Event-Driven

I tally 51 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal was discussed on Smartkarma this week:Huafa Property Services Group (982 HK)‘s Scheme. Asia Cement China (743 HK) also suspended pursuant to the Takeovers Code.
Key updates took place on: QV Equities (QVE AU), Boral (BLD AU), Greatview Aseptic Packaging (468 HK), Sciclone Pharmaceuticals (6600 HK), and Chilled & Frozen Logistics Holdings (9099 JP).

Weekly Deals Digest (02 Jun) – Infocom, CF Logistics, Asia Cement, GA Pack, Huafa, Shift Up

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: Shift Up (462870 KS) seeks to raise up to US$320 million.
Event-Driven developments: Asia Cement China (743 HK), Greatview Aseptic Packaging (468 HK), Huafa Property Services Group (982 HK), Chilled & Frozen Logistics Holdings (9099 JP), Infocom Corp (4348 JP).

Last Week in Event SPACE: Mitsui Matsushima, China Merchants,Kansai Paint, Teijin, Sciclone Pharma

Colour me perplexed. Murakami Group ran up Mitsui Matsushima (1518 JP)‘s share price in acquiring 29%. The pattern was clear, but one assumes everyone in-group was on the same page.
Two activist shareholders. And long only upping its stake. Heavily discounted China Merchants China Direct Investments (133 HK) is in play.
A HUGE new buyback for Kansai Paint (4613 JP). Really big. Buy Kansai Paint vs Nippon Paint. One can buy the pop. One can buy any dips after the pop.

Mainland Connect NORTHBOUND Flows (To 31 May 2024): Net Sell Flows on Weak Gross Volumes

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 5.7bn of A-shares on lower gross volumes. NORTHBOUND bought Zijin, Yangtze Power, and renewables and sold SOEs.
Ongoing questions as to whether the NORTHBOUND volumes to the buy side are all foreigners. Some suspect there is national team buying mixed in, as was expected from earlier announcements.

HK Connect SOUTHBOUND Flows (To 31 May 2024); Private Tech, Energy/Financial SOEs See BIG Net Buys

SOUTHBOUND was again a net buyer for HK$29.7bn on small two-way volumes. Bank Of China Ltd (H) (3988 HK) dropped to #4 this week but SOE buying dominated.
It is not clear how much of this is H/A discounts, expected dividend tax removal, and the KPIs for SOE CEOs to raise prices and payout ratios, but it continues.
Valuations are acceptable. Flows are good. Policy changes are afoot. SOUTHBOUND may continue to see inflows – national team and otherwise.

KWEB Index Rebalance: ZX (9890 HK) In; Fenbi (2469 HK) Out

ZX (9890 HK) will replace Fenbi Ltd (2469 HK) in the KraneShares CSI China Internet ETF (KWEB US) at the close on 14 June.
There will be over 6 days of ADV to sell in Fenbi Ltd (2469 HK) and we estimate over 2 days of ADV to buy in ZX (9890 HK).
There are other ETFs that track very similar indices and there could be a lot more to trade in the stocks at the close on 14 June.

(Mostly) Asia M&A, May 2024: Malaysia Airports, Alps Logistics, Nihon Housing, Great Eastern

For the month of May 2024, 10 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$6.6bn.
The average premium for the new transactions announced (or first discussed) in May was ~60%. The average premium YTD is ~46%. Japan is well up yoy. Hong Kong is down.
This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.

Helios Techno Holding (6927) – Small TOB, Fat Premium (74%), Still Too Cheap

On Friday, acquisitive wafer technology firm Rs Technologies (3445 JP) announced it would buy lamp and printing equipment maker Helios Techno Holding (6927 JP) at a 74% premium.
The premium is big, but Helios is a steal at the price. Granted, it is a small potatoes steal.
The register is not controlled by any one party or group of investors other than retail. That makes this interesting.

A/H Premium Tracker (To 31 May 2024): HK Stocks Have an Ugly Week; AH Premium in Liquid Pairs Rises

The New/Better 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’s renewed buy streak continued this past week; every day net positive. Strong net buying. NORTHBOUND saw net selling. Gross volumes on both were light.
AH Premia rebounded off multi-year lows, on average, this past week as Hang Seng/other HK indices fell and A-shares did not do much. Liquid Hs underperformed As by 2%.

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Jun 01

Daily Brief Event-Driven: SG Holdings to Launch TOB on C&F Logistics (9099) At A Whopping ¥5 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

SG Holdings to Launch TOB on C&F Logistics (9099) At A Whopping ¥5,740/Share – HUGE Governance Win
GAPack (468 HK): Shandong Xinjufeng Offer Progesses
Infocom (4348 JP): Blackstone’s Rumoured JPY260bn Bid to Acquire Teijin’s Stake
End of Mandatory Lock-Up Periods for 45 Companies in Korea in June 2024
Chilled & Frozen Logistics (9099 JP): SG Holdings’ Stunning JPY5,740 Offer
Hot Topic Among Local Institutions in Recent Days: Utilizing COE in Value-Up Investing
Quiddity JPX-Nikkei 400 Rebal 2024: End-May 2024 Estimates

SG Holdings to Launch TOB on C&F Logistics (9099) At A Whopping ¥5,740/Share – HUGE Governance Win

Chilled & Frozen Logistics Holdings (9099 JP) was near an all-time high in late March when it closed at ¥2,041 the day AZ-Com Maruwa Holdings (9090 JP) bid ¥3,000/share.
That was hostile, and C&F’s Board reacted swiftly, looking for a market check and competitive process. It got one. It was VERY successful in getting the best bid.
SG Holdings (9143 JP) has bid ¥5,740 – a very full multiple and 91% higher than AZ-Com’s price. I don’t expect an overbidder. Huge governance win for Japan minorities.

GAPack (468 HK): Shandong Xinjufeng Offer Progesses

On the 9th May, Shandong Xinjufeng (301296 CH) (XJF) made a pre-conditional voluntary general Offer at $2.65/share (best & final), contingent on a 50% acceptance. Final/special dividends to be added.
GAPack(468 HK) has made it clear that XJF is a competitor of GAPack. And Mengniu (2319 HK) may review its relationship if pre-cons are satisfied/waived; or the Offer gets up.
XJF has announced the necessary applications have been sent to NDRC, MoC, and SAMR; and it prepping for a shareholder meeting to approve the Offer.

Infocom (4348 JP): Blackstone’s Rumoured JPY260bn Bid to Acquire Teijin’s Stake

Bloomberg reports that Blackstone (BX US) has agreed to acquire Teijin Ltd (3401 JP)’s 55% stake in Infocom Corp (4348 JP) at a rumoured valuation of JPY260 billion.
The potential minority offer price depends on whether the rumoured valuation refers to market cap or enterprise value and whether Teijin will share TOB tax benefits.
The most likely scenario is that the valuation refers to the market cap, with Teijin sharing TOB tax benefits, resulting in a minority offer of around JPY5,720 per share.

End of Mandatory Lock-Up Periods for 45 Companies in Korea in June 2024

We discuss the end of the mandatory lock-up periods for 45 stocks in Korea in June 2024, among which 5 are in KOSPI and 40 are in KOSDAQ.
These 45 stocks on average could be subject to further selling pressures in June and could underperform relative to the market.
The top three market cap stocks including those of which at least 1% of outstanding shares could be sold in June include Hanwha Ocean, LS Materials, and Komico.

Chilled & Frozen Logistics (9099 JP): SG Holdings’ Stunning JPY5,740 Offer

Chilled & Frozen Logistics Holdings (9099 JP) has recommended SG Holdings (9143 JP)’s JPY5,740 tender offer, a 91.3% premium to AZ-Com Maruwa Holdings (9090 JP)’s JPY3,000 hostile offer.
SG Holdings’ offer premium is stupendous. However, the offer values C&F at a CY2024 EV/EBITDA of 27.2x vs. Alps Logistics (9055 JP) offer at a CY2024 EV/EBITDA of 29.2x.
The Board deserves credit. AZ-COM Maruwa is unlikely to engage in a bidding war as SG Holding’s offer has the Board’s recommendation and comes with a hefty takeover premium.

Hot Topic Among Local Institutions in Recent Days: Utilizing COE in Value-Up Investing

Local institutional investors were disappointed Kiwoom omitted COE from their value-up disclosure. They seek clearer plans to address low-yield assets and reduce COE.
Rapidly rising interest in COE among local institutional investors is now shaping the screening criteria for the Korea Exchange’s value-up index, possibly using COE as a primary factor for inclusion.
Competition likely centers on selecting and weighting stocks, including those beyond KOSPI 200. Key metric: COE linked with ROE.

Quiddity JPX-Nikkei 400 Rebal 2024: End-May 2024 Estimates

By Janaghan Jeyakumar, CFA

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.
In this insight, we take a look at potential ADDs/DELs for the JPX-Nikkei 400 index rebal event to come in August 2024 based on trading data as of end-May 2024.

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May 31

Daily Brief Event-Driven: Exedy (7278) Huge Offering Resized – Watch the Dynamics Here and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Exedy (7278) Huge Offering Resized – Watch the Dynamics Here
Infocom (4348 JP) – Reports of an Exclusive Negotiation May Give Hints
Detailed Summary of Today’s Second Trial Ruling in Chey Tae-Won’s Divorce Case Involving SK Inc
Kansai Paint (4613) – Going Hard with a BIG Buyback and More Capital Moves Beyond
Zomato Placement Lockup Expiry – US$800m Overhang
Legal Complications on Put Options on SSG.Com to Result in Ongoing Concerns for Emart and Shinsegae
Quiddity Leaderboard ES50 Sep 24: US$1.1bn Index Inflow for Engie if Nokia’s Rank Falls by ONE
SET50 Index Rebalance Preview: 4 Changes as Review Period Ends Today
Brookfield to Launch Mandatory Offer for Neoen

Exedy (7278) Huge Offering Resized – Watch the Dynamics Here

On Monday 27 May, Aisin (7259 JP) announced an offering to sell ALL of its 36+% stake in equity affiliate Exedy Corp (7278 JP) for likely ¥40bn+.
Exedy announced a big buyback to go with it. It bought back 30% of the total on Weds morning, and that reduced the size of the offer.
I had expected “short-term games” but we haven’t really had them. Which is a bit weird. This update shows the details and dynamics (they differ).

Infocom (4348 JP) – Reports of an Exclusive Negotiation May Give Hints

The entire saga here of Teijin Ltd (3401 JP)‘s disposal of its 55.1% stake in Infocom Corp (4348 JP) is being played out in the non-generally-public press.
There is reportedly a new piece of writing out late Thursday which suggests an approach.
I wrote about the “meaning” of words in Infocom (4348 JP) – The Meaning of ‘Binding Bids’ and ‘¥250bn’ and now there is more nuance to parse.

Detailed Summary of Today’s Second Trial Ruling in Chey Tae-Won’s Divorce Case Involving SK Inc

The first trial in December 2022 ordered Chey to pay 67.5 billion KRW; today’s ruling increased this to 1.38 trillion KRW plus 2 billion KRW, including splitting SK Inc. shares.
The increased settlement and SK Inc. share split could spark a management rights battle, causing SK Inc.’s stock price to jump as investors and shareholders react.
It may take a year for the final verdict, making a sustained stock price increase unlikely. Yet, differences between trial rulings could alter Chey’s SK Inc. stake, sustaining market interest.

Kansai Paint (4613) – Going Hard with a BIG Buyback and More Capital Moves Beyond

24mos ago, Kansai Paint (4613 JP) announced a new MTMP, a large buyback, and plans to unwind cross-holdings. Big. 15mos ago a large secondary offering kicked off the festivities.
Key was Toyota sold. Then KP could sell its Toyota shares – two-thirds of its cross-holdings. The offering was one to buy. A buyback followed. KP vs Nippon Paint doubled.
KP offered a CB recently with the delta hedge done by TN-3. Now there is a HUGE new buyback. Really big. This gets rid of more cross-holders. And there’s more.

Zomato Placement Lockup Expiry – US$800m Overhang

By Sumeet Singh

Antfin will come out of its placement linked lockup for its remaining stake in Zomato soon.
Ant Group had earlier sold some of its stake in Nov 2023 and Mar 2024. It still has over US$800m worth of shares left to sell.
In this note, we talk about the deal dynamics and run the deal through our ECM framework.

Legal Complications on Put Options on SSG.Com to Result in Ongoing Concerns for Emart and Shinsegae

Emart and Shinsegae are facing concerns about put options of nearly 1 trillion won on private equity investors’ investment in SSG.com nearly six years ago.
From AEP and BRV’s point of views, they want to get their money back through put options since an IPO is not likely in the near term.
The most probable result appears to be that this is likely to be dragged on for some time, which will cause continued concerns on both Emart and Shinsegae.

Quiddity Leaderboard ES50 Sep 24: US$1.1bn Index Inflow for Engie if Nokia’s Rank Falls by ONE

By Janaghan Jeyakumar, CFA

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

SET50 Index Rebalance Preview: 4 Changes as Review Period Ends Today

With one day left in the review period, we see 4 potential changes for the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at the June rebalance.
Berli Jucker (BJC TB) could be added to the index following the market consultation that lowered the inclusion thresholds for Average Daily Trading Values and Turnover ratios.
An equally weighted basket of potential adds has outperformed the potential deletes but there has been a deterioration in performance over the last month.

Brookfield to Launch Mandatory Offer for Neoen

Brookfield (BN CN) has entered exclusive negotiations with the top shareholders of Neoen (NEOEN FP) to acquire a 53.32% stake at €39.85/share, 26.9% premium, which will trigger a mandatory offer.
The offer represents 15.1x EV/NTM Fwd EBITDA vs. the median of peers at 9.3x. My fair-value estimate (DCF-based) is €33.76/share, therefore the offer is generous, in my view.
Expect the shares to close the spread tomorrow and trade around 3% gross spread and the convertibles to price higher (2% 06/25 at around €51.85, 2.875% 09/27 around 111.72%).

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May 30

Daily Brief Event-Driven: Asia Cement (743 HK): Parent’s Ready-Mixed Offer? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Asia Cement (743 HK): Parent’s Ready-Mixed Offer?
TIP Customized Taiwan Select High Dividend Index Rebalance Preview: AUM Jump & HUGE Trade
Asia Cement China (743 HK): Privatisation by Asia Cement?
JAPAN ACTIVISM: Murakami-Père Ran Up Mitsui Matsushima (1518 JP), Now Murakami-Fille Selling Down
Latest Info on Value-Up Index Involving KRX & NPS: Potential Flow Trading Patterns
Block Deal Prospects Arising from SK Group’s Corporate Reshuffle
NIFTY200 Momentum30 Index Rebalance Preview: 49% Turnover; US$850m Trade; Election Results Coming
KFIN Tech: Block Deal Trade Special Situations and Tactical Trade Strategy
C&F (9099) Pushes Back on AZ-Com Call for Transparency, Again. Still Not A Buy.
RR Kabel: Block Deal Trade Special Situations and Tactical Trade Strategy

Asia Cement (743 HK): Parent’s Ready-Mixed Offer?

Chinese cement play Asia Cement China (743 HK) (ACC) is currently suspended pursuant to the Takeovers Code.
Asia Cement (1102 TT) has been ACC’s majority shareholder since its 2008 IPO. Asia Cement currently holds 73.07%.
Shares gained ~50% this week. On serious volume. With net cash of US$1.03bn vs. a market cap of US$66mn, a privatisation should command a punchy premium to the last close.

TIP Customized Taiwan Select High Dividend Index Rebalance Preview: AUM Jump & HUGE Trade

The TIP Taiwan Select High Dividend ETF (00919 TW) tracks the TIP Customized Taiwan Select High Dividend Index and has an AUM of TWD 209bn (US$6.5bn).
There could be 14 changes for the ETF in June with an estimated one-way turnover of around 40% and a round-trip trade of around US$5bn.
The potential adds have outperformed the potential deletes over the last couple of months and there could be more to go heading into announcement and implementation.

Asia Cement China (743 HK): Privatisation by Asia Cement?

Asia Cement China (743 HK) entered a trading halt based on the Hong Kong Code on Takeovers and Mergers. Bloomberg reports that Asia Cement (1102 TT) is considering a buyout.
Privatisation interest is unsurprising, as ACC’s EV has been negative since 6 July 2022 due to headwinds from the weak Chinese property sector and uncertainty about cash use.
An offer price of HK$5.18 would imply a zero EV. However, due to the difficult trading conditions, we think an offer would be around HK$4.00 per share.

JAPAN ACTIVISM: Murakami-Père Ran Up Mitsui Matsushima (1518 JP), Now Murakami-Fille Selling Down

Colour me perplexed. Murakami Group ran up Mitsui Matsushima (1518 JP)‘s share price in acquiring 29%. The pattern was clear, but one assumes everyone in-group was on the same page.
The earliest buyer was NOMURA Aya. She bought early, slowly, then aggressively, then onshore buyers bought aggressively at higher prices. But she has now sold 6 days straight.
The pattern is confusing but it will become clearer in coming days.

Latest Info on Value-Up Index Involving KRX & NPS: Potential Flow Trading Patterns

The value-up index aims to align closely with the KOSPI 200’s composition, adjusting stock weights based on factors from KRX Governance Leaders 100 and KRX ESG Dividend Opportunities Index.
Insiders confirm NPS will create new funds to track the value-up index, needing SAA adjustments and Fund Management Committee approval. Despite hurdles, government backing suggests smooth NPS involvement.
Buybacks could cause passive outflows in KOSPI 200 rebalancing and inflows in value-up index rebalancing. This timing discrepancy could create a consistent passive flow pattern for these stocks.

Block Deal Prospects Arising from SK Group’s Corporate Reshuffle

The declining appeal of the separator business prompts SK to seek buyers for SKIET through block deals amid financial pressures. The first deal is anticipated despite recent stock price drops.
SK Ecoplant looks to sell its 37.6% stake in SK Oceanplant. Negotiations stall over the former major shareholder’s 20% stake, prompting consideration of a block deal.
SK Bioscience, under SK Discovery, faces possible sale amid SK’s bio company reshuffle. SK Chemicals may bring SK Biopharm under its wing to help SK Inc focus on semiconductors/batteries.

NIFTY200 Momentum30 Index Rebalance Preview: 49% Turnover; US$850m Trade; Election Results Coming

There could be 13 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 27 June.
If all changes are on expected lines, one-way turnover is estimated at 48.8% and that will result in a one-way trade of INR 35.5bn (US$426m).
Since January, the potential adds to the index have outperformed the potential deletes by a big margin. Watch out for the general election results on 4 June for momentum change.

KFIN Tech: Block Deal Trade Special Situations and Tactical Trade Strategy

By Nimish Maheshwari

Impending block deals which generally create supply over-hang on the stock leads to a negative impact on the stock
These block deals generally include selling promoters and big funds at a price discount to its current market price
Historically, such events suggest once the block deal is done; stock reacts positively creating a Special Situation Opportunity

C&F (9099) Pushes Back on AZ-Com Call for Transparency, Again. Still Not A Buy.

Chilled & Frozen Logistics Holdings (9099 JP) asked AZ-Com Maruwa Holdings (9090 JP) repeatedly to respond to its entreaties, and delay the start of its tender offer until end-May.
C&F was running a process and wanted to be transparent. When AZ-Com announced, C&F said “we have counter-bidders” and the stock went up. Then a Nikkei article propelled it higher.
AZ-Com then asked, twice, for clarity from C&F, saying investors deserved more information. The shoe was on the other foot. Now C&F has responded. Again.

RR Kabel: Block Deal Trade Special Situations and Tactical Trade Strategy

By Nimish Maheshwari

Impending block deals which generally create supply over-hang on the stock leads to a negative impact on the stock
These block deals generally include selling promoters and big funds at a price discount to its current market price
Historically, such events suggest once the block deal is done; stock reacts positively creating a Special Situation Opportunity

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May 29

Daily Brief Event-Driven: S&P/ASX Index Rebalance Preview: Regular & Ad Hoc Changes in June and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

S&P/ASX Index Rebalance Preview: Regular & Ad Hoc Changes in June
PNB Housing: Block Deal Trade Special Situations and Tactical Trade Strategy
QV Equities (QVE AU): 28th June Shareholder Vote
DS Dansuk: Block Deal Sale by Stonebridge Capital
JSE June ‘24 Rebalance Rankings: No Changes Expected + NPN X PRX Discount Update
Quiddity Leaderboard SE600 Jun 24: Potential ADDs Could Continue to Outperform Potential DELs
BBVA Files Hostile Offer: Conditions, Defences and Probabilities

S&P/ASX Index Rebalance Preview: Regular & Ad Hoc Changes in June

With the review period complete, we take a look at the potential index changes at the June rebalance as well as potential index inclusions due to M&A.
Timing is key for the ad hoc inclusions to the S&P/ASX 200 (AS51 INDEX) with an ad hoc inclusion being announced prior to the regular announcement.
Passive trackers will need to buy 1.3-27x ADV on the expected adds and have 0.8-4.7x ADV to sell on the expected deletes. Shorts have built up on the potential deletes.

PNB Housing: Block Deal Trade Special Situations and Tactical Trade Strategy

By Nimish Maheshwari

Impending block deals which generally create supply over-hang on the stock leads to a negative impact on the stock.
These block deals generally include selling promoters and big funds at a price discount to its current market price.
Historically, such events suggest once the block deal is done; stock reacts positively creating a Special Situation Opportunity

QV Equities (QVE AU): 28th June Shareholder Vote

On the 12th March, Aussie-based investment plays QV Equities Ltd (QVE AU) and WAM Leaders Ltd (WLE AU) entered into a Scheme.
The current scrip terms are 0.739 new WAM shares per QVE share; OR A$0.989/share cash. Terms will be adjusted for updated pre-tax NTA/shares of both companies after the Scheme Meeting.
The Scheme Booklet is now out, with a Scheme Meeting to be held on the 28th June. Expected implementation on the 15 July. The IE says fair & reasonable.

DS Dansuk: Block Deal Sale by Stonebridge Capital

After the market close on 28 May, it was announced that Stonebridge Capital plans to conduct a block deal sale of a portion of its stake in DS Dansuk.
This deal involves 210,000 to 290,000 shares of DS Dansuk. The block deal price range is from 99,800 won to 101,400 won, which represents 7.06% to 8.52% discount.
After this second block deal, there will be further overhang concerns about additional sales of DS Dansuk by Stonebridge Capital in the coming months.

JSE June ‘24 Rebalance Rankings: No Changes Expected + NPN X PRX Discount Update

By Charlotte van Tiddens, CFA

Last night, the price snapshot was taken for the JSE June rebalance.
We do not anticipate any index changes for the Top 40, FINDI, FINI, INDI or RESI.
There are several noteworthy free float changes across ALSI constituents, particularly amongst foreign counters (detail below).

Quiddity Leaderboard SE600 Jun 24: Potential ADDs Could Continue to Outperform Potential DELs

By Janaghan Jeyakumar, CFA

The SE600 index is one of the most widely followed benchmark indices in Europe. This index is rebalanced on a quarterly basis.
The base date for rankings for the June 2024 index rebal event is 31st May 2024. In this insight, we take a look at the latest list of potential ADDs/DELs.
Currently, I see 7 ADDs and 7 DELs for the SE600 index. There are more names just outside the border requiring small price changes to get involved in index changes.

BBVA Files Hostile Offer: Conditions, Defences and Probabilities

On 24 May, Banco Bilbao Vizcaya Argentari (BBVA SM) submitted the authorisation request for its all-stock offer for Banco De Sabadell SA (SAB SM). Closing expected to take 6-8 months.
Gross spread (CSP 27 May) is 7.6%, which This translates in a 52% implied probability of deal success. The fixed income market appears to share this view.
Nevertheless, from a long-only perspective, the risk/reward of Sabadell is interesting. The deal values Sabadell’s shares at €2.07 each, an implied equity value of €11,187 million, for a 0.92 P/TBV.

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May 28

Daily Brief Event-Driven: Cash-Rich Exedy (7278) Sees Huge Offering Offset by Huge Buyback – Watch For Short-Term Games and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Cash-Rich Exedy (7278) Sees Huge Offering Offset by Huge Buyback – Watch For Short-Term Games
Infocom (4348 JP) – The Meaning of ‘Binding Bids’ and ‘¥250bn’
HYBE: Block Deal Sale of SM Entertainment
Yuanta Taiwan Div+ ETF Rebalance Preview: 5 Changes as Names Move Around; US$2.35bn Round-Trip Trade
Huafa Property Services (982 HK)’s Knockout Offer
Activism Takes On CMCDI (133 HK)
Huafa Property Services (982 HK): Scheme Offer at HK$0.29
Taiwan Top 50 ETF Rebalance Preview: Asia Vital Components (3017 TT) In Back-To-Back Inclusion?
Best World (BEST SP): Best & Final Offer
An Early Look at Potential Deletions and Additions to KOSPI200 in December 2024

Cash-Rich Exedy (7278) Sees Huge Offering Offset by Huge Buyback – Watch For Short-Term Games

Toyota equity affiliate Aisin (7259 JP) last September said it would sell all its crossholdings. That now includes a 36.5% stake in Exedy Corp (7278 JP).
Today, they announced an offering of all the shares (when including the greenshoe). That is nearly ¥50bn. That is offset by a ¥15bn buyback which could reduce the offering size.
Games may be played, but there is considerable accretion, and Exedy will see higher float and still-high net cash.

Infocom (4348 JP) – The Meaning of ‘Binding Bids’ and ‘¥250bn’

A variety of articles of recent from private media sources have suggested that Teijin Ltd (3401 JP) has its 55% stake in Infocom Corp (4348 JP) up for auction.
According to earlier articles, binding Second Round bids were due last week. According to an article out late last week, binding bids have been made, with some “around ¥250bn.”
What that means for price may depend on what the “around ¥250bn” means. A brief exploration below.

HYBE: Block Deal Sale of SM Entertainment

After the market close on 27 May, HYBE (352820 KS) announced that it will conduct a block deal sale of 0.75 million to 0.94 million shares of SM Entertainment.
The block deal sale price discount is 4% to 5.5% discount to the closing price on 27 May (95,800 won).
One of the major positive, recent issues facing the Korean K-Pop related stocks has been the potential easing of Korean content restrictions by China.

Yuanta Taiwan Div+ ETF Rebalance Preview: 5 Changes as Names Move Around; US$2.35bn Round-Trip Trade

With the review period now complete, there could be 5 changes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June.
Price changes and changes to dividend estimates have led to names dropping off the list of potential adds and deletes over the last week.
Constituent changes, capping and funding flows will lead to a one-way turnover of 12.7% and a one-way trade of US$1.17bn. There are 12 stocks with over 4x ADV to trade.

Huafa Property Services (982 HK)’s Knockout Offer

After entering a trading halt on the 16th May pursuant to the Takeover’s Code, property manager Huafa Property Services (982 HK) has now announced a privatisation by way of a Scheme.
The cancellation price of A$0.29/share is a 30.63% to last close, a 70.59% premium over the 30-day average close, and a life-time high price. The price is final.
The Offeror, Zhuhai Huafa, a state-owned enterprise wholly-owned by Zhuhai SASAC, plus concert parties hold 42.63% of shares out. Clean deal.

Activism Takes On CMCDI (133 HK)

In January this year, Argyle Street, a (now) 8% shareholder of China Merchants China Direct Investments (133 HK) (CMCDI), a closed-end investment company, proposed a solution to boost shareholder value.
Two months later, Rydal Value Fund (stake unknown) also proposed a means to boosting shareholder value along similar lines.
CMCDI is currently trading at a ~63% discount to NAV. But it is up 78% since Argyle’s initial proposal, and recently touched a six-year high. Argyle is still buying.

Huafa Property Services (982 HK): Scheme Offer at HK$0.29

Huafa Property Services Group (982 HK) announced a privatisation offer from Huafa Industrial Co., Ltd. Zhuhai (600325 CH) at HK$0.29 per share, a 30.6% premium to the undisturbed price.
Key conditions include approval by at least 75% of independent shareholders (<10% of independent shareholders rejection) and a headcount test. No shareholder holds a blocking stake.
The offer, which has been declared final, is attractive compared to historical share prices and peer multiples. This is a done deal, with payment likely in November.

Taiwan Top 50 ETF Rebalance Preview: Asia Vital Components (3017 TT) In Back-To-Back Inclusion?

Asia Vital Components (3017 TT) could replace Chang Hwa Commercial Bank (2801 TT) in the Yuanta/P-Shares Taiwan Top 50 ETF at the June rebalance.
This ETF inclusion for Asia Vital Components (3017 TT) could come back-to-back with another index inclusion scheduled for the end of May.
Shorts in Asia Vital Components (3017 TT) have been increasing recently while shorts in Chang Hwa Commercial Bank (2801 TT) are near their lows.

Best World (BEST SP): Best & Final Offer

The $2.50/share Exit Offer announced last month seemed fair. Not great, but okay. Best World International (BEST SP)‘s founders Dora Hoan and Doreen Tan have now blinked, and bumped.
Terms are S$2.56/share – best & final. The increase in the Exit Offer price followed “a review of its most recent financial and cash position“. More likely, shareholder pushback.
Elsewhere, nephews and siblings of Hoan, bought shares just prior to the initial Offer announcement; and have been selling since. Not a great look.

An Early Look at Potential Deletions and Additions to KOSPI200 in December 2024

In this insight, we provide an early look at the potential additions and deletions to KOSPI200 rebalance in December 2024.
The seven potential additions are up on average 53.9% from end of 2023. The seven potential deletion candidates are down on average 14.2% YTD.
The average market cap of the seven potential additions is 2.2 trillion won. The average market cap of the seven potential deletion candidates is 0.7 trillion won.

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May 27

Daily Brief Event-Driven: KRX Announces Final Version of Value-Up Disclosure Guidelines Alongside Dedicated Website Launch and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

KRX Announces Final Version of Value-Up Disclosure Guidelines Alongside Dedicated Website Launch
Chilled & Frozen Logistics (9099 JP): Irrational Exuberance Takes Hold
HK Connect SOUTHBOUND Flows (To 24 May 2024); Strong Bank Buying and Tech Selling Continues
KOSDAQ150 Index Rebalance: Short Sell Ban Definitely Helping
A/H Premium Tracker (To 24 May 2024): HK Stocks Have a BAD Week and AH Premium Rebounds In
What’s Still Concerning in the HLB Situation & HLB Life Science’s Stock Rights Trading Next Week
Merger Arb Mondays (27 May) – L’Occitane, SciClone, GA Pack, KFC Japan, CF Logistics, Best World
Offshore China ETFs Rebalance Preview: Three Changes in June; Cutoff Today
KOSPI200 Index Rebalance: Index Committee Knows Best; Cosmo AM&T the Winner
FXI Rebalance Preview: Cutoff Today; Two Changes Likely in June

KRX Announces Final Version of Value-Up Disclosure Guidelines Alongside Dedicated Website Launch

Starting May 27th, KRX-listed firms can voluntarily disclose value-up details, publicly available on the website. Additionally, view five investment indicators for all KRX-listed companies below.
Finalized version similar to draft, with added content requested by listed companies, like R&D investment growth rate. Tax incentives excluded, awaiting alignment with Ministry’s plan in July.
KRX keeps a screening framework for the index akin to March’s criteria, with ROE likely having the highest weight. Recent signals hint at increasing dividend weighting.

Chilled & Frozen Logistics (9099 JP): Irrational Exuberance Takes Hold

Chilled & Frozen Logistics Holdings (9099 JP) shares are trading 85.7% above AZ-Com Maruwa Holdings (9090 JP) JPY3,000 offer due to the disclosure of four counterbidders.
The white knight “winning” bidder can secure the Board’s recommendation if it is the highest offer (likely well below the last close) and does not result in AZ-COM Maruwa-type dis-synergies.
AZ-COM Maruwa would face the dilemma of bumping, particularly if the white knight bidder secures irrevocables and the Board presents a compelling case to support the white knight bidder.

HK Connect SOUTHBOUND Flows (To 24 May 2024); Strong Bank Buying and Tech Selling Continues

SOUTHBOUND was again a net buyer for HK$18.6bn on strong two-way volumes. The top three net buys of the week were SOE banks. Some may be Central Huijin.
Some of this may be driven by the dividend w/h tax cancellation on H divs and by significant H-share discounts, but high-div CNOOC was the biggest net sell.
No end to the inflows, and HK valuations are not at a place where they would hamper continued flows. Alibaba making HK a Primary will spur more inflows over time.

KOSDAQ150 Index Rebalance: Short Sell Ban Definitely Helping

There are 13 inclusions and 13 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance to be implemented at the close on 13 June.
For the second consecutive review, Fadu (440110 KS) and Shinsung DeltaTech (065350 KS) have been kept out of the index. Not sure what the index committee’s beef with them is.
The adds have outperformed the deletes and the KOSDAQ150 since the start of the review period. This has been helped, in no small, part by the ban on short selling.

A/H Premium Tracker (To 24 May 2024): HK Stocks Have a BAD Week and AH Premium Rebounds In

The New/Better 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’s buy streak continued this past week; every day was net positive. NORTHBOUND was net positive too. It is not clear how much is National Team buying. Much may be.
AH Premia rebounded off multi-year lows, on average, this past week as Hang Seng and other HK indices fell sharply and A-shares did not fall as much.

What’s Still Concerning in the HLB Situation & HLB Life Science’s Stock Rights Trading Next Week

HLB expects Jiangsu Hengrui to receive another CRL from the FDA, but specifics on CMC issues remain unclear. Due to the lack of clarity, it’s advisable to avoid trading HLB.
HLB IR stated they’ll apply for KOSPI transfer listing after FDA approval when asked by local media, suggesting it’s currently not under consideration.
We should instead consider short-term trading opportunities in HLB Life Science. Anticipate a surge in forfeited shares from Day 1, reminiscent of last year’s CJ CGV rights offer event.

Merger Arb Mondays (27 May) – L’Occitane, SciClone, GA Pack, KFC Japan, CF Logistics, Best World

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: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), Ansarada Group Ltd (AND AU), Malaysia Airports Holdings (MAHB MK), China Traditional Chinese Medicine (570 HK).
Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Mimasu Semiconductor Industry (8155 JP), Boral Ltd (BLD AU).

Offshore China ETFs Rebalance Preview: Three Changes in June; Cutoff Today

Based on the close of 24 May, there could be three changes for the iShares A50 China (2823 HK)/ CSOP China A50 (HKD) (2822 HK) in June.
COSCO SHIPPING (601919 CH), CRRC (601766 CH) and China National NuclearPower (601985 CH) could replace LONGi GreenEnergy (601012 CH), CSC Financial (601066 CH) and China Tourism Group DutyFree (601888 CH).
There are a couple of stocks that are close adds and could become adds if they outperform higher ranked stocks in trading today.

KOSPI200 Index Rebalance: Index Committee Knows Best; Cosmo AM&T the Winner

There will be 6 additions and 6 deletions for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the June rebalance that will be implemented on 13 June.
The index committee has used a boatload of discretion in the inclusion of CosmoAM&T (005070 KS) and the deletion of some of the stocks.
The adds and deletes from the Information Technology sector will also have passive flow from the sector ETF and will increase the impact of the changes.

FXI Rebalance Preview: Cutoff Today; Two Changes Likely in June

With a day to go in the review period, there could be 2 changes for the iShares China Large-Cap (FXI) (FXI US) in June.
There should be more than 1x ADV to buy on one of the adds while there will be nearly 5x ADV to sell on one of the deletes.
There will be positioning in all the potential changes but there appears to be higher interest in one of the potential adds and one of the potential deletes.

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May 26

Daily Brief Event-Driven: Best World (BEST SP): Best and Final S$2.56 Offer and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Best World (BEST SP): Best and Final S$2.56 Offer
(Mostly) Asia-Pac M&A: KFC Holdings Japan, Shanghai Henlius, Alumina, BHP/ Anglo American, SciClone
Last Week in Event SPACE: Mitsui Matsushima, L’Occitane, Prosus/Tencent, EOFlow

Best World (BEST SP): Best and Final S$2.56 Offer

Best World International (BEST SP) has disclosed a revised exit offer which has been declared final. The S$2.56 offer is a modest 2.4% premium to the previous S$2.50 offer.
The key conditions are approval for the selective capital reduction (at least 75% of eligible shareholders) and delisting resolution (a majority holding not less than 75% in value).
The revised offer remains underwhelming. However, the headcount test risk is lowering as retail seems resigned to accepting it. At the last close, the gross spread was 2.4%.

(Mostly) Asia-Pac M&A: KFC Holdings Japan, Shanghai Henlius, Alumina, BHP/ Anglo American, SciClone

I tally 51 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal was discussed on Smartkarma this week: Carlyle’s tiult for KFC Holdings Japan (9873 JP). Shanghai Henlius Biotech (2696 HK) suspended pursuant to the Takeovers Code.
Key updates took place on: Alumina Ltd (AWC AU), L’Occitane (973 HK), BHP Group Ltd (BHP AU)/ Anglo American (AAL LN), and SciClone Pharmaceuticals (6600 HK).

Last Week in Event SPACE: Mitsui Matsushima, L’Occitane, Prosus/Tencent, EOFlow

Murakami-San now owns far more in Mitsui Matsushima (1518 JP) than he can easily get out of other than by corporate action. Murakami-san is not a dumb guy. He knows this.
The unique investigative shareholder register confirms what has been long rumoured about a certain shareholder activist in L’Occitane (973 HK). It is also informative for what isn’t present.
Prosus (PRX NA)‘s discount to NAV and implied stub widened after Fabricio Bloisi’s CEO appointment the previous week. But the sell-down of Tencent (700 HK) to buy-back Prosus will continue.

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May 25

Daily Brief Event-Driven: SciClone Pharma (6600 HK): Scheme Vote on 19 June and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

SciClone Pharma (6600 HK): Scheme Vote on 19 June
KOSPI200 June ’24 Rebalance: Index Changes Released, 6 Additions & 6 Deletions
Unexpected Inclusion of Cosmo AM&T in KOSPI 200 Sparks Notable One-Day Flow Via KOSPI 200 IT
EQD | Hang Seng Down: How Low Can the Pullback Go?
Iberdrola/Avangrid: Spread

SciClone Pharma (6600 HK): Scheme Vote on 19 June

Sciclone Pharmaceuticals (6600 HK)‘s scheme document is out, and the court meeting is scheduled for 19 June. The IFA considers the HK$18.80 per share offer fair and reasonable.
The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake.
This is a done deal. At the last close and for the 12 July payment, the gross and annualised spread is 2.2% and 17.3%, respectively.

KOSPI200 June ’24 Rebalance: Index Changes Released, 6 Additions & 6 Deletions

By Charlotte van Tiddens, CFA

The KRX have announced the index changes for the KOSPI200 June review.
The index will be rebalanced in the closing auction on Thursday the 13th of June.
There will be 6 additions to the index and 6 deletions.

Unexpected Inclusion of Cosmo AM&T in KOSPI 200 Sparks Notable One-Day Flow Via KOSPI 200 IT

Unexpectedly, KRX included Cosmo AM&T (005070 KS) despite not meeting the market cap cutoff and excluded DB Hitek (000990 KS) and Lotte Energy Materials (020150 KS).
Cosmo AM&T’s unexpected inclusion triggers a significant one-day passive flow event through the KOSPI 200 IT, the sector index with the largest AUM.
Sector index rebalancing, a single-day event managed by one ETF operator, more significantly correlates flow direction with price impact. We should consider a long-short setup for these on June 13th.

EQD | Hang Seng Down: How Low Can the Pullback Go?

By Nico Rosti

The Hang Seng Index has been rallying for 3 weeks but then last week the rise was halted and the index gave up a good chunk of the gains.
It seems the index has become quite volatile but this week it could go up again, or otherwise next week, the reversal is imminent given its oversold condition.
It’s hard to predict if the rally can continue after the bounce, the index seems a bit long-term overbought, albeit short-term oversold. A contradiction, but that is the situation now.

Iberdrola/Avangrid: Spread

Post-March announcement, investors bought shares of Avangrid (AGR US) in the hope of an offer sweetening, which was flagged here, as Iberdrola got $6 billion from its Mexico exit.
The improved $35.75/shareoffer was made in response to potential resistance from prospective minority shareholders, as the deal needs the approval of a majority of these non-Iberdrola stakeholders.
Spread is 3.2%/5.55% (gross/annualised) assuming $1.4667 in dividend payments (three dividends of $0.44 and a prorated dividend of $0.1467) and settlement on 30 December. Long.

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May 24

Daily Brief Event-Driven: EOFlow (294090 KS): Suitably Pumped and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

EOFlow (294090 KS): Suitably Pumped
FSS Head Lee Made an Urgent TV Appearance Today to Discuss the Resumption of Short Selling
Henlius Biotech (2696 HK): Fosun Offer?
Henlius (2696 HK): Privatisation by Fosun Pharma?
Tata Technologies IPO Lockup Expiry – US$1.5bn Lockup Release, Some Funds Are Sitting on 40x Gains
Anglo American Rejects BHP’s Increased and Final Offer
SciClone Pharmaceuticals (6600 HK): 19th June Shareholder Vote

EOFlow (294090 KS): Suitably Pumped

For a company that strives to improve people’s lives, investors in EOFlow (294090 KS) shares have mostly faced a world of pain over the past year.
After Insulet Corp (PODD US) filed a lawsuit on the 8th August 2023, accusing EOFlow of misappropriating trade secrets, patent infringement, and trademark dilution, shares declined ~88% by year-end.
Earlier this month, the courts quashed Insulet’s preliminary injunction. EOFlow is up 200%. Insulet is up 3% (?). And Medtronic (MDT US), EOFlow’s prior suitor, is no doubt weighing options.

FSS Head Lee Made an Urgent TV Appearance Today to Discuss the Resumption of Short Selling

Lee urgently appeard on TV today and said, “In June, we will explain whether and when short selling will be resumed, and what criteria we might use for the resumption.”
He noted considering flexible partial short selling resumption even if only some conditions are met, contrasting the Presidential Office’s stance from two days ago.
Presidential Office led short selling ban, now likely under FSC/FSS jurisdiction for resumption.

Henlius Biotech (2696 HK): Fosun Offer?

Biopharmaceutical outfit Shanghai Henlius Biotech (2696 HK) is currently suspended pursuant to the Takeovers Code.
Shanghai Fosun Pharmaceutical (Group) (2196 HK) holds ~60% in Henlius, mostly via domestic shares. Co-founders and Qatar Authority hold ~28% and 8% the H shares respectively.
IF an Offer were to unfold, it would be the third in this space in the past two months, after Offers for Sciclone (6600 HK) and Yichang HEC (1558 HK),

Henlius (2696 HK): Privatisation by Fosun Pharma?

Shanghai Henlius Biotech (2696 HK) entered a trading halt “pending the release of an announcement pursuant to the Code on Takeovers and Mergers.” The likely bidder is Fosun Pharma.
A merger by absorption would require approval by at least 75% independent H Shareholders (<10% of all independent H Shareholders rejection). There could also be a 90% minimum acceptance condition.
The shares are 62% below the IPO price. However, shareholders with blocking stakes would welcome an offer suggesting a 30-40% takeover premium would be sufficient.

Tata Technologies IPO Lockup Expiry – US$1.5bn Lockup Release, Some Funds Are Sitting on 40x Gains

By Sumeet Singh

Tata Technologies (TT) raised around US$370m in its India IPO in Dec 2023.
Tata Technologies is a global engineering services company offering product development and digital solutions, including turnkey solutions, to global original equipment manufacturers (OEMs) and their tier 1 suppliers.
In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

Anglo American Rejects BHP’s Increased and Final Offer

On 22 May, Anglo American rejected the last offer (0.8860) from BHP on execution risks, potential negative value impacts and additional approvals needed in South Africa. PUSU extended 29 May.
I update my SOTP to 2938p. Copper Fair Value, in my opinion, is £17.70 per share. This contrasts with BHP’s current offer of £21.32/share for the entirety of Anglo’s rump.
There is now a ~20.1% difference between the implied value of BHP’s offer and the share price of Anglo. The market assumes a lower likelihood of an agreed deal

SciClone Pharmaceuticals (6600 HK): 19th June Shareholder Vote