Event-Driven

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

There are 18 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 28 December. We had forecast all the index changes.
Estimated one-way turnover is 57.7% resulting in a one-way trade of INR 21.75bn (US$261m). 8 stocks have over 1x ADV to trade; 21 stocks have atleast 0.5x ADV to trade.
The adds have continued to outperform the deletes and the index and there could be further outperformance heading into year-end and buying from passive trackers.

Focus on Leverage Reduction

By Jesus Rodriguez Aguilar

Cellnex Telecom Sau (CLNX SM) plans to divest non-strategic assets in Ireland (for around €1.1 billion) and later in Austria in order to reduce its debt.
The new strategy focuses on portfolio rationalisation due to the higher debt costs. Cellnex seeks expansion in certain markets, but without taking on too much debt.
Using multiples EV/EBITDA, my base-case fair value estimate (pro-forma Ireland divestment) is €48.73; a reduction in leverage should drive multiple expansion. Long.

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Dec 07

Daily Brief Event-Driven: Swire (19 HK / 87 HK) Announces NEW and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Swire (19 HK / 87 HK) Announces NEW, Bigger, Better Buyback
StubWorld: Swire’s Latest Buyback
Rakuten Bank (5838 JP) Placement: Index Inclusion Will Absorb Some Stock
Eoflow Vs Insulet: Round II
CPMC Holdings (906 HK): Pre-Conditional Voluntary Offer at HK$6.87
Toho Takeout of Rakutenchi – Buying a Real Estate Portfolio at a 50% Premium but 0.7x NAV.
WHSP’s Non-Binding Indicative Offer for Perpetual Turned Down
China: Consolidated Flows at the Close Tomorrow
Tokyo Rakutenchi (8842 JP): Toho’s Tender Offer at JPY6,720
CPMC (906 HK): SASAC Takeover

Swire (19 HK / 87 HK) Announces NEW, Bigger, Better Buyback

Yesterday afternoon, Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK) announced a new buyback program. The last one was announced August 2022 and ran until the AGM.
That was HK$4bn. In the meantime the company paid an HK$8.12 special div on the Swire As (14%) in September (on top of the HK$1.20 regular div).
Now they have announced a new HK$6bn buyback buying both A Shares and B shares. Details, index impact, historical B/A trading patterns, etc, below.

StubWorld: Swire’s Latest Buyback

Yesterday afternoon (5th Dec), Swire Pacific (A) (19 HK) (and Swire Pacific (B) (87 HK)) announced a large (HK$6bn) buyback.
The response this morning sees Swire A up 14.4% (as I type), and 11.8% for Swire Bs.
I still like the idea of buying Swire A and Swire B outright here.

Rakuten Bank (5838 JP) Placement: Index Inclusion Will Absorb Some Stock

Rakuten Group (4755 JP) is looking to sell 25.5m shares of Rakuten Bank (5838 JP) via a secondary offering at a discount of between 8.7%-12.3%.
The offering will raise a maximum of US$433m and Rakuten Group (4755 JP) will use the funds to reduce its interest-bearing debt by the early repayment of its bonds.
There will be limited passive buying at the time of settlement of the stock but there is an index inclusion coming up that will result in passives buying.

Eoflow Vs Insulet: Round II

This insight provides a detailed analysis of Eoflow’s appellant brief (released on 4 December) on Insulet Corp (PODD US)’s lawsuit.
We provide the following three major reasons why we believe Eoflow will win versus Insulet in this lawsuit.
One of the most important arguments on Eoflow’s appellant brief is the DTSA three years statute of limitations.

CPMC Holdings (906 HK): Pre-Conditional Voluntary Offer at HK$6.87

CPMC Holdings (906 HK) has announced a pre-conditional voluntary offer from Changping Industrial at HK$6.87 per share, a 32.1% premium to the undisturbed price (16 August).
The pre-condition mainly relates to Chinese approvals. The offer is conditional on the offeror and concert parties representing more than 50% of voting rights.
The 50% minimum acceptance condition should be met due to COFCO’s irrevocable and the second-largest shareholders’ past dealings with COFCO. At the last close, the gross spread was 6.0%.

Toho Takeout of Rakutenchi – Buying a Real Estate Portfolio at a 50% Premium but 0.7x NAV.

Yesterday, Tokyo Rakutenchi (8842 JP)‘s #1 shareholder Toho Co Ltd (9602 JP) agreed to buy out the rest of Tokyo Rakutenchi from its #2 and #3 shareholders and minorities.
The Takeover Price is a 51% premium. Which is nice. But the asset is a real estate portfolio, and it was sold as a company, not a real estate portfolio.
The revaluation surplus to market value for the real estate assets is more than net equity, so Takeover PBR >1.0, but Price/NAV of the takeover is 0.7x, without synergies included.

WHSP’s Non-Binding Indicative Offer for Perpetual Turned Down

On 21 November, Washington H. Soul Pattinson and Co. Ltd (SOL AU) submitted a non-binding, indicative offer to acquire Perpetual Ltd (PPT AU) at ~A$27/share.
A few hours ago, that offer was rejected by Perpetual Ltd (PPT AU)‘s Board citing a material undervaluation, conditional on demerger of the Asset Management business and execution risk.
If the deal goes through, there will be small passive buying in Washington H. Soul Pattinson and Co. Ltd (SOL AU). No major index changes expected.

China: Consolidated Flows at the Close Tomorrow

Local indices in China including the CSI 300 Index, CSI 500 Index, STAR50 Index and SSE50 Index will rebalance at the close tomorrow.
There are many changes for the indices and there are stocks that are adds and/or deletes from multiple indices which results in cumulative or offsetting flows.
We estimate turnover at the close tomorrow in China will be around US$7.5bn with big impact on a lot of stocks.

Tokyo Rakutenchi (8842 JP): Toho’s Tender Offer at JPY6,720

Tokyo Rakutenchi (8842 JP) has recommended Toho Co Ltd (9602 JP)’s tender offer of JPY6,720 per share, a 51.5% premium to the undisturbed (6 December).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 24.29% ownership ratio.
Based on the irrevocables, the minimum acceptance condition requires a 30.2% minority acceptance rate. This acceptance rate is doable as the offer represents a ten-year high.

CPMC (906 HK): SASAC Takeover

Packaging play CPMC Holdings (906 HK) has announced a pre-conditional Offer from SASAC and the National Council for Social Security Fund of China.
The joint offerors have offered $6.87/share, an okay 32.1% premium to last close. Pre-cons involve the standard PRC regulators. The Offer itself is contingent on a 50% acceptance hurdle.
China Foods (506 HK) has given an irrevocable for its 29.7% stake. This will turn unconditional. The timing of the Offer is interesting as a VP is under graft investigation.

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Dec 06

Daily Brief Event-Driven: P.S.Mitsubishi Contruction (1871 JP) – Pro-Ration Expectations Update and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

P.S.Mitsubishi Contruction (1871 JP) – Pro-Ration Expectations Update
Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Other Changes
EOFLOW/Medtronic Tender: Appeals Brief Is All Bark, No Bite
Dissenters Mobilise As Chindata (CD US)’s Shareholders Approve Bain’s Offer
Navigating the Potential of Hankook & Company’s Revised Tender Offer
Medikit (7749 JP) Below Market Tender Offer Buyback
JETS US Equity: Takeoff Accomplished, Time to Return to Base
EQD | Nikkei 225 MONTHLY Analysis

P.S.Mitsubishi Contruction (1871 JP) – Pro-Ration Expectations Update

The Partial Offer launched last month by Taisei Corp (1801 JP) to take a 50.2% stake in Ps Mitsubishi Construction (1871 JP) ends at the beginning of next week.
This hasn’t been a very “exciting” trade. Small, boring sector. One big company selling to another. But it has traded cheap. However, volume has been high.
Volume has been so high it causes me to revisit my pro-ration expectations, so I have updated estimates and tables below.

Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
Depending on the changes, passives trackers will need to buy 2.4-22.5x ADV (10-24% of real float) on the inclusions and sell between 3.5-42.5x ADV on the deletions.
Fast Retailing (9983 JP) capping, Nitori Holdings (9843 JP) increase in PAF, a big funding trade, and potentially new stocks being added in two-steps.

EOFLOW/Medtronic Tender: Appeals Brief Is All Bark, No Bite

Eoflow (294090 KS) filed a 117-page appeal against the amended preliminary injunction (PI), sparking a 16% share price rally. Insulet Corp (PODD US) is required to respond by 14 December.
Eoflow argues that the Massachusetts District Court committed legal errors. However, Eoflow’s arguments are rehashed from those that the district court has already dismissed with balanced counterarguments.
The appeal is Eoflow’s last roll of the dice. Eoflow’s appeal brief worryingly notes that the PI profoundly imperils both the Medtronic transaction and its status as a going concern.

Dissenters Mobilise As Chindata (CD US)’s Shareholders Approve Bain’s Offer

Back on the 11 August, Chinese data center provider Chindata Group (CD US) and major shareholder Bain Capital entered into a definitive agreement at US$8.60/ADS.
The EGM was held yesterday, the 4 December, and the merger was approved by 97.75% of the total votes cast. No specific PRC regulatory approval is needed for this merger.
All good right? Not quite. There’s still the nagging issue involving 22.79% of shares out objecting to the deal, exceeding the 12% dissenting threshold, a condition to the merger.

Navigating the Potential of Hankook & Company’s Revised Tender Offer

With the price almost 10% above ₩20,000, it’s practically fair to regard MBK’s tender offer as effectively canceled, raising the question of the proxy battle’s potential continuation.
There is a significant likelihood that MBK has prepared a next-phase plan involving an upward adjustment of the offering price, considering the tight situation of successfully securing the target volume.
Essentially, there’s a high likelihood that the situation will resemble the earlier battle between HYBE and Kakao Corp over S.M. Entertainment Co at the start of this year.

Medikit (7749 JP) Below Market Tender Offer Buyback

Japanese medical products maker Medikit Co Ltd (7749 JP) Tuesday announced a buyback of ~12% of its shares from the founder’s company.
The stock is extraordinarily illiquid. 12mo ADV is <US$40k/day. But Medikit runs 40% gross margins, 20% EBIT margins, and trades at an EV/revenue ratio of ~0.8x. It’s cash-rich, and cheap.
But it’s an interesting situation. The buyback (and its reason) combined with the shareholder structure allow me to idly speculate this is an MBO candidate.

JETS US Equity: Takeoff Accomplished, Time to Return to Base

By Mohshin Aziz

The surprise US$1.9 billion acquisition of Hawaiian Holdings (HA US) by Alaska Air Group (ALK US) could potentially rerate the U.S. airline sector
US Global Jets ETF (JETS US) is up 16% from our initiation on 13 November, a mere 5% to our target price of US$19
We advocate to take profits and square this trade in the upcoming days

EQD | Nikkei 225 MONTHLY Analysis

By Nico Rosti

After a strong rally in November, the Nikkei is currently in a temporary corrective phase, reaching between the Q1 and Q2 support levels of the MRM LONG chart.
There are 2 possible paths from here: 1) a modest pullback, followed by a rally into the end of December, 2) a dive to <= 31672, and December closes down.
Both these scenarios offer very good seasonal LONG odds for January closing up (based on our SRM model), so we suggest going LONG the Nikkei 225 on the pullback.

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Dec 05

Daily Brief Event-Driven: Benefit One (2412) – Pro-Ration Expectations Update and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Benefit One (2412) – Pro-Ration Expectations Update
NIFTY200 Momentum30 Index Rebalance Preview: 58% Turnover & Strong Momentum
Korean Government Launches a Tender Offer to Sell a 29.3% Stake in NXC Corp for US$3.6 Billion
Weiqiao Textile (2698 HK): Pre-Conditional Privatisation Offer at HK$3.50
A/H Premium Tracker (To 1 Dec 23): H Down Vs A, SOUTHBOUND Selling Continues, Tech Still Sold
MVIS Australia Equal Weight Index Rebalance Preview: Stocks Close to Deletion Zone
Weiqiao Textile (2698 HK)’s Pre-Conditional Merger By Absorption
HK Connect SOUTHBOUND Flows (To 1 Dec 23); Meituan Dip-Buyings Leads Inflows; CNOOC Vs 941 on SOEs
Seven & I Ventures Down Under with 7-Eleven Australia Acquisition
Elder Brother Cho Hyun-Sik Joins Hands With MBK Partners to Tender Offer Hankook & Co. Shares

Benefit One (2412) – Pro-Ration Expectations Update

Since the announcement of the Benefit One Inc (2412 JP) partial offer, the stock has traded 16+mm shares in the market, which is about 40% of Real World Float.
Some of that has been traded multiple times. Looking only at that data would suggest a higher pro-ration, but I expect there is other data one must take into account.
Benefit One shares are currently trading at a level suggesting either lower participation OR higher back-end despite the earnings guidance downgrade at announcement.

NIFTY200 Momentum30 Index Rebalance Preview: 58% Turnover & Strong Momentum

There could be 18 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 28 December.
If all changes are on expected lines, one-way turnover is estimated at 58.2% and that will result in a one-way trade of INR 20bn (US$240m).
Since July, the potential adds to the index have outperformed the index and the potential deletes by a big margin. Momentum could keep the outperformance going till implementation date.

Korean Government Launches a Tender Offer to Sell a 29.3% Stake in NXC Corp for US$3.6 Billion

On 4 December, the South Korean government announced that it will launch a tender offer to sell a 29.3% stake in NXC Corp for about US$3.6 billion.
The two daughters of ex-Chairman Kim Jung-Ju handed over a 29.3% stake in NXC Corp to the Korean government as payment-in-kind in May 2023 to pay for inheritance taxes.
The tender offer sale of the Korean government’s 29.3% stake in NXC Corp (worth nearly 4.7 trillion won) is a positive catalyst for Nexon (3659 JP).

Weiqiao Textile (2698 HK): Pre-Conditional Privatisation Offer at HK$3.50

Weiqiao Textile Co (2698 HK) announced a pre-conditional privatisation offer from Weiqiao Chuangye at HK$3.50 per H Share, a 104.7% premium to the undisturbed price.
The pre-condition of regulatory approvals from the NDRC, MOC and SAFE. The key condition is approval by at least 75% independent H Shareholders (<10% of all independent H Shareholders rejection).
The offer price is final. Despite the premium, the offer is struck materially below net cash. Nevertheless, the irrevocable from the largest H Shareholder should help the offer get up.

A/H Premium Tracker (To 1 Dec 23): H Down Vs A, SOUTHBOUND Selling Continues, Tech Still Sold

The New and Better (17 weeks old) A-H Monitor 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 220+bp. Liquid HK H/A Pairs saw H/As -244bp. H/A Pair intracorrelation is up and A premia continue to trend better.
SOUTHBOUND and NORTHBOUND were net buys overall but Hs had a VERY BAD WEEK vs their A-Shares where pairs were concerned.

MVIS Australia Equal Weight Index Rebalance Preview: Stocks Close to Deletion Zone

AMP Ltd (AMP AU) and A2 Milk Co Ltd (A2M AU) could be deleted as the lowest ranked current index constituents.
There are three other stocks that are close to the deletion threshold and a change in the free float could result in the stocks being deleted.
With the exception of A2 Milk Co Ltd (A2M AU), shorts have been increasing on nearly all the potential and close deletions.

Weiqiao Textile (2698 HK)’s Pre-Conditional Merger By Absorption

After shares were suspended on the 27 November, Weiqiao Textile Co (2698 HK) has now announced a pre-conditional privatisation at HK$3.50 per H-share.
This Offer, from its parent, is by way of a Merger by Absorption, which incorporates a Scheme-like vote. There is no tendering condition.
The Offer Price is a premium to last close is a hefty 104.68%. and around a six-year high. This is done.

HK Connect SOUTHBOUND Flows (To 1 Dec 23); Meituan Dip-Buyings Leads Inflows; CNOOC Vs 941 on SOEs

SOUTHBOUND flows the last several weeks clearly indicated a momentum move. The top net sells were all down. The top buys were all up. This week saw reversion.
SOUTHBOUND saw net buys of HK$3.5bn this week, breaking a nascent sell streak. Meituan dip-buying Wednesday to Friday was worth the entire net buy.
High-Div SOEs remain mixed. CNOOC (883) saw decent net buying, and China Mobile saw decent net selling. Again.

Seven & I Ventures Down Under with 7-Eleven Australia Acquisition

By Oshadhi Kumarasiri

Seven & I Holdings (3382 JP) announced last week that it had agreed to buy the 7-Eleven convenience store chain in Australia for A$1.71bn ($1.1bn).
The acquisition may not immediately impact Seven & I’s stock price like Speedway did, given its smaller scale, lack of synergies, and less favorable macroeconomic conditions.
The main positive takeaway from this news is that the acquisition price for 7-Eleven Australia is not as extravagant as the amount Seven & I paid for the Speedway acquisition.

Elder Brother Cho Hyun-Sik Joins Hands With MBK Partners to Tender Offer Hankook & Co. Shares

Cho Hyun-Sik has joined hands with MBK Partners to make a tender offer for shares of Hankook & Co for a minimum of 20.35% and maximum of 27.32% stake.
The tender offer price is 20,000 won which is 18.9% higher than the closing price of 16,820 won on Monday.
Chairman Cho Hyun-Bum may try to find a strategic ally to launch his own tender offer of Hankook & Co shares at even higher tender offer price than 20,000 won.

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Dec 04

Daily Brief Event-Driven: March 2024 Nikkei 225 Rebal – Socionext and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade
Taisho Pharmaceutical (4581 JP): Japan Catalyst Pushes for a Bump
S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough
Yuanta/P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover
FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M
Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea
Merger Arb Mondays (4 Dec) – Origin, OreCorp, Healius, CIMC Vehicles, T&K Toka, Eoflow, Hollysys
S&P/NZX 50 Index Rebalance: Two High Impact Changes Coming Up
Selected European HoldCos and DLC: November’23 Report

March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade

Minimal changes in the rankings since last time. Socionext (6526), Disco (6146), and a Consumer Goods stock (Zozo (3092) top-ranked, Ryohin Keikaku (7453) a better choice) are ADDs.
The DELETEs are still Takara Holdings (2531), Pacific Metals (5541), Sumitomo Osaka Cement (5232) with a dark horse candidate in Hitachi Zosen (7004) to replace Takara.
There is the upweight to Nitori (9843) AND funkiness with Fast Retailing (9983) to consider. We are right on the threshold. The question is whether it gets “help” in January.

Taisho Pharmaceutical (4581 JP): Japan Catalyst Pushes for a Bump

Japan Catalyst’s press release supports the idea of a Taisho Pharmaceutical Holdin (4581 JP) MBO but not the proposed offer price as it implies a P/B less than 1.0x.
The press release is a discovery exercise encouraging other like-minded shareholders to show their hand. The shares are trading marginally above the JPY8,620 offer.
While justifiable, a bump is unlikely due to the lack of a substantial activist shareholder, irrevocables, no competing bid and the offer’s 55.5% premium to the undisturbed price.

S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough

There are 3 changes for the S&P/ASX 200 (AS51 INDEX) that will be implemented at the close on 15 December. One name is a relative surprise.
There will be 8-15 days of ADV to buy on the inclusions and there will be 12-18 days of ADV to sell on the deletions.
Cumulative excess volume and changes in short interest indicate there will be positioning in most stocks. But it may not yet be enough to cover the passive trade.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover

There are 5 adds and 4 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in December with implementation taking place from 15-21 December.
The constituent changes and capping changes result in an estimated one-way turnover of 16.1% resulting in a one-way trade of US$1.26bn.
There will be positioning in a lot of the adds/deletes and the real action could be in the other stocks with capping and/or funding flows.

FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M

The Samsung KODEX Fn Top10 Equal Weight ETF (395170 KS) tracks the FnGuide Top 10 Index and has an AUM of US$264m.
We expect Kia Corp (000270 KS) to replace Posco Future M (003670 KS) in the index at the December rebalance.
There will be 0.4x ADV to buy in Kia Corp (000270 KS) while passives will need to sell 0.1x ADV of Posco Future M (003670 KS).

Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea

Korea’s financial authorities prompted LPs to refrain from providing liquidity to ETFs through short-selling. This has resulted in a significant increase in both the frequency and magnitude of tracking errors.
Therefore, it’s time to actively explore this from an arbitrage trading standpoint. ETF arbitrage involves straightforward steps: purchasing and redeeming ETFs, followed by selling the underlying shares in the market.
The focus should be particularly directed towards sector ETFs that include a select few large-cap stocks carrying single-stock futures.

Merger Arb Mondays (4 Dec) – Origin, OreCorp, Healius, CIMC Vehicles, T&K Toka, Eoflow, Hollysys

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 – Eoflow (294090 KS), 111 Inc (YI US), Irc Ltd (1029 HK), Orecorp Ltd (ORR AU), Healius (HLS AU), Hollysys Automation Technologies (HOLI US), Origin Energy (ORG AU).
Lowest spreads – Azure Minerals (AZS AU), Tietto Minerals Ltd (TIE AU), Toyo Construction (1890 JP), T&K Toka Co Ltd (4636 JP), Pact Group Holdings (PGH AU), Taisho.

S&P/NZX 50 Index Rebalance: Two High Impact Changes Coming Up

Gentrack (GTK NZ) and Turners Automotive (TRA NZ) will be added to the S&P/NZX 50 Index while Synlait Milk (SML NZ) and Pacific Edge (PEB NZ) will be deleted.
There is a lot to trade on the stocks. The impact in terms of days of ADV appears high but historically there has been volume on implementation date.
The adds have jumped recently and there will be pre-positioning on the stocks. Not so much on the deletes.

Selected European HoldCos and DLC: November’23 Report

By Jesus Rodriguez Aguilar

The discounts to NAV of covered holdcos have all tightened during November. Discounts to NAV: C.F.Alba, 47.1% (vs. 47.8%); GBL, 34.9% (vs. 35.5%); Heineken Holding, 14.5% (vs. 14.9%);
Industrivärden C, 4.9% (vs. 6%); Investor B, 14.6% (vs. 16.5%); Porsche Automobile Holding, 39.9% (vs. 40.9%). The spread of Rio DLC tightened to 17.2% (vs. 21%).
What seems interesting: holding trades, Heineken Holding vs. Heineken, Porsche SE/vs. listed assets and the Rio DLC: long RIO LN/short RIO AU.

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Dec 03

Daily Brief Event-Driven: S&P500 Index Rebalance: Calling an UBER and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

S&P500 Index Rebalance: Calling an UBER
Japan Activism: Japan Catalyst Fund Calls Out Taisho Pharma Committee on MBO Price
Mischief Managed! Iwatani Corp (8088) Buys Out Murakami-San’s Cosmo Energy Stake
Quiddity TDIV/50/100 Dec 23 Rebal: Inflow Names Could Outperform Outflow Names
Index Rebalance & ETF Flow Recap: KWEB, CSI300/500, STAR50, SSE50, ChiNext, SET50, Chips, Denso, SPX
Last Week in Event SPACE: Denso, Sapporo, Hollysys, PCCW, Origin Energy
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Glosel, CIMC, Orecorp, Tietto Mineral, Lansen Pharmaceutical
Quiddity ASX Dec 23 Index Rebal: Beware of Pre-Positioning

S&P500 Index Rebalance: Calling an UBER

Uber Technologies (UBER US), Jabil Circuit (JBL US) and Builders Firstsource (BLDR US) will be added to the S&P 500 INDEX (SPX INDEX) at the close on 15 December.
There are a bunch of inclusions. deletions and migrations across the S&P 500 INDEX (SPX INDEX), the S&P Midcap 400 Index, and the S&P SmallCap 600 Index.
We estimate passive trackers will need to buy around US$18bn of Uber Technologies (UBER US). There has been positioning in the stock for just over a month now.

Japan Activism: Japan Catalyst Fund Calls Out Taisho Pharma Committee on MBO Price

Japan Catalyst Fund is a relatively young effort in the Japan “engagement activism” space, having been founded by Monex Group in September 2019. Total assets remain apparently small.
Championed by Monex Group founder Oki Matsumoto, despite small AUM, the fund has decent access. As of end-October, Taisho Pharmaceutical Holdings (4581 JP) was #5 and 5.26%. Now it’s #2.
Friday, they released a statement about the MBO. It isn’t a barn-burner, but the stock has traded through terms since announcement at a too-low price. And nobody else has commented.

Mischief Managed! Iwatani Corp (8088) Buys Out Murakami-San’s Cosmo Energy Stake

The question of how Murakami-san would get out of his stake in Cosmo Energy Holdings (5021 JP) was always a biggie. He likes to sell stock in tender offer buybacks.
Cosmo wasn’t going to do that for him. They promised dividends and a high payout ratio, but that left the question was how he was going to get out.
A semi-obvious solution was to find a corporate partner to buy his stake and today, Iwatani Corp (8088 JP) announced that it had bought 19.86% of Murakami-san’s 20.01% holding.

Quiddity TDIV/50/100 Dec 23 Rebal: Inflow Names Could Outperform Outflow Names

The index changes for the T50/100 index family and the TDIV index were confirmed after market close on Friday 1st December 2023.
The index changes were mostly in line with our final expectations.
In this insight, we take a close look at the breakdown of our final flow expectations for the upcoming Inclusion/Exclusion and Capping events.

Index Rebalance & ETF Flow Recap: KWEB, CSI300/500, STAR50, SSE50, ChiNext, SET50, Chips, Denso, SPX

The announcement of the inclusion of Uber Technologies (UBER US) in the S&P 500 INDEX was a big one last week. There were announcements for some other indices too.
There are many indices in China that will be rebalanced at the close on Friday, the biggest being the CSI 300, CSI 500, STAR50, SSE50 and KWEB US.
Relatively quiet in ETF world with net inflows to China focused ETFs and net outflows for Japan.

Last Week in Event SPACE: Denso, Sapporo, Hollysys, PCCW, Origin Energy

A holistic view of the three different documents here suggests the Denso Corp (6902 JP) buyback, indeed, “It was a trap”.
3D Investment Partners raised its stake in Sapporo Holdings (2501 JP), suggesting the activist investor is optimistic about successfully advancing their proposals.
A firm merger proposal is expected for Hollysys Automation Technologies (HOLI US) in the next couple of weeks. Time to buy.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Glosel, CIMC, Orecorp, Tietto Mineral, Lansen Pharmaceutical

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.
Two new deals discussed on Smartkarma this week: Glosel (9995 JP)‘s Tender Offer; and the indicative Offer for CIMC Vehicle Group Co Ltd (1839 HK)‘s H-shares.
Key updates on: Orecorp Ltd (ORR AU), Tietto Minerals Ltd (TIE AU), and Lansen Pharmaceutical Holdings Co, Ltd. (503 HK)

Quiddity ASX Dec 23 Index Rebal: Beware of Pre-Positioning

The December 2023 review results for ASX indices were announced after the close on Friday 1st December 2023.
There will be three ADDs and thee DELs for the ASX 200 index. There are no changes for ASX 20, 50, and 100.
In this insight, we take a look at our index flow expectations, trends in short interest, and the recent trading performance of the names involved in the ASX 200 changes.

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Dec 02

Daily Brief Event-Driven: HK CEO & Director Dealings (1 Dec 2023): Kwoks Still Buying SHK; Co-Founder Selling Akeso and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HK CEO & Director Dealings (1 Dec 2023): Kwoks Still Buying SHK; Co-Founder Selling Akeso
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Rate Cuts?

HK CEO & Director Dealings (1 Dec 2023): Kwoks Still Buying SHK; Co-Founder Selling Akeso

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
The key stocks mentioned in this regular insight are Sun Hung Kai Properties (16 HK) and Akeso Biopharma Inc (9926 HK).

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Rate Cuts?

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

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Dec 01

Daily Brief Event-Driven: Itoen Pref (25935 JP) – Big Discount and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Itoen Pref (25935 JP) – Big Discount, Big Buyback, No Big Governance Change
Sapporo Holdings: Activist Investor 3D Investment Partners Assumes Majority Ownership
GAPack (468 HK): Unpacking XJF’s Move To Send The Board Packing
SET50 Index Rebalance Preview: KCE Could Replace TIDLOR
(Mostly) Asia M&A, Nov 2023: Taisho Pharma, CIMC Vehicle, CMIC, Japan Best Rescue, Shidax

Itoen Pref (25935 JP) – Big Discount, Big Buyback, No Big Governance Change

This is always a tough subject, but every now and then I throw myself on the mercy of the ho-humming crowd and write about the Ito En Prefs (25935 JP).
No strong catalyst. Limited capacity for strongly better governance. Even less apparent corporate interest in good governance.
But we have a mini-catalyst, and it has been a while, and I think there IS a good way to think about this stock, so here’s another crack at it.

Sapporo Holdings: Activist Investor 3D Investment Partners Assumes Majority Ownership

By Oshadhi Kumarasiri

Last week, activist investor 3D Investment Partners raised its stake in Sapporo Holdings (2501 JP) by an additional 13%, cementing its position as the majority shareholder in the business.
This suggests the activist investor is optimistic about successfully advancing their proposals.
If investment properties are sold or spun off, and Alcoholic Beverages and Food & Soft Drinks undergo the suggested turnaround, we anticipate an additional 80-100% upside in the near term.

GAPack (468 HK): Unpacking XJF’s Move To Send The Board Packing

Back on the 27 January 2023, Jardine Matheson (JM SP) entered an agreement with Shandong Xinjufeng (301296 CH) (XJF) to sell its 28.22% stake in GAPack (468 HK).
That sale completed in September. Last week, XJF requisitioned an EGM to consider appointing five new (& friendly) directors, all-but taking control of the board.
CEO and founder Jeff Bi holds 9.65%. The question is: what are his options?

SET50 Index Rebalance Preview: KCE Could Replace TIDLOR

With the review period complete, KCE Electronics PCL (KCE TB) should replace Ngern Tid Lor (TIDLOR TB) in the SET50 INDEX at the December rebalance.
Liquidity is poor in Intouch Holdings (INTUCH TB) and Thai Life Insurance (TLI TB) but the stocks should be maintained in the index.
Passive trackers will need to buy 0.9x ADV (1.2% of float) of KCE Electronics PCL (KCE TB) and sell 0.8x ADV (1.6% of float) of Ngern Tid Lor (TIDLOR TB).

(Mostly) Asia M&A, Nov 2023: Taisho Pharma, CIMC Vehicle, CMIC, Japan Best Rescue, Shidax

For the month of November 2023, 16 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$13bn.
The average premium for the new deals announced (or first discussed) in November was 41%. The average YTD is 38% (97 deals).
This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

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Nov 30

Daily Brief Event-Driven: StubWorld: Toyota Group To Sell 10% of Denso; Adelson Selling LVS and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

StubWorld: Toyota Group To Sell 10% of Denso; Adelson Selling LVS
Spread Trade Opportunities Arising from KQ150/KS200 Passive Flows in the Celltrion Merger
SK Square: Drag Along Rights To Be Exercised to Sell 11 Street + Merger of TVing and Wavve
Japan – A Last Look at Shorts on Some Interesting Stocks & Positioning
Quiddity JPX-Nikkei 400 Rebal 2024: End-Nov 2023
Naspers (NPN SJ), Prosus (PRX NA) H1 FY24 Results, Key Takeaways
Tata Consultancy Services Buyback: Tender Offer Period Opens on 1st Dec
Taking off from Heathrow

StubWorld: Toyota Group To Sell 10% of Denso; Adelson Selling LVS

The Toyota Group of companies are proposing to reduce their holdings in Denso (6902 JP) by selling about 10% by year-end, in a share sale worth ~$4.7bn.
Preceding my comments on Toyota Industries (6201 JP) / Toyota Motor (7203 JP) – and Las Vegas Sands (LVS US) – 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%.

Spread Trade Opportunities Arising from KQ150/KS200 Passive Flows in the Celltrion Merger

KOSDAQ 150’s passive outflow occurs on December 14th for Celltrion Healthcare, whereas it would be January 11th for Celltrion with KOSPI 200.
The estimated passive flow size (x ADTV) on their respective rebalancing trading days is anticipated to be approximately -2.79x (Celltrion Healthcare) and +1.76x (Celltrion).
We should monitor the potential expansion of the swap spread on December 14th. Additionally, contemplating an outright approach for Celltrion, akin to the Hanwha Ocean scenario, could be worth considering.

SK Square: Drag Along Rights To Be Exercised to Sell 11 Street + Merger of TVing and Wavve

SK Square announced it will not exercise the call option to repurchase minority stake in 11 Street. This is likely to have a positive impact on the company.
SK Square does not need to pay 500 billion won plus 3.5% annualized interest to the financial investors of 11 Street. This will also accelerate sale of 11 Street.
In addition, SK Square announced the merger of TVing and Wavve OTT services.

Japan – A Last Look at Shorts on Some Interesting Stocks & Positioning

There should be liquidity events on Persol Holdings, Hakuhodo Dy Holdings, Welcia Holdings, GMO Payment Gateway, CyberAgent, Kobayashi Pharmaceutical, NGK Insulators, Lixil Group, Kurita Water Industries and Keio Corp tomorrow.
On average, the stocks have underperformed the Nikkei 225 Index over the last 2-3 months but there has been near-term outperformance.
There has been a big increase in shorts on the stocks over the last couple of months and positioning varies across stocks.

Quiddity JPX-Nikkei 400 Rebal 2024: End-Nov 2023

JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the rankings of the potential ADDs/DELs every month.
Below is a look at potential ADDs/DELs for the JPX-Nikkei 400 Index Rebal to come in August 2024 based on trading data as of end-November 2023.

Naspers (NPN SJ), Prosus (PRX NA) H1 FY24 Results, Key Takeaways

By Charlotte van Tiddens, CFA

Improved transparency from management is an important positive. Additional disclosures were included on entity IRR in the results presentation (attached, not previously disclosed).
Profitability target for the consolidated ecommerce businesses moved forward to H2 FY24 from H1 FY25. Significant narrowing of trading losses in H1 FY24 to $36m from $256m in H1 FY23.
As management ‘commit to highlight value where and when possible’, we think an IPO could very well be on the horizon.

Tata Consultancy Services Buyback: Tender Offer Period Opens on 1st Dec