Event-Driven

This morning, BHP Group Ltd (BHP AU) and OZ Minerals Ltd (OZL AU) announced they had entered into a Scheme Implementation Deed at A$28.25/share (5wks after I said 3-6 weeks).
All terms are confirmed and there may be a fully-franked dividend up to A$1.75/share which would reduce terms to A$26.50. The OZL Directors unanimously recommend.
Anti-Trust approvals are needed in Brazil & Vietnam, other standard conditions, and the OZL Scheme Meeting should be late March early April. I expect this is done.

Swire Now Buying Back B Shares Only

In August this year, Swire Pacific started a buyback programme for up to HK$4.0 billion worth of their shares (Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK)).
The shares went up. And B briefly outperformed A, but since then, the B/A ratio has fallen and my impression was Swire may have been misinterpreting the buyback rules.
Swire had been buying both every day. But they’ve been Buying Bs but no As for the last ten days in a row. This begs a few questions.

Nojima (7419) Launches Buyout of Conexio (9422)

Nojima Corp (7419 JP) is buying out Conexio Corp (9422 JP) majority owner Itochu Corp (8001 JP) along with minorities. At a 59% premium, it looks good.
However, in terms of normalised EV/EBITDA or EV/FCF multiple, this is not expensive.
And while the major seller/target and friendlies are oh so close, the register is more interesting than the yuho top 10 shareholder list suggests.

JAFCO (8595 JP): Murakami Gets His Way with a JPY2,500 Tender Offer

Jafco Co Ltd (8595 JP) and Murakami have reached an agreement on a revised tender offer for 16.8 million shares (23.60% of outstanding shares) at JPY2,500 per share.
The revised tender offer’s primary purpose remains to facilitate Murakami to tender his 19.53% shareholding at the expense of other shareholders and the misallocation of JPY42 billion (tender cost).
The justification for the transaction is weak as most of the benefits could have been achieved without it. This calls into question the Board’s ability to enhance value.

Futu (FUTU US / 3588 HK): Dual Primary Listing, Stock Connect & Potential HSCI/HSTECH Inclusion

Futu Holdings Ltd (FUTU US) will Dual Primary list on the HKEX (388 HK) by Way of Introduction and the stock is expected to start trading on 30 December.
Following the changes to the handling of Dual-Primary-listed companies, Futu Holdings Ltd (FUTU US) should be added to the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
Futu Holdings Ltd (FUTU US) should also be added to the HSCI at the March rebalance and should be added to Southbound Stock Connect late July/ early August.

Conexio Corporation (9422 JP) JPY1,911 Tender Offer from Nojima

Conexio Corp (9422 JP) has recommended Nojima Corp (7419 JP)’s tender offer of JPY1,911 per share, an 59.1% premium to the undisturbed price (22 December).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the offer has been set to meet the 66.67% ownership ratio.
The tender offer was set in motion due to Itochu Corp (8001 JP)’s desire to exit. Itochu tendering its 60.34% stake and an attractive offer, suggests a done deal.

OZ Minerals (OZL AU)’s SID with BHP at A$28.25

OZ Minerals Ltd (OZL AU) has entered into a SID with BHP Group Ltd (BHP AU) at A$28.25 per share, a 49.3% premium to the undisturbed price (5 August).
The offer price is attractive. The key conditions are shareholder and regulatory (Brazil and Vietnam) approvals. The scheme meeting is in late March/early April 2023.
The key risk is the rise in copper prices. At last close and for the end-April payment, the gross and annualised spread to the offer is 1.6% and 4.8%, respectively.

Revised CGT/SST in Korea: Intense Selling Flow on T-1 Ex-Date Will Be Intact Until 2024

The all-inclusive CGT will be implemented in 2025. The current partial capital gains tax will be maintained until 2024. And the STT will drop from 0.23% to 0.15% in 2024.
The critical cause of an arb opportunity on ex-date price correction+dividend yield has been the yearend selling flow on T-1 ex-date for the purpose of tax avoidance by majority shareholders.
So, from this year to 2024, we should keep an eye on this arbitrage opportunity, which will continue to arise.

MergerTalk:Why Black Knight May Be As Safe As Houses Even If Regulators Stop Its Merger With ICE

By Robert Sassoon

We think that a ~40% spread overstates the risk of this deal not moving to completion.
The horizontal integration aspects of this transaction can be remedied, but this is a largely vertical merger transaction which regulators may struggle to prove will lead to monopolistic behavior.
Even if the ICE merger is ultimately blocked, BKI has other supporting factors that could drive upside – an attractive valuation and a potential revival of interest from other parties

EQD | HSI Index:-Chinese Equities Have Held up into Year End and We Revisit the December Call Ratio

By Simon Harris

Chinese equities have continued to outperform versus other global markets
The HSI Index 200dma has proved to be a barrier to the upside
We evaluate the call ratio we suggested in November and recommend action

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Dec 22

Daily Brief Event-Driven: JAFCO (8595) Succumbs to Even Worse Greenmail – SPECTACULARLY BAD Governance and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JAFCO (8595) Succumbs to Even Worse Greenmail – SPECTACULARLY BAD Governance
Appier (4180) – Down But Not Out; Shareholder Structure Still The Biggest Risk
Nippon Steel & Mitsui & Co to Buy Out Nippon Steel Trading (9810) At 87% Premium
ENEOS to Buy Out Tatsuta Electric (5809) At 74% Premium
Nippon Steel Trading’s (9810 JP) JPY9,300 Tender Offer from Nippon Steel
Warrego Energy: Reinhart Disses Strike’s “Superior” Offer
Mandatory Offer Arrives in Korea: Detailed Rules & Trading Ramifications
Thailand SET 50 Dec 22 Rebal: Good Hit Rate, Successful Pre-Event Trade, Unwind Now
AMFI Stock Reclassification Preview (Dec 2022): A Bunch of Migrations
TIGER (WISE) Secondary Battery ETF Rebalancing in January: Names to Watch

JAFCO (8595) Succumbs to Even Worse Greenmail – SPECTACULARLY BAD Governance

Jafco Co Ltd (8595 JP) was the target of activist Murakami-san in August 2022. They threatened a poison pill. Murakami-san sold, then bought to 19.5%. They negotiated. He won.
His result excluded others. The market did not take it well. Murakami-san rejected taking a 1% hit to original terms (vs reference NAV). JAFCO went back to the drawing board.
Then submitted to greenmail at a higher price. The first buyback was agreed at ¥2,500 vs ¥2,651 NAV. The new one? ¥2,730-2,840 vs ¥2,513 NAV. Inexplicable – Spectacularly Bad Governance.

Appier (4180) – Down But Not Out; Shareholder Structure Still The Biggest Risk

Appier Group (4180 JP) had been among our picks for TSE Prime promotion and we had recommended positioning for it. That worked. On 8 Dec they announced the promotion.
The company is now part of TSE Prime which means a TOPIX Inclusion at end-January and an upweight in April. More than 20% of TSE float to buy by end-April.
Share price performance has not kept pace with potential, and yesterday’s BOJ decision saw a flurry of volume selling (bailing). Pre-IPO holder overhang may be the biggest “risk” here.

Nippon Steel & Mitsui & Co to Buy Out Nippon Steel Trading (9810) At 87% Premium

Nippon Steel Corporation (5401 JP) and Mitsui & Co Ltd (8031 JP) today announced they would buy out Nippon Steel & Sumikin Bussan (9810 JP), their steel-trading subsidiary.
The shares trade near an all-time high, but Nippon Steel is paying an 87% premium. (Interestingly, the high end of the DCF ranges suggest a 280% premium)
On fundamentals, this could have been higher, but given the shareholder structure, I expect it is a done deal as-is. The Tender Offer should start in February 2023.

ENEOS to Buy Out Tatsuta Electric (5809) At 74% Premium

ENEOS Holdings (5020 JP) and subsidiary JX Nippon Mining & Metals Corporation announced today it would buy out minorities in miner and refiner Tatsuta Elec Wire & Cable (5809 JP).
The Tender Offer comes at a 74% premium for their 37% sub. 5% off a 2yr high, 10% off a 20-year high. This is likely to be a “done deal”.
JX probably starts with ~55% in the bag out of the 66.7% minimum. But the tender doesn’t start for ~ 6 months. Separately, importantly, there is a precedent here.

Nippon Steel Trading’s (9810 JP) JPY9,300 Tender Offer from Nippon Steel

Nippon Steel & Sumikin Bussa (9810 JP) has recommended Nippon Steel Corporation (5401 JP)’s tender at JPY9,300 per share, an 87.5% premium to the undisturbed price and an all-time high.
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the offer has been set to meet the 66.67% ownership ratio.
Mitsui & Co Ltd (8031 JP) will retain its 19.93% stake and together with Nippon Steel account for 55.01% of outstanding shares. Tender starts in late-February subject to antitrust clearances.

Warrego Energy: Reinhart Disses Strike’s “Superior” Offer

After the Gina Reinhart-backed Hancock bumped its Offer for Warrego Energy (WGO AU) to A$0.28/share, in cash, Beach Energy (BPT AU) declined to match the revised Offer.
With Hancock seemingly in the driver’s seat, Strike Energy (STX AU), with 19.9% of shares out, proposed a one-for-one scrip Offer, with an indicative price of A$0.335/share.
Hancock has responded that its Offer provides certainty, with cash, whereas Strike’s proposal does not. Now 15.84% of the register has come out in support of Hancock’s Offer.

Mandatory Offer Arrives in Korea: Detailed Rules & Trading Ramifications

The target is those who purchase 25% or more of the shares of a listed company and become the largest shareholder with management rights.
The minimum volume of a mandatory offer is [(50% of total shares + 1 share) – the management right purchase volume].
We will be exposed to pro-rata risk, so it will be essential to figure out the nature and propensity of the shareholder composition to estimate the tendering rate in advance.

Thailand SET 50 Dec 22 Rebal: Good Hit Rate, Successful Pre-Event Trade, Unwind Now

By Janaghan Jeyakumar, CFA

The index changes for the Thailand SET Index (SET INDEX) for the December 2022 Rebalance were announced yesterday (20th December 2022) after the close.
There will be four ADDs/DELs for the SET 50 index.
In this insight, we take a closer look at our expectations for index flows and potential trading ideas.

AMFI Stock Reclassification Preview (Dec 2022): A Bunch of Migrations

Near the end of the review period, we see 7 stocks moving from MidCap to LargeCap, 6 from LargeCap to MidCap, 8 from SmallCap to MidCap and vice versa.
One spin-off should be added to the MidCap segment, while a bunch of recent listings will be added to the SmallCap segment.
Stock migrating upwards have outperformed stocks migrating downwards and we expect there could be some mean reversion from the middle of January.

TIGER (WISE) Secondary Battery ETF Rebalancing in January: Names to Watch

The key to this rebalancing is the inclusion of WCP, which satisfies the requirements of minimum listing period and secondary battery sales amount.
As a hedge for the LONG WCP position, we can use Soulbrain and Solus Advanced, whose passive outflow is relatively high among those of a similar size to WCP.
Among large caps, we should pay attention to L&F, Posco Chemical, and Iljin Materials. However, we should be cautious about approaching them as an active trading target.

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Dec 21

Daily Brief Event-Driven: KLINE (9107) CEO Comes Out Swinging – More LPG Carriers and More Shareholder Returns THIS YEAR and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

KLINE (9107) CEO Comes Out Swinging – More LPG Carriers and More Shareholder Returns THIS YEAR
SET50 Index Rebalance: CENTEL, COM7, DELTA, RATCH Added; BLA, IRPC, KCE, SAWAD Out
Northbound Stock Connect Expansion: Potential Changes in 2023
Fengxiang (9977 HK): SPA Completed. Now For The Unconditional MGO
S&P/ASX Quiddity Leaderboard Mar 23: Index Changes Galore
KOSPI 200 Rebalancing Early Preview: Few Names Stand Out
Fengxiang (9977 HK)’s Share Transfer to PAG Complete, Unconditional MGO
Korea FSC: Official Mandate of Appraisal Rights in Split-Offs & Trading Ramifications
Selected European Holdcos and DLC: November/Mid-December‘22 Report

KLINE (9107) CEO Comes Out Swinging – More LPG Carriers and More Shareholder Returns THIS YEAR

The Nikkei reported this AM that Kawasaki Kisen Kaisha (9107 JP) CEO was considering increasing shareholder returns this fiscal year. It already has a juicy div and a ¥100bn buyback.
The company announced its buyback, and an agreement by two holders of 39% to sell in a ToSTNeT-3 buy, then started buying in the market. Results are impactful.
The shares are up today on this news, though they gave some back after the BOJ news. The outlook for more share price impact is not bad.

SET50 Index Rebalance: CENTEL, COM7, DELTA, RATCH Added; BLA, IRPC, KCE, SAWAD Out

Central Plaza Hotel, Com7 PCL, Delta Electronics Thai and Ratch Group will replace Bangkok Life Assurance, IRPC PCL, KCE Electronics PCL and Srisawad Power in the SET 50 Index.
Passive trackers will need to buy between 2-4 days of ADV on the adds while selling between 0.6-3 days of ADV on the deletes.
The adds have significantly outperformed the deletes over the last few months. We’d use any big moves over the next couple of days to trim positions.

Northbound Stock Connect Expansion: Potential Changes in 2023

On Monday, the CSRC and the SFC agreed to further deepen mutual stock market access between the Mainland and Hong Kong and promote the development of both capital markets.
For Northbound Stock Connect, the eligible universe has been widely expanded to include constituents of the SSE A Share Index and the SZSE Composite Index.
There are 1,112 stocks that join the eligible universe, and 938 stocks currently meet the criteria for Northbound Stock Connect inclusion. There are implications for inclusion in global indices.

Fengxiang (9977 HK): SPA Completed. Now For The Unconditional MGO

A little over two months since PAG Capital won the judicial auction to acquire 70.92% of Shandong Fengxiang (9977 HK), the acquisition has now cleared all regulatory clearances, including SAMR.
PAG will now be required to make an unconditional Offer for all H-shares at HK$1.5132/share. Separately, PAG intends to delist Fengxiang which involves Scheme-like delisting resolutions.
This is done. The timing for approving the SPA was bang-on with my expectation.

S&P/ASX Quiddity Leaderboard Mar 23: Index Changes Galore

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential index changes for S&P ASX 300, 200, 100, 50, and 20 in the run up to the March 2023 Rebalance.
Pendal Group (PDL AU)‘s deletion is expected in early-January 2023 and this could trigger an intra-review addition to the ASX 200 index.
I expect there to be one, two, and four changes, respectively, for the ASX 20, ASX 100, and ASX 200 indices in the March 2023 Rebalance.

KOSPI 200 Rebalancing Early Preview: Few Names Stand Out

One name is screened to newly join the index. That is Kum Yang (001570 KS). With a YTD performance of over 400%, it is currently in very safe territory.
Two constituents stand out as likely deletes at this point: Zinus (013890 KS) and Hwaseung Enterprise (241590 KS). The market cap gap with the next ones in line isn’t small.
Kum Yang’s passive impact is substantially low due to the recent surge in TV. But if it moves sideways and TV stabilizes downward, we should build preemptive flow trade setups.

Fengxiang (9977 HK)’s Share Transfer to PAG Complete, Unconditional MGO

PAG completed the auction procedures for the acquisition of a 70.92% stake in Shandong Fengxiang (9977 HK). This will trigger an unconditional MGO at HK$1.5132 per H Share.
As PAG has no compulsory acquisition rights, it will also seek shareholder delisting approval. The MGO is not conditional on the approval of the delisting resolution.
The composite document is to be despatched on or before 28 December. At last close and for an end-of-January payment, the gross and annualised spread is 5.1% and 65.9%, respectively.

Korea FSC: Official Mandate of Appraisal Rights in Split-Offs & Trading Ramifications

The exercise price is the arithmetic average of weighted average prices for the past two months, the past month, and the past week from the day before the board resolution.
Considering the governance structure of most local companies, a split-off will still be more likely to be preferred than a spin-off. Split-offs will emerge despite the mandate of appraisal rights.
We should look into staggering spread openings, with the pricing done on a two-month window, as a downward price revision will likely intensify toward the announcement with mandatory appraisal rights.

Selected European Holdcos and DLC: November/Mid-December‘22 Report

By Jesus Rodriguez Aguilar

Discounts to NAV of covered holdcos have showed a mixed performance during November and the first half of December, with the same number of spreads widening and tightening.
Discounts to NAV (31 October): C.F.Alba, 49.5%; GBL, 35.7%; Heineken Holding, 18%; Industrivärden C, 13.5%; Investor B, 15.5%; Porsche Automobile Holding 40.4%. The spread of Rio Tinto DLC widened to %.
Spreads tend to widen in bear markets but short-term recoveries provide opportunities on tightening discounts. Recommended trades are: GBL, Rio Tinto (DLC), CF Alba (long position).

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Dec 20

Daily Brief Event-Driven: Fujitec (6406) Activism Levelling Up – A Board Spill to Come? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Fujitec (6406) Activism Levelling Up – A Board Spill to Come?
Boss Zhipin (2076 HK | BZ US) HK Dual Primary Listing on 22 Dec – Index, Southbound, and SPECIAL
Southbound Stock Connect Expansion: Potential Adds in 2023
IPet Holdings (7339 JP) – Tender Offer Extended But No Biggie
Straits Times Index Quiddity Leaderboard Mar 23: SMM Addition Could Cause SATS or KDCREIT Deletion
Warrego (WGO AU): Strike Energy (STX AU) Strikes with a Revised Offer
SARIA/Devro: Agreed Offer
GoTo IPO Lockup Expiry Follow-Up – Has Corrected but Has Traded Relatively Little Volume

Fujitec (6406) Activism Levelling Up – A Board Spill to Come?

Two years ago, I wrote about the history of activist attention on what was then the 8th largest elevator maker in the world Fujitec Co Ltd (6406 JP).
In Activist Pressure FINALLY Works on Fujitec (6406)- Going Up? (Albeit Slowly) I discussed what were still nascent efforts by Oasis to trigger change at the top.
On 30 November 2022, Oasis – which officially went above 5% only this past March but on 30 November reported 16.52% – called an EGM. It’s worth a look.

Boss Zhipin (2076 HK | BZ US) HK Dual Primary Listing on 22 Dec – Index, Southbound, and SPECIAL

Kanzhun (BZ US) a.k.a. has been listed in the US since about the same time as DiDi Global (DIDI US), and it had similar but minor tech issues pre-listing.
On Friday 16 December, the company announced it would conduct a Listing by Introduction in Hong Kong under the ticker Zhipin (2076 HK), listing on 22 Dec.
That creates an interesting launch supply/demand dynamic, likely HS Tech inclusion in March 2023, and then Southbound much later in 2023.

Southbound Stock Connect Expansion: Potential Adds in 2023

Last evening, the CSRC and the SFC agreed to further deepen mutual stock market access between the Mainland and Hong Kong and promote the development of both capital markets.
For Southbound Stock Connect, eligible foreign companies primary-listed in Hong Kong will become eligible. That could mean 5 additions to Stock Connect.
Additionally, Southbound access via Shanghai Stock Connect will be expanded to being it in alignment with Shenzhen Stock Connect. That could see 131 stocks added to Shanghai Stock Connect.

IPet Holdings (7339 JP) – Tender Offer Extended But No Biggie

On 8 November, major Japanese life insurer Dai Ichi Life Insurance (8750 JP) announced it would buy out leading pet insurer ipet Holdings (7339 JP). Yes, you read that right.
Japanese listed VC/PE firm and incubator Dream Incubator Inc (4310 JP) owns 55% and agreed to tender. Tender success is dependent on getting 66.7%.
Today the buyer extended for 10 days because it had received approval under Article 271-22 Para 1 of the Insurance Business Act, triggering a requirement to refile/extend.

Straits Times Index Quiddity Leaderboard Mar 23: SMM Addition Could Cause SATS or KDCREIT Deletion

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential index changes for the FTSE Straits Times Index (STI) (STI INDEX) between now and the March 2023 index review.
The Sembcorp Marine (SMM SP) – Keppel Corp (KEP SP) deal seems likely to complete in 1Q 2023.
Below is a look at the potential index flow consequences of this deal and other potential index changes between now and the March 2023 Rebalance.

Warrego (WGO AU): Strike Energy (STX AU) Strikes with a Revised Offer

Strike Energy (STX AU)’s revised off-market takeover is 1 STX share per Warrego Energy (WGO AU) share, a 29.0% premium to its previous offer and a 21.4% premium to Hancock’s offer.
Hancock has the war chest to comfortably outbid STX. However, the smart move for Hancock is to be disciplined on price and instead bid for the combined STX/WGO post-completion.
The Board’s view will be sent in Target’s statement to be despatched by 29 December. At the last close, the gross spread to STX’s offer is 6.3%.

SARIA/Devro: Agreed Offer

By Jesus Rodriguez Aguilar

Saria agreed to acquire Devro for 316.1p/share in cash, for an implied equity value of £540.8 million and an implied EV of £667 million. This represents 9.6x EV/Fwd EBITDA, 65% premium.
The offer price seems fair: the multiple is close to Viscofan’s (market leader) and my fair value estimate is 305p (DCF based). A competing bid seems unlikely.
After the shares went ex-dividend, gross spread is 2.7%, but the estimated annual return is 3.6% (assuming settlement by 30 September 2023), which means there should be better opportunities elsewhere.

GoTo IPO Lockup Expiry Follow-Up – Has Corrected but Has Traded Relatively Little Volume

GoTo pre-IPO shareholders were released from the lockup on 1st Dec 2022, which led to a 47% slide in its share price.
We had written about the upcoming lockup expiry in our earlier note, GoTo IPO Lockup Expiry – US$13bn Lockup Release or in Other Words, the Real IPO.
While the price appears to be settling down now, given the intra-day trading limits in Indonesia, very little volumes have been transacted compared to the shares released from lockup.

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Dec 19

Daily Brief Event-Driven: Yuanta/P-Shares Taiwan Dividend Plus ETF: Day 1 Flows & Performance and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Yuanta/P-Shares Taiwan Dividend Plus ETF: Day 1 Flows & Performance
MSCI Korea: An Early Assessment of February Index Review
Merger Arb Mondays (19 Dec) – Toyo, Genesis/St Barbara, Norwest, Nitro, Tyro, Elmo, Yashili, O2Micro
KOSPI Size Index: Early Preview at One Fourth into Screening Period
Weekly Deals Digest (18 Dec) – Acotec, Yashili, Toshiba, Toyo, Genesis, Norwest, O2Micro, VinFast

Yuanta/P-Shares Taiwan Dividend Plus ETF: Day 1 Flows & Performance

The Yuanta/P-shares Dividend Plus ETF (0056 TT) started to rebalance its holdings on Friday and will continue to do so for the next 4 trading days.
Stocks with buy flows dropped 1.82% on average on Friday while the stocks with sell flows rose 1.03%. On a flow weighted basis, the numbers were -2.01% vs +1.09%.
Given the large volumes at auction and the large moves on stocks, we cannot rule out the possibility that a lot of pre-positions were unwound at the close on Friday.

MSCI Korea: An Early Assessment of February Index Review

MSCI’s quarterly comprehensive index review begins with the February review. QIR disappears, and all quarters are subject to the SAIR rules.
Currently, no constituents face deletion risk. On the other hand, we have three potential additions: Hanwha Aerospace (012450 KS), Meritz Financial Group (138040 KS), and Kakao Pay (377300 KS).
Meritz Financial will likely take Meritz Fire’s place through a Continuation. Kakao’s chances have increased significantly due to the recent price rise and the comprehensive index review.

Merger Arb Mondays (19 Dec) – Toyo, Genesis/St Barbara, Norwest, Nitro, Tyro, Elmo, Yashili, O2Micro

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Genex Power Ltd (GNX AU), Golden Energy & Resources (GER SP), Origin Energy (ORG AU).
Lowest spreads Warrego Energy (WGO AU), Nitro Software Ltd (NTO AU), Chip Eng Seng Corp (CHIP SP), Uzabase Inc (3966 JP), Norwest Energy Nl (NWE AU), Elmo Software (ELO AU).

KOSPI Size Index: Early Preview at One Fourth into Screening Period

To MID migrants: Amorepacific Group (002790 KS), E Mart (139480 KS), Iljin Materials (020150 KS), Hanjin KAL (180640 KS), OCI (010060 KS), LX Semicon (108320 KS), and SOCAR (403550 KS)
To LARGE migrants: Hyundai Rotem (064350 KS), Hotel Shilla (008770 KS), GS Retail (007070 KS), CS Wind (112610 KS), and Posco International (047050 KS)
This time, the degree of predictability is high as the MC gap widened from an early point. So, we should consider building our position in phases from early next month.

Weekly Deals Digest (18 Dec) – Acotec, Yashili, Toshiba, Toyo, Genesis, Norwest, O2Micro, VinFast

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 – VinFast (1905332D VN) pre-markets a US$1bn IPO and Weilong Delicious Global (9985 HK) has a poor debut.
Event-Driven developments – Genesis Minerals (GMD AU)/St Barbara Ltd (SBM AU), Norwest Energy Nl (NWE AU), Acotec Scientific Holdings (6669 HK), Toshiba Corp (6502 JP), Toyo Construction (1890 JP), O2Micro.

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Dec 18

Daily Brief Event-Driven: Norwest Energy (NWE)’s Opportunistic Bid from Mineral Resources (MIN AU) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Norwest Energy (NWE)’s Opportunistic Bid from Mineral Resources (MIN AU)
Celltrion Siblings Announced Dividends: Trading Based on Past Patterns
Last Week in Event SPACE: NTT Data, Origin Energy, Toyo Construction, Haidilao, Toshiba
Index Rebalance & ETF Flow Recap: S&P/ASX, HSCEI, HSTECH, Haidilao/Super Hi, CSI REIT
Kanzhun (BZ US/ 2076 HK): Dual Primary Listing & Potential HSTECH Inclusion
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
Elmo Software (ELO AU)’s Scheme Meeting on 30 January
O2Micro (OIIM US) Privatisation Vote on 31 January
(Mostly) Asia-Pac Weekly Risk Arb Wrap: St Barbara/Genesis, Tyro, Yashili, Acotec, Okk Corp/Nidec
SK Inc: Chairman Chey’s Divorce Settlement Finalized + SoTP Valuation Analysis

Norwest Energy (NWE)’s Opportunistic Bid from Mineral Resources (MIN AU)

Mineral Resources (MIN AU) has launched an all-scrip off-market takeover offer at 1 MIN share for every 1,367 Norwest Energy Nl (NWE AU) shares, a 33.3% premium to undisturbed price.
There is no minimum acceptance condition, and the offer is only subject to prescribed occurrences. The timing is opportunistic and motivated by recent Perth Basin consolidation activity.
While the offer implies a premium to historical prices, the gross exchange ratio is unattractive. MIN’s key aim is privatisation, and a bump is likely required to achieve that goal.

Celltrion Siblings Announced Dividends: Trading Based on Past Patterns

The three Celltrion companies are showing the same pattern of boosting share prices towards the yearend T-1 ex-date. This isn’t unique to Celltrion, but the intensity is high for them.
Celltrion’s yearend dividend effect has an inverse correlation with the market’s overall performance. Fortunately, this year’s market-wide performance was the worst in the past five years.
For this year, the dividend yield isn’t bad either, swing on Dec 17 to T-1 ex-date or day trade on T-1 ex-date should provide juicy returns based on past patterns.

Last Week in Event SPACE: NTT Data, Origin Energy, Toyo Construction, Haidilao, Toshiba

Stay long NTT Data Corp (9613 JP) through mid-January. Then sell.
Origin Energy (ORG AU) may drift lower as the street crunches numbers, in tandem with a vacuum of news as Brookfield undertakes its due diligence.
Toyo Construction (1890 JP) is now upset that YFO has decided to release the reason why Toyo management didn’t.

Index Rebalance & ETF Flow Recap: S&P/ASX, HSCEI, HSTECH, Haidilao/Super Hi, CSI REIT

It was a busy Friday with the implementation of the December rebalance for multiple indices. The Yuanta/P-shares Taiwan Dividend Plus ETF will continue to rebalance over the next 4 days.
The coming week should be relatively quiet with the announcement of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) changes expected.
There were large inflows to ETFs focused on China, Korea, Japan, Taiwan. There were inflows to Hang Seng H Share Index ETF and outflows from Tracker Fund of Hong Kong.

Kanzhun (BZ US/ 2076 HK): Dual Primary Listing & Potential HSTECH Inclusion

Kanzhun (BZ US) will Dual Primary list on the HKEX (388 HK) by Way of Introduction and the stock is expected to start trading on 22 December.
Following the changes to the handling of Dual-Primary-listed companies, Kanzhun (BZ US) should be added to the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
Kanzhun (BZ US)‘s inclusion will lead to other changes to the Hang Seng Tech Index (HSTECH INDEX) with an extra deletion to keep the number of index constituents at 30.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

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

Elmo Software (ELO AU)’s Scheme Meeting on 30 January

The IE considers K1’s A$4.85 offer for Elmo Software (ELO AU) to be fair and reasonable as it is towards the high end of its valuation range of A$4.39-4.98.
K1 has received FIRB and US antitrust approval. The remaining key conditions are shareholders and court approval.
This is a done deal. At the last close price and for the 23 February 2023 payment, the gross and annualised spread is 1.9% and 10.9%, respectively.

O2Micro (OIIM US) Privatisation Vote on 31 January

O2Micro International (OIIM US)’s EGM to vote on the US$5.00 per ADS privatisation offer from FNOF Precious Honour Limited is on 31 January 2023.
Shareholders representing two-thirds of shares need to approve the deal. As rollover shareholders represent 16.92% of voting rights, 59.88% of disinterested shareholders must vote YES to meet the two-thirds threshold.
While peers have re-rated, the offer is attractive and there are no competing bids. At the last close, the gross spread to the offer is 11.6%.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: St Barbara/Genesis, Tyro, Yashili, Acotec, Okk Corp/Nidec

There are 48 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Four new deals were discussed on Smartkarma: the St Barbara (SBM AU)/ Genesis Minerals (GMD AU) merger; Acotec (6669 HK)‘s Offer, Okk (6205 JP)‘s Offer, MinRes (MIN AU)/Norwest (NWE AU) merger.
Key updates took place for: Tyro Payments (TYR AU), Origin Energy (ORG AU), Yashili International Holdings (1230 HK), and Toyo Construction (1890 JP).

SK Inc: Chairman Chey’s Divorce Settlement Finalized + SoTP Valuation Analysis

By Douglas Kim

In early December, the divorce settlement between SK Group Chairman Chey Tae-Won and his former wife Roh So-Young was finalized after 6+ years of long proceedings.
The end of the divorce settlement means that there is now a greater probability of SK Inc materially cancelling some of its treasury shares in 2023.
Our SoTP valuation of SK Inc suggests an implied valuation of 260,712 won per share, suggesting 28.1% upside from current levels.

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Dec 17

Daily Brief Event-Driven: Celltrion Group Companies – Sharp Increase in Dividends and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Celltrion Group Companies – Sharp Increase in Dividends

Celltrion Group Companies – Sharp Increase in Dividends

By Douglas Kim

Celltrion Inc, Celltrion Healthcare, and Celltrion Pharm all announced much higher dividend payments for this year as compared to last year.
Based on the new dividend payments, the dividend yields are as follows: (Celltrion Inc – 4.2%, Celltrion Healthcare – 4.2%, and Celltrion Pharm – 5%).
Merger of three companies is likely to have long-term positive impact on the their share prices. Although exact timing is uncertain, 2023 could be the year of this merger.

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Dec 16

Daily Brief Event-Driven: Toshiba (6502) – Funding Secured! and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toshiba (6502) – Funding Secured!
China ADRs Delisting – Christmas Came a Day Earlier than We Expected – No Delisting Risk for Now
Yashili/Mengniu: Are We There Yet?
China ADRs: PCAOB Resets the Clock on Delistings; Implications
Toshiba (6502 JP): Securing Financing Helps Sentiment but Hurdles Remain
Discussing Why Meritz Swap Spread Not Being Narrowed & When to Enter
MinRes’ “Unconditional” Offer For Norwest
Liquid Universe of European Ordinary and Preferred Shares: December ‘22 Report

Toshiba (6502) – Funding Secured!

A Nikkei article today suggests FUNDING SECURED for JIP’s deal for Toshiba Corp (6502 JP). Noises 2wks ago suggested this timing for a deal, but there are no terms yet.
The syndicate, led by SMBC and Mizuho, “has agreed to ¥1.2trln in loans.” The two leads take two-thirds but details suggest not all is as smooth as the headline suggests.
The remaining questions are whether the major holders will take the bait at that price, and/or whether JIC would come in over the top. I expect yes to the first.

China ADRs Delisting – Christmas Came a Day Earlier than We Expected – No Delisting Risk for Now

Today PCAOB announced that they had secured complete access to inspect and investigate Chinese Firms for the first time in history.
This was on back of the Aug 2022 agreement between PCAOB, CSRC and MOF, which was followed up with a Hong Kong visit by PCAOB officials over Sep-Nov 2022.
We wrote about this on 14th Dec 2022 and expected the results to be out on Friday (16th Dec), they have come out a day earlier than we expected.

Yashili/Mengniu: Are We There Yet?

Back on the 6 May, Yashili International Holdings (1230 HK) announced a pre-conditional Offer, by way of a Scheme, from China Mengniu Dairy Co (2319 HK).
Pre-Conditions concern three sales and purchase agreements, all of which Yashili shareholders voted through on the 16 August.
From a regulatory standpoint, various conditions attached to Dumex China remain outstanding. But the wording in the most recent monthly update suggests the process is getting to the pointy end.

China ADRs: PCAOB Resets the Clock on Delistings; Implications

After getting ‘unprecedented access’ to inspect and investigate audit firms in the PRC, the PCAOB is vacating their 2021 determinations; there will be no ADR delistings in the near future.
PCAOB inspectors have identified numerous potential deficiencies that are consistent with what the PCAOB has encountered in other first-time inspections around the world.
The iShares MSCI China ETF (MCHI US), KraneShares CSI China Internet ETF (KWEB US) and NASDAQ Golden Dragon China Index (HXC INDEX) are trading lower in the U.S.

Toshiba (6502 JP): Securing Financing Helps Sentiment but Hurdles Remain

The Nikkei reports that Japan Industrial Partners (JIP), the preferred bidder, has secured bank financing of around JPY1.2 trillion (US$8.8 billion), conditional on Toshiba Corp (6502 JP) selling some businesses.
JIP will table an offer valuing Toshiba at JPY2.2 trillion (US$16 billion). The special committee is assessing the proposal and a final decision will be made at a board meeting.
JIP’s next challenge is getting the committee to recommend the offer. While a potential offer of JPY5,100 is not terrible, it is well below the original bid expectation of JPY6,000.

Discussing Why Meritz Swap Spread Not Being Narrowed & When to Enter

The swap arb spread has been consistently within the 3% to 5% band since November 23, when arb trading should have actually started.
Meritz Financial’s buyback seems to be making it difficult to build positions on expectations that the price gap relative to Fire and Securities will converge quickly with the swap ratio.
As the actual risk of repaying financial borrows is small, we should start building up positions two weeks before the end of January, aiming to exit in early or mid-February.

MinRes’ “Unconditional” Offer For Norwest

Iron ore and lithium play Mineral Resources (MIN AU) is offering one new share for every 1,367 Norwest Energy (NWE AU), an onshore O&G play, in an off-market takeover.
The implied value of A$0.06/share under the Offer represents a 27% premium to NWE’s one-month VWAP.
MinRes currently owns 19.9% in Norwest. There is no minimum acceptance condition. This is done and will trade tight.

Liquid Universe of European Ordinary and Preferred Shares: December ‘22 Report

By Jesus Rodriguez Aguilar

Since mid-November, spreads have shown a mixed performance across our liquid universe with a slight bias towards widening (10 have widened, 9 tightened).
Trade recommendations long ords / short prefs: Fuchs Petrolub, Henkel, Ericsson, Handelsbanken, SSAB Svenska Stal.
Trade recommendations long prefs / short ords: Sixt, VW, MFE-Media for Europe, Grifols, Atlas Copco.

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Dec 15

Daily Brief Event-Driven: Acotec/Boston Scientific: Even Higher Proration and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Acotec/Boston Scientific: Even Higher Proration
Toyo Construction (1890 JP): Pot Shots and Warning Shots
Yashili (1230 HK): Monthly Update Suggests that Pre-Condition Satisfaction in the Final Leg
CSI REITs Index: An Investable Benchmark Launches Today
PayTM (One 97 Communications) Announces a BUYBACK – Overhang Vs Feelings Vs Buyback Vs Index
Alpha Generation Through Share Buybacks in Korea: December 2022
Adani Enterprise US$2.4bn Raising Early Look – Lots to Think About: Controversies, Debt, Grand Plans

Acotec/Boston Scientific: Even Higher Proration

Back on the 12 December, Acotec Scientific Holdings (6669 HK) announced a Partial Offer from Boston Scientific (BSX US)
The Offer Price of $20/share is for up to 65% of shares out. Irrevocables total up to 60.14% of shares out, sufficient to clear the minimum tendering condition.
My initial read was that the proration was simply 65%. That was wrong. It is higher. Plus there are some interesting quirks to avoid breaching the public float post-Offer.

Toyo Construction (1890 JP): Pot Shots and Warning Shots

YFO’s press release alleges the Toyo Construction (1890 JP) Board will not recommend the tender as YFO is not a suitable owner rather than the JPY,1000 price being too low.
The Board responded that YFO violated the NDA by disclosing the reasons for the Board’s disapproval. This damages the understanding between the parties, an essential precondition to recommending the offer.
The start of the tender has been pushed back to late January 2023. YFO is committed and will not withdraw the offer for any reason that shareholders may consider unreasonable.

Yashili (1230 HK): Monthly Update Suggests that Pre-Condition Satisfaction in the Final Leg

Yashili International Holdings (1230 HK)‘s latest monthly update suggests that the remaining pre-condition, the 25% Yashili acquisition, is entering the final stages towards being satisfied.
The wording “in the course of processing the relevant application” suggests that the government authorities will grant the new registration certificate, which should be received shortly.
The gross spread is 6.2%. The downside is low as both Danone SA (BN FP) and China Mengniu Dairy Co (2319 HK) can waive conditions to satisfy the pre-condition.

CSI REITs Index: An Investable Benchmark Launches Today

The China Securities Index (CSI) will launch the CSI REITs Index today. The index currently has 14 constituents, and the REITs will be capped at 15% of the index weight.
We expect another 6 REITs to be added to the index at the March rebalance. And then at least another 3 more in June.
The launch of the index should result in ETFs and other passive investment products being floated which should further enhance market liquidity and bring long-term benefits to the market.

PayTM (One 97 Communications) Announces a BUYBACK – Overhang Vs Feelings Vs Buyback Vs Index

PayTM, which IPOed 13 months ago at Rs2150/share and now trades 75% lower “intimated” the possibility of a buyback on the 8th, and shares jumped 7.2% on the 9th.
The Board approved the INR 8.5bn buyback at max price INR 810/share late last night. The shares fell slightly today. Now we move to a postal ballot.
The buy-back rules crate interesting parameters and these buy-back terms provide interesting opportunities.

Alpha Generation Through Share Buybacks in Korea: December 2022

By Douglas Kim

In this insight, we discuss the alpha generation through companies that have been buying back their shares in the Korean stock market in the past two months.
In addition to these share buybacks, there has also been more recent news flow regarding the share purchases of Samsung Electronics by numerous senior directors.
In the past month, some of the larger market cap companies including KT&G, Douzone Bizon, and Hyundai Elevator that have been buying back shares have been outperforming KOSPI.

Adani Enterprise US$2.4bn Raising Early Look – Lots to Think About: Controversies, Debt, Grand Plans

Adani Enterprises (ADE IN) is looking to raise INR200bn (US$2.4bn) via a further public offering. The company has obtained board approval and is now awaiting shareholder approval.
It is the flagship company of the Adani Group. The group’s listed entities’ stock performance over the past few years has made the founder one of the richest persons globally.
However, the stock is expensive and has had some issues in the past. In this note, we take an early look at the possible placement and its impact.

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Dec 14

Daily Brief Event-Driven: S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)
NTT Buying NTT Data Shares – ¥40bn to Go
MVIS Australia A-REITs Index Rebalance: Cromwell Property (CMW) Is a Deletion
Toyo (1890) Says “We Reject”. YFO Says “But We Didn’t Talk”. Medium-🌶🌶🌶 Hostile Activism To Ensue
Haidilao’s Imminent SpinOff of the Super Hi Overseas Business – Index Treatment and Implications
Origin Energy: Gas Price Cap Compromises Brookfield’s Offer
Nidec (6594) To Take Over Nidec OKK (6205), Squeezing Out Minorities
DTAC/True Merger: The Court Dismisses the Consumer Council’s Petition
China ADRs Delisting – Friday Could Be Judgment Day for over US$800bn Mcap of Stocks
EQD | Alibaba (BABA US): Revisiting the December Call Ratios

S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)

We currently see one change each for the ASX20 and ASX100 indices, 4 changes for the S&P/ASX 200 and 10 adds/ 6 deletes for the ASX300 Index in March.
There could be an addition to the S&P/ASX 200 (AS51 INDEX) in January following Pendal Group (PDL AU)‘s acquisition by Perpetual Ltd (PPT AU).
PEXA Group (PXA AU) is a potential inclusion to the S&P/ASX 200 (AS51 INDEX) if Link Administration (LNK AU)‘s in-specie distribution of PEXA shares to its shareholders is approved.

NTT Buying NTT Data Shares – ¥40bn to Go

NTT (Nippon Telegraph & Telephone) (9432 JP) and NTT Data Corp (9613 JP) did a deal earlier this year to sell NTT’s global data business to NTT Data. Discussed here.
NTT sold 55% of its current overseas business in NTT Communications, Dimension Data, and NTT Security Group, in return getting 45% of NTT Data’s current global business, plus ¥112bn.
NTT would then spend ¥100bn of the ¥112bn increasing its stake. So far it has spent ¥58.39bn buying 18% of volume every day since Oct 1.

MVIS Australia A-REITs Index Rebalance: Cromwell Property (CMW) Is a Deletion

Cromwell Property (CMW AU) is a deletion from the MVIS Australia A-REITS Index at the close on 16 December.
Passive trackers will need to sell 13.9m shares (5 days ADV) of Cromwell Property (CMW AU) and there appears to be little to no pre-positioning on the stock.
There are a few other stocks that will have over 0.5 days of ADV to buy from passive trackers.

Toyo (1890) Says “We Reject”. YFO Says “But We Didn’t Talk”. Medium-🌶🌶🌶 Hostile Activism To Ensue

In March, Toyo Construction (1890 JP) agreed to be bought out by INFRONEER Holdings (5076 JP) for ¥770/share. One activist objected, and bought 28%. They then said they’d pay ¥1,000.
The Infroneer deal failure started an acrimonious back and forth. The hostility lessened over the summer, but despite activist Yamauchi Family Office’s protestations of love, no deal as of November.
Today saw another press release, delaying things. The contents are 🌶🌶🌶. NOW things are getting more interesting. Hostility is back. Medium-spicy. Three 🌶 out of five.

Haidilao’s Imminent SpinOff of the Super Hi Overseas Business – Index Treatment and Implications

On 11 July, Haidilao (6862 HK) announced it would propose to spin off its international restaurant business (13-15% of revenue) to shareholders and employees. Shareholders approved in August.
There were interim announcements and indeed interim reports with some information, but not a lot. But Super Hi International Holding was headed for separate listing in HK.
Last week, Haidilao said it was going ahead with a Listing by Introduction pending listing approval by HKEX. Haidilao shares go ex- 16 December. Index providers have announced treatment.

Origin Energy: Gas Price Cap Compromises Brookfield’s Offer

On the 10 November, Brookfield and EIG/MidOcean offered Origin Energy (ORG AU) shareholders $9.00/share, a 54.9% premium to last close, by way of a Scheme. The Offer is non-binding.
On the 9 December, the Aussie government said it would take action to limit the worst impacts of the forecast gas price increases to protect Australian households, industry, and manufacturers.
This includes a temporary price cap on new domestic wholesale gas contracts by east coast producers, such as Origin, for 12 months.

Nidec (6594) To Take Over Nidec OKK (6205), Squeezing Out Minorities

Small machine tool maker OKK used to be good for about ¥2bn in EBITDA, then that dropped to the low ¥1bns on average, then the last two years were negative.
A year ago, Nidec agreed to inject capital and buy 66.6% of OKK – Now Nidec OKK – for peanuts. Yesterday, the two agreed a scrip merger on 1 March.
The process and ratio leave a LOT to be desired but they only need 66.67% and with 66.66% already, it’s a done deal. Nothing you can do about it.

DTAC/True Merger: The Court Dismisses the Consumer Council’s Petition

The Administrative Court has dismissed the Thai Consumers Council petition to impose an injunction on the Total Access Communication (DTAC TB)/True Corp Pcl (TRUE TB) merger.
Telenor ASA (TEL NO) and CP Group are currently seeking clarification on certain NBTC conditions such as tariff adjustments and MVNOs network capacity.
Completion is targeted for 1Q23. The current share price ratio of 9.072x vs exchange ratio of 10.221x is attractive. Timing and tweaks to the exchange ratio are risks.

China ADRs Delisting – Friday Could Be Judgment Day for over US$800bn Mcap of Stocks