Semiconductor 25 Index Rebalance: TSMC Is the Big Sell

There are no constituent changes for the VanEck Vectors Semiconductor (SMH US) in December but there are a lot of float and capping changes.
Taiwan Semiconductor (TSMC) – ADR (TSM US) is the biggest sell while NVIDIA Corp (NVDA US) is the biggest buy.
Estimated one-way turnover is 6.6% resulting in a one-way trade of US$682m. Couple of stocks have greater than 0.2x ADV to trade.

MVIS Global Rare Earth/Strategic Metals Index Rebalance: Albermarle (ALB US) Finally Added

Albemarle Corp (ALB US) will replace ioneer (INR AU) in the VanEck Rare Earth/Strategic Me (REMX US) at the close on 15 December.
Constituent changes, float changes and capping changes result in an estimated one-way turnover is 13.4% and in a one-way trade of US$50m.
The mainland China stocks in the index have been the biggest laggards and this rebalance will reduce their weight in the index significantly.

Merger Arb Mondays (11 Dec) – Benefit One, Outsourcing, Tokyo Rakutenchi, CPMC, Weiqiao Textile

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 – Outsourcing Inc (2427 JP), Healius (HLS AU), Irc Ltd (1029 HK), Orecorp Ltd (ORR AU), Hollysys Automation Technologies (HOLI US), Tokyo Rakutenchi (8842 JP).
Lowest spreads Toyo Construction (1890 JP), IJTT Co., Ltd. (7315 JP), Tietto Minerals Ltd (TIE AU), Azure Minerals (AZS AU), T&K Toka Co Ltd (4636 JP), Benesse Holdings (9783 JP).

HK Connect SOUTHBOUND Flows (To 8Dec23); CNOOC & China Mobile Both Now To The Buy Side, Tencent Not

SOUTHBOUND flows showing reversion tendencies continues for a second or third week after weeks of momentum.
SOUTHBOUND saw HK$11.2bn of INFLOWS on the week, a chunk of which was net buys on HK-listed ETFs, but Hs underperformed their A counterparts in the H/A pairs once again.
High-Div SOEs again saw action. This time with both CNOOC Ltd (883 HK)andChina Mobile (941 HK) seeing strong net buying as a percentage of volume. Tech was sold.

A/H Premium Tracker (To 8 Dec 23): H Down Vs A, Again, Despite SOUTHBOUND Buying; Pharmas Weak

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.
Hs with H/A pairs under-perform their As on average by 70+bp. Liquid HK H/A Pairs saw H/As -66bp. H/A Pair intracorrelation is down but it feels like liquidation.
SOUTHBOUND and NORTHBOUND flows were buys, and sells, respectively, but Hs have had two bad weeks in a row, and high premia A/H pairs have seen premia rise significantly.

Bain Deal for Outsourcing (2427): Cheeky, Opportunistic, Too Low

On Friday 8 December, Bain announced an MBO with Outsourcing Inc (2427 JP) Chair Haruhiko Doi to take the company private at a 51% premium. Looks good at first glance.
It is, however, an offer at ~6.6x Management Forecast derived Dec 2024 EBITDA. This for a top player in a fast-growing market where Street/mgmt both see up-and-to-the-right results from here.
This is a delayed start (late-Jan) for regulatory approvals. It is too cheap. It is blockable. But Doi-san is young at 64yrs old and he could come back years later.

MVIS Australia Equal Weight Index Rebalance: Three Deletions & Other Changes

A2 Milk Co Ltd (A2M AU), AMP Ltd (AMP AU) and Charter Hall (CHC AU) will be deleted from the MVIS Australia Equal Weight Index at the close 15 December.
Constituent changes plus capping and float changes result in a one-way turnover of 5.05% and will result in a one-way trade of A$99m.
There is a fair amount of short interest on the deletions and shorts could look to cover against the passive flow.

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Dec 10

Daily Brief Event-Driven: Benefit One (2412 JP): Thoughts on the Potential Minority Offer Price and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Benefit One (2412 JP): Thoughts on the Potential Minority Offer Price
Last Week in Event SPACE: Pasona/Benefit One, EOFlow, Swire Pacific, Hankook & Co, Toyo Construction
Index Rebalance & ETF Flow Recap: NKY, TW Div+, ASX200, NZX50, Mom30, Top10EW, MVW, Rakuten Bank
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Perpetual, Weiqiao Textile,Tokyo Rakutenchi,Toyo, Chindata
Weekly Deals Digest (10 Dec) – CPMC, Weiqiao, Benefit One, Tokyo Rakutenchi, Eoflow, Rept Battero

Benefit One (2412 JP): Thoughts on the Potential Minority Offer Price

Dai Ichi Life Insurance (8750 JP)‘s pre-conditional tender offer for Benefit One Inc (2412 JP) has a total value of JPY285,733 million (JPY1,800 per share).
The offer structure is that Pasona Group (2168 JP) will receive JPY1,800 less TOB tax benefits. Minorities will receive JPY1,800 plus the proportionate share of Pasona’s TOB tax benefits.
Our estimated minority offer price is JPY2,086 per share, which is 15.9% higher than the JPY1,800 floor price and 9.1% higher than the last close price.

Last Week in Event SPACE: Pasona/Benefit One, EOFlow, Swire Pacific, Hankook & Co, Toyo Construction

Dai Ichi Life (8750 JP)‘s proposal suggests more upside to Benefit One (2412 JP)‘s minorities than originally thought, and less upside (but still a chunk) to Pasona Group (2168 JP).
It’s all over for EOFlow (294090 KS), as Medtronic Plc (MDT US) folds it tent.
Cho Hyun-Sik (eldest son of Cho Yang-Rae, Chairman of Hankook & Company (000240 KS) has joined MBK Partners in making a partial Tender Offer for Hankook & Co.

Index Rebalance & ETF Flow Recap: NKY, TW Div+, ASX200, NZX50, Mom30, Top10EW, MVW, Rakuten Bank

There were a lot of rebalance implementations in China on Friday, plus a few upcoming index changes that were announced during the week.
There are a lot of implementations this week, with KOSPI 200 and KOSDAQ 150 on Thursday and then others across a bunch of countries on Friday.
There were big inflows to Tracker Fund of Hong Kong (2800 HK) during the week taking units outstanding to a new high. ETF inflows continue even as the market drops.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Perpetual, Weiqiao Textile,Tokyo Rakutenchi,Toyo, Chindata

I tally 42 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Four new deals discussed this week: WashSoul‘s tilt for Perpetual (PPT AU); CPMC (906 HK)‘s SASAC Offer; Weiqiao Textile (2698 HK)‘s Offer; and Tokyo Rakutenchi (8842 JP)‘s Tender Offer.
Key updates took place on: Origin Energy (ORG AU), Healius (HLS AU), Toyo Construction (1890 JP), Eoflow (294090 KS), and Chindata Group (CD US).

Weekly Deals Digest (10 Dec) – CPMC, Weiqiao, Benefit One, Tokyo Rakutenchi, Eoflow, Rept Battero

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 – REPT BATTERO Energy (1998104D CH) IPO and Denso Corp (6902 JP)‘s US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback.
Event-Driven developments – Benefit One Inc (2412 JP), Tokyo Rakutenchi (8842 JP), CPMC Holdings (906 HK), Weiqiao Textile Co (2698 HK), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US).

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Dec 09

Daily Brief Event-Driven: Pasona Is Up Bigly. More To Come and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Pasona Is Up Bigly. More To Come
EQD | Nikkei 225 WEEKLY Analysis
Itausa (ITSA4 BZ) – Big NAV Discount Provides Attractive Indirect Exposure to Brazilian Bank Itaú

Pasona Is Up Bigly. More To Come

After M3 Inc (2413 JP) announced an intention to buy 51.16%-55.00% of Benefit One Inc (2412 JP) via a partial Tender Offer at ¥1,600, Pasona Group (2168 JP) took off.
Now Dai Ichi Life Insurance (8750 JP) has countered with an unsolicited ¥1,800/share Offer of Equity Value; TOB followed by a Benefit One buyback to mop up Pasona’s stake.
The big news is how tax would be applied under Dai Ichi’s deal structure, which should see Pasona’s net proceeds significantly exceed those under M3’s Offer.

EQD | Nikkei 225 WEEKLY Analysis

By Nico Rosti

The Nikkei 225 (NKY INDEX) closed the week down (CC=-2) at 32307.86, it’s OVERSOLD, WEEKLY and MONTHLY.
Our hypothesis is that this pullback is about to end (it could last maybe another week, or maybe it’s already over…), and will be followed by higher prices.
Go LONG the Nikkei 225 in the support area between 31000 and 32000, this coming week.

Itausa (ITSA4 BZ) – Big NAV Discount Provides Attractive Indirect Exposure to Brazilian Bank Itaú

By Victor Galliano

Itausa’s equity value is predominantly composed of its core holding stake in big cap Latin American bank Itaú Unibanco whilst it has actively reduced its exposure to wealth tech XP
Yet these two financials together account for over 90% of Itausa’s total equity value, with Itaú accounting for almost the entirety of that value
Itausa is trading at a HoldCo NAV discount of over 25%, which is historically high; currently, Itausa is an excellent vehicle that provides indirect and discounted exposure to Itaú

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Dec 08

Daily Brief Event-Driven: Dai-Ichi Life (8750) Proposes a Full Takeover of Benefit One (2412) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Dai-Ichi Life (8750) Proposes a Full Takeover of Benefit One (2412), Overbidding M3
New Deal for Benefit One (2168) Could Mean Lots More Money for Pasona (2168)
Benefit One (2412 JP): Dai-Ichi Life Counters M3 with a Privatisation Offer
KOSPI 200 Futures Calendar Spread Trading: Latest on Year-End Dividend Record Date Changes
Hankyu Hanshin Takeout of OS Corp
Oh, The Irony! Perpetual Rejects Soul Patts’ “Fair” Offer
Quiddity HSCEI Mar 24 Rebalance: Same Rankings; Same Questions
Quiddity HSTECH Mar 24 Leaderboard: Third Time’s A Charm?
NIFTY200 Momentum30 Index Rebalance: 18 Changes a Side, 58% Turnover, Momentum Intact
Focus on Leverage Reduction

Dai-Ichi Life (8750) Proposes a Full Takeover of Benefit One (2412), Overbidding M3

Today post-close, life insurer Dai Ichi Life Insurance (8750 JP) announced plans to launch a Tender Offer to buy out all minorities in Benefit One Inc (2412 JP) at ¥1,800/share.
M3’s Partial (55%) Tender at ¥1,600/share ending next week is obviously a question.
This is GREAT news for M&A in Japan. It’s good for holders of Benefit One and Pasona Group (2168 JP) too.

New Deal for Benefit One (2168) Could Mean Lots More Money for Pasona (2168)

Today, Dai Ichi Life Insurance (8750 JP) announced a proposed counter/over-bid for Benefit One Inc (2412 JP). ¥1800/share for minorities and a better (undefined) outcome for Pasona Group (2168 JP).
This throws the cat amongst the pigeons as it is unsolicited, for 100% not just to get Pasona’s stake, and it will require Benefit One recommend or not.
For Pasona, this deal structure would likely increase the net result from the stake sale, possibly substantially so. It’s in the details.

Benefit One (2412 JP): Dai-Ichi Life Counters M3 with a Privatisation Offer

Dai Ichi Life Insurance (8750 JP)‘s pre-conditional tender offer for Benefit One Inc (2412 JP) is JPY1,800 (floor price) + share of Pasona Group (2168 JP)’s TOB tax benefits.
The pre-conditions relate to the Board recommendation, Pasona support, and M3 Inc (2413 JP) offer not completing its partial offer. The tender offer starts in mid-January 2024 (20 business days).
While the Dai-ichi Life offer is light, M3’s engagement in a bidding war is low. The proposed minimum acceptance condition (15.51% ownership ratio) requires a 32% minority acceptance rate.

KOSPI 200 Futures Calendar Spread Trading: Latest on Year-End Dividend Record Date Changes

It would be prudent to anticipate that a considerable portion of these 636 companies will indeed adjust their dividend record dates, effective from this year’s year-end dividends.
One notable setup gaining attention is calendar spread trading for the KOSPI 200 futures in anticipation of an upward trend in the KOSPI 200 futures market towards the year’s end.
This entails buying the near-month and selling the far-month, liquidating when the price difference reverts. Traders pay attention to potential far-month divergence due to the shift in dividend record dates.

Hankyu Hanshin Takeout of OS Corp

The flip-side of the Toho Takeout of Rakutenchi – Buying a Real Estate Portfolio at a 50% Premium but 0.7x NAV. is the Hankyu-Hanshin deal to buy OS Corp (9637).
Tokyo-Based Toho buys out Kansai-based Hankyu-Hanshin’s stake in Tokyo-based Rakutenchi. HH buys out Toho’s stake in Kobe-based OS Corp. This is a “TOB Swap”. HH owns 21.7% of Toho too.
Like Rakutenchi, it is being done at a PBR higher than 1, but a decent discount to NAV. But this one is horribly, horribly illiquid (1,000 shs/day)

Oh, The Irony! Perpetual Rejects Soul Patts’ “Fair” Offer

Yesterday, Washington H. Soul Pattinson and Co. Ltd (SOL AU) made a $3bn scrip offer Aussie-listed equities manager Perpetual Ltd (PPT AU).
Under the indicative terms, PPT shareholders receive one-third of the Offer in SOL shares, and two-thirds in PPT’s asset management arm via an in-specie spin-off.
PPT rejected the proposal as it undervalues PPT, its corporate trust and wealth management businesses; and it offers SOL shares as consideration. But the Offer is not without merit.

Quiddity HSCEI Mar 24 Rebalance: Same Rankings; Same Questions

The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI in March 2024.
Based on the current data, I see only one low-conviction ADD and one low-conviction DEL.

Quiddity HSTECH Mar 24 Leaderboard: Third Time’s A Charm?

The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
In this insight, we take a look at the rankings of potential ADDs and potential DELs for the March 2024 index rebalance.
Based on the current numbers, our estimate shows there could be one ADD and one DEL but there are some question marks due to the past index review outcomes.

NIFTY200 Momentum30 Index Rebalance: 18 Changes a Side, 58% Turnover, Momentum Intact