Event-Driven

HDFC Limited (HDFC IN) and HDFC Bank (HDFCB IN) are looking at a mega-merger where HDFC shareholders will receive 42 shares in HDFCB for every 25 HDFC shares held.
Regulatory and other approvals are expected to take around 18 months and the merger will create a US$145bn behemoth. Some regulatory approvals could be tougher to get than others.
HDFC Limited (HDFC IN) is a member of the FTSE All-World and MSCI India indices, while HDFC Bank (HDFCB IN) is not. The index treatment is tricky.

Shocker! HDFC Bank To Merge With HDFC Limited

This is at a time a shocker and at a time, not. Because of rising regulatory requirements for NBFCs, this was to be expected at some point.
The deal pays Limited shareholders a slight premium vs previous close, but enables them to exit without a holdco discount.
Early days yet regulatorily speaking, but accretive, and it makes a lot of sense. It will be appreciated.

MSCI India Index Rebalance Preview: Potential Changes in May

As of the close on 1 April, we expect Tata Elxsi Ltd (TELX IN) and Jindal Steel & Power (JSP IN) to be included in the MSCI India Index.
Potential deletions at the May SAIR are HDFC Asset Management Co Ltd (HDFCAMC IN), Indraprastha Gas (IGL IN), Mrf Ltd (MRF IN) and Petronet LNG (PLNG IN).
Passive trackers will need to buy between 3-4 days of ADV on the inclusions and sell between 4-16 days of ADV on the deletions.

Perpetual’s Indicative (& Opportunistic) Offer for Pendal Group: Details & Index Implications

Earlier today, Perpetual Ltd (PPT AU) made a conditional, non-binding indicative proposal for Pendal Group (PDL AU) to acquire 100% of the shares by way of a Scheme of Arrangement.
Pendal Group (PDL AU) shareholders will receive 1 share of Perpetual Ltd (PPT AU) for every 7.5 shares of PDL plus A$1.67/PDL share in cash.
This is a highly opportunistic offer and it is unlikely that Pendal Group (PDL AU)‘s Board will support the proposal. There could be further improved proposals that come in.

HDFC+HDFC Bank Merger – A Long Time Coming

By Sumeet Singh

Today morning, HDFC Limited (HDFC IN) announced that it would merger with HDFC Bank (HDFCB IN).
Investors have been asking the two companies about a possible merger for at least the past decade.
In this note, we talk about the background for the merger and why now.

MSCI Japan Index Rebalance Preview: Only Deletions for Now

As of the close on 1 April, we see 13 potential deletions from the MSCI Japan Index. There could be changes in the next couple of weeks as prices change.
The potential deletions are Tokyo Century, Pola Orbis, Miura, Lion Corp, Tsuruha Holdings, Hino Motors, Benefit One, Stanley Electric, Ryohin Keikaku, Sohgo Security Services, Orix JREIT, Rinnai Corp and Lawson.
Most of the stocks will have over 5 days of ADV to sell from passive funds and there has been an increase in short interest over the last month.

Expect Pendal To Reject Perpetual’s Offer

Asset manager Pendal Group (PDL AU) has announced a non-binding proposal from investment firm Perpetual Ltd (PPT AU).
Perpetual’s cash/scrip Offer provides an indicative price of $6.23/share. The proposal would see Pendal’s shareholders owning 48% of the merged entity and Perpetual the remainder.
Pendal is assessing the proposal; however, the wording in the announcement suggests the bid is opportunistic and will be rejected.

Pendal’s Indicative Bid from Perpetual Is Underwhelming

The scrip-heavy bid values Pendal Group (PDL AU) at A$6.23 based on the Perpetual Ltd (PPT AU) price on 1 April, a 39.2% premium to the unaffected price of A$4.48.
The Pendal Board hints at opportunism. We agree as the Perpetual offer is unattractive in the context of historical multiples and share prices.
The bid lays a marker of Pendal’s inherent value, and we think another bidding round is possible. The gross spread to the offer at the last close prices is 12.1%.

SK Square: NAV Post IPOs of SK Shieldus/OneStore and a Major Investment in ARM Holdings?

By Douglas Kim

Our updated NAV valuation of SK Square suggests an implied price of 82,167 won per share, which represents a 46% upside from current levels.
For SK Shieldus and OneStore, we took the mid-points of the IPO price ranges and applied SK Square’s post IPO ownership stakes, respectively.
SK Square’s CEO Park Jung-Ho announced that the SK Group is interested in investing in Arm Holdings. SK Group is well positioned to participate in the investment of ARM Holdings.

Royal Bank of Canada/Brewin Dolphin Holdings: Agreed Offer

By Jesus Rodriguez Aguilar

Brewin Dolphin Holdings (BRW LN) has agreed to be acquired by RBC (scheme of arrangement). Consideration is 515p/share in cash, cum dividend; it represents a 62% premium.
The offer represents 3.2x forward sales vs. 2.9x for the median of comparables (source: Capital IQ consensus). The offer also represents 2.8% of AuM (vs. a common multiple of 2.5%).
Consideration looks fair. The market believes there will be a deal; gross spread is an unexciting (in my view) 0.58%, 1.19% annualised (assuming settlement on 30 September).

Before it’s here, it’s on Smartkarma

Apr 04

Event-Driven: Lenovo, KraneShares CSI China Internet ETF, NIO Inc, Razer Inc, Shanghai Jin Jiang Capital Company Limited and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HSCEI Index Rebalance Preview: Lenovo Could Replace Hansoh Pharma; Great Wall In/Sunac Out?
New CSRC “Provisions” Take a Step Towards Meeting PCAOB Requirements
Hang Seng TECH Index Rebalance Preview: Big Impact as NIO (9866) Could Replace ASM Pacific (522)
Merger Arb Mondays – Yashili, Razer, Sezzle, Link Admin, Uniti, AKM, Virtus
Jin Jiang Capital (2006 HK): Composite Doc Out. 26 April H-Class Meeting

HSCEI Index Rebalance Preview: Lenovo Could Replace Hansoh Pharma; Great Wall In/Sunac Out?

Lenovo (992 HK) could replace Hansoh Pharmaceutical (3692 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the June rebalance to be implemented on 10 June.
If Sunac China Holdings (1918 HK) remains suspended, it could be deleted from the index and Great Wall Motor (2333 HK) could be added to the index.
Passive Hang Seng China Enterprises Index (HSCEI INDEX) trackers will need to buy around 2.45% of Lenovo (992 HK)‘s real float. Short interest is over 17 days of ADV.

New CSRC “Provisions” Take a Step Towards Meeting PCAOB Requirements

The PCAOB has not, despite a cooperation agreement with the CSRC signed in 2013, been able to conduct on-site investigations of a HK or mainland-based company since 2010.
On Friday, the CSRC published a new Strengthening Confidentiality and File Management Related to Overseas Issuance to replace 2009 rules.
Importantly, the revised Provisions deletes the stipulation that “on-site inspections shall be dominated by domestic regulators or depend on the conclusions of inspections by domestic regulators.” Will it be enough?

Hang Seng TECH Index Rebalance Preview: Big Impact as NIO (9866) Could Replace ASM Pacific (522)

NIO Inc (9866 HK) passes the velocity test and could replace ASM Pacific Technology (522 HK) in the Hang Seng Tech Index (HSTECH INDEX) at the June rebalance.
Given the low trading volumes and the large assets tracking the Hang Seng Tech Index (HSTECH INDEX), passive trackers will need to buy around 10 days of ADV on NIO.
Passive trackers need to sell around 7 days of ADV on ASM Pacific Technology (522 HK). Given implementation is two months away, sell the stock on rallies.

Merger Arb Mondays – Yashili, Razer, Sezzle, Link Admin, Uniti, AKM, Virtus

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore and the US (Chinese ADRs only).
This week, the highest gross spreads are Yashili International Holdings (1230 HK), Razer Inc (1337 HK), Sezzle Inc (SZL AU), Link Administration Holdings (LNK AU), Uniti Group Ltd (UWL AU)
The lowest gross spreads CIMIC Group Ltd (CIM AU), China Logistics Property Holdings (1589 HK), Dragon Crown Group (935 HK), 51 Job Inc Adr (JOBS US), Jin Jiang Capital.

Jin Jiang Capital (2006 HK): Composite Doc Out. 26 April H-Class Meeting

Hotel operator Shanghai Jin Jiang Capital Company Limited (2006 HK)‘s Composite Doc is out. The H-Class meeting on the 26 April, with expected payment on the 17 May.
The IFA considers the Offer to be fair and reasonable.
This is done and trading tight at a gross/annualised spread of 1.6%/14%.

Before it’s here, it’s on Smartkarma

Apr 03

Event-Driven: Daiho Corp, JD.com Inc., Uniti Group Ltd, Razer Inc, Shanghai Jin Jiang Capital Company Limited and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Daiho Post-Div STILL Trading Too Rich For the Event Trade
Index Rebalance & ETF Flow Recap: MSCI, KOSDAQ150, HSCEI, KT Corp, JD.com, Tabcorp
Asia-Pac Weekly Risk Arb Wrap: Uniti, Toyo Construction, Irongate, Crown, CIMIC, Jin Jiang Capital
Last Week in Event SPACE: Razer, Daiho, Uniti Group, Toshiba, Tabcorp, China Conch
Jin Jiang Capital’s H Share Class Meeting on 26 April, IFA Opinion

Daiho Post-Div STILL Trading Too Rich For the Event Trade

10 days ago, Daiho Corp (1822 JP) announced an exit for Murakami-san who had gone from zero to 42% of voting rights buying 18% of volume over two years.
They found a kind of white knight to buy the shares Murakami-san wanted to sell. The structure looks “fair” but is not. Almost all investors are now buying through terms.
And the result looks expensive with a rather unfortunate forward flow profile.

Index Rebalance & ETF Flow Recap: MSCI, KOSDAQ150, HSCEI, KT Corp, JD.com, Tabcorp

There are two weeks to the start of the review period for the MSCI May SAIR. There are expected to be many changes to the stocks and their FIFs.
There will be passive buying in JD.com Inc. (9618 HK) from Hang Seng trackers in June, while KT Corp (030200 KS) is a high probability MSCI inclusion in May.
There were big inflows to the iShares MSCI Emerging Markets (EEM US) ETF and iShares Core MSCI Emerging Markets ETF (IEMG US) during the week.

Asia-Pac Weekly Risk Arb Wrap: Uniti, Toyo Construction, Irongate, Crown, CIMIC, Jin Jiang Capital

There are 33 – mostly firm – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
A quiet week with no new deals discussed on Smartkarma.
Key updates took place for: Razer (1337 HK), Uniti Group (UWL AU), Toyo Construction (1890 JP), Irongate (IAP AU), Crown (CWN AU), CIMIC (CIM AU), Jin Jiang Capital (2006 HK)

Last Week in Event SPACE: Razer, Daiho, Uniti Group, Toshiba, Tabcorp, China Conch

Razer Inc (1337 HK)‘s Scheme Document flags the abolishment of the headcount test may become law ahead of the shareholder meeting. That is a game-changer. If true.
Daiho Corp (1822 JP) has announced a deal which is not quite what it looks like. This situation is kind of a governance disaster.
Uniti Group Ltd (UWL AU) backs the revised Morrison/Brookfield tilt and severs ties with Macquarie

Jin Jiang Capital’s H Share Class Meeting on 26 April, IFA Opinion

Shanghai Jin Jiang Capital Company Limited (2006 HK)‘s H Shareholders’ class meeting is scheduled for 26 April. The IFA considers the offer to be fair and reasonable.
The 10% blocking stake is 2.50% of outstanding shares (10.00% of H Shares). The two H Shareholders with blocking stakes will be supportive. There is no minimum acceptance condition.
At last close and for a 17 May payment date, the gross and annualised spread to the total offer is 1.6% and 15.7%, respectively.

Before it’s here, it’s on Smartkarma

Apr 02

Event-Driven: Shinsei Bank, China Conch Venture Holdings, Toyo Construction, Intertrust NV and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Nikkei 225 Rebalance Day – Shinsei Dip Chance?
China Conch (586 HK): Post-Spinoff Blues
Toyo Construction (1890) Funkier Still
CSC/Intertrust: Start of Offer Period

Nikkei 225 Rebalance Day – Shinsei Dip Chance?

The Nikkei 225 Rebalance to boot Shinsei Bank (8303 JP) and add Orix Corp (8591 JP) occurs today at the close.
The announcement was not a surprise per se, but BOTH have outperformed their Peer Baskets since the announcement, ORIX by a long ways.
ORIX is a bigger deal, Shinsei is worth buying a dip.

China Conch (586 HK): Post-Spinoff Blues

In my last note, I thought China Conch Venture Holdings (586 HK) (CCV) appeared fully-priced. If I had been long CCV, I recommended getting out.
CCV shed HK$11.35/share after going ex- the China Conch Environment Protection Holdings (587 HK) (CCEP) water treatment in-specie spin-off. CCEP closed at HK$9.77/share on its first day of trading.
CCV is trading back to around levels prior to the announcement of the spin-off. Separately, CCEP appears to be trading rich relative to waste treatment peers.

Toyo Construction (1890) Funkier Still

Toyo Construction (1890 JP) situation changes day by day. In three days we have three Large Shareholder Report filings as The Expected Activist ducked out, replaced by A New Entrant.
Now one has to consider what the rest of this week has looked like.
And we wonder who it is, but reading between the lines can get you to a place where one might see what the aim is.

CSC/Intertrust: Start of Offer Period

By Jesus Rodriguez Aguilar

The offer period starts on 1 April and runs until 10 June (if necessary, it can be extended 2-10 weeks). The offer memorandum has been published.
If, after the post-acceptance period, the offeror holds at least 80%, but less than 95% of the shares, the offeror may elect to implement the Asset Sale and Liquidation.
The share price increased by 2.2% after announcement of the start of the offer period. Gross spread to the offer price is 1.8%. Long INTER NA.

Before it’s here, it’s on Smartkarma

Apr 01

Event-Driven: Toshiba Corp, Toyo Construction, Tabcorp Ltd, Irongate Group, Crown Resorts, Yashili International Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toshiba (6502) – Effissimo’s Pledge Isn’t One. It Is a Signalling Device.
Toyo Construction (1890) Tender Still Funky – A New (Perhaps Serious), but Secretive Large Holder
Tabcorp To Split Lotteries and Wagering Businesses
Tabcorp (TAH AU): Spin-Off Upside & Index Implications
Irongate Enters Into SIA With Charter Hall And PGGM
Crown Resorts Scheme Meeting on 29 April, IE Opinion
(Mostly) Asia M&A: March 2022 Roundup

Toshiba (6502) – Effissimo’s Pledge Isn’t One. It Is a Signalling Device.

Raymond Zage’s letter was super interesting in terms of its nuance, as discussed in Toshiba Board Ructions as Independent Director Goes Rogue.
In Toshiba Coin Toss Is Neither Heads Nor Tails as Both Proposals Fail, I discussed that this opens the door to exploring combinations of ideas.
Today Effissimo filed an amended LSR to say they’d sell their shares to a Bain Tender Offer if launched. The statement, and the break clause are informative, and more nuanced.

Toyo Construction (1890) Tender Still Funky – A New (Perhaps Serious), but Secretive Large Holder

After Murakami-san reported yesterday selling most of his shares on 23 March, the stock fell heavily today. From 6.7% above terms to 0.65% above terms.
6.5 mm shares changed hands today at less than a 1% premium to terms.
After the close, a Cayman company, “WK 1 Limited”, announced it had two affiliates owned 5.89% as of 24-March. Still funky. Still fun. Bet it pops now.

Tabcorp To Split Lotteries and Wagering Businesses

Tabcorp Ltd (TAH AU) has registered the Demerger Booklet in relation to the proposed demerger of The Lottery Corporation.
The demerger general meeting and Scheme Meeting will be held on the 12 May with a potential demerger date on the 1 June.
The independent expert estimates the lottery ops may be worth up to A$11.6bn and wagering A$2.7bn, against Tabcorp’s current market cap of A$11.6bn.

Tabcorp (TAH AU): Spin-Off Upside & Index Implications

If approved, Tabcorp Ltd (TAH AU) will spin-off the Lotteries and Keno business (The Lottery Corporation; TLC) from the Wagering & Media and Gaming Services business (new Tabcorp).
Based on peer valuations, we see an upside of 11% from the last price. The Scheme Meeting is on 12 May and the Second Court Hearing on 20 May.
TLC should remain in all major indices, while new Tabcorp Ltd (TAH AU) could be deleted from the S&P/ASX 50 Index and the MSCI Australia Index.

Irongate Enters Into SIA With Charter Hall And PGGM

Irongate Group (IAP AU) has entered into Scheme Implementation Agreement with Charter Hall (CHC AU) and Dutch pension fund PGGM.
The consideration of A$1.90/cash plus a A$0.0467/security distribution is in line with the non-binding proposal terms announced on the 31 January.
A Scheme Booklet is expected to be despatched in May. The transaction is expected to close late July.

Crown Resorts Scheme Meeting on 29 April, IE Opinion

Unsurprisingly, the independent expert (IE) considers Crown Resorts (CWN AU)‘s A$13.10 offer from Blackstone Group (BX US) to be fair and reasonable. We think that IE’s valuation approach is sound.
The key condition is approval from shareholders and gaming regulatory authorities. The scheme meeting is scheduled for 29 April.
We continue to think that offer is attractive. At the last close price and for the 12 May implementation date, the gross and annualised spread is 2.7% and 27.1%, respectively.

(Mostly) Asia M&A: March 2022 Roundup

For the month of March, five new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$3bn.
The average premium for the new deals announced (or first discussed) in March was ~31%.
This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.

Before it’s here, it’s on Smartkarma

Mar 31

Event-Driven: Toyo Construction, Crown Resorts, 51 Job Inc Adr, Hazama Ando, Kakao Pay, Hang Seng China Enterprises Index, Nippo Corp, Irongate Group, Mindtree Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toyo Construction (1890) Tender Situation Indeed Getting Funky
Crown Resorts: Scheme Booklet Lodged. Shareholder Meeting On 29 April
51job (JOB US): EGM On The 27 April
Hazama Ando (1719 JP) – Big Buyback Is Set & Forget
MSCI Korea Index Review: Kakao Pay Inclusion Possibilities
51job’s Privatisation Offer to Be Voted for on 27 April
HSCEI Dividend Futures: 2022 Fair Value Update & CNOOC/Sunac/JD.com Adjustments
JPX-Nikkei 400 Rebalance 2022: Leaderboard End-Mar 2022
Irongate Enters into an SIA with Charter Hall and PGGM
S&P BSE Indices (SENSEX Family): Quiddity Leaderboard for June 2022 Rebalance

Toyo Construction (1890) Tender Situation Indeed Getting Funky

Toyo Construction (1890 JP)‘s Independent Committee thought this deal was being done too cheaply, but they signed off on it. I thought it was cheap too.
I thought that a leading activist in the name would think so too, and try his hand because of his running start of 7+%. Huge volume Day1 sparked wider interest.
It has traded every day so far above terms so far but on the first full day of trading, the activist Murakami-san bailed. That changes things, but… it’s still funky.

Crown Resorts: Scheme Booklet Lodged. Shareholder Meeting On 29 April

Crown Resorts (CWN AU)‘s Scheme Booklet is now out. The Scheme Meeting will be held on the 29 April with possible implementation on the 12 May.
The Independent Expert has concluded Blackstone’s Offer is fair and reasonable and in the best interest of Crown shareholders.
This transaction is a done deal, and is trading accordingly.

51job (JOB US): EGM On The 27 April

On the 1 March, 51 Job Inc (JOBS US) said it had entered into a revised merger agreement at US$61.00/share, 22.8% down from the initial terms.
51job has now announced that it has called an extraordinary general meeting of shareholders to be held on April 27.
Despite regulatory opacity, this transaction appears done. Separately, 51job’s FY21 financials will be released tomorrow.

Hazama Ando (1719 JP) – Big Buyback Is Set & Forget

Hazama Ando spent a long time coming out of its doldrums. In February 2020, it started to improve. It started a buyback, scarfing up 22% of volume in 6 weeks.
Later in 2020, another, and in 2021, another still, now with the last one finished in a hurry, they announced another. They’ve bought back stock 17 months in a row.
It’s not clear the master rules of the buyback, but historically they have been reasonably aggressive. I expect that continues.

MSCI Korea Index Review: Kakao Pay Inclusion Possibilities

The minimum float-adjusted market cap of non-constituents such as Kakao Pay should be 1.8x of the cutoff float market cap if the FIF is 0.15 or less.
Kakao Pay has to rise by 5.92% by the Price Cutoff Date for a 12% float. So, the key is whether MSCI will classify Alipay’s entire stake as non-float.
Assuming a 40% float, Kakao Pay will face a passive inflow of ₩576B or 3.84M shares, which are close to 17.4x the current ADTV.

51job’s Privatisation Offer to Be Voted for on 27 April

The EGM to approve the 51 Job Inc Adr (JOBS US)’s privatisation offer of $61.00 in cash per ADS will be held at 9 am (Shanghai time) on 27 April.
The transaction is expected to close during the second quarter of 2022. The continuing shareholders represent 56.2% of the voting rights according to the proxy statement.
Based on 67.5 million ADS entitled to vote at the EGM, around 21% of disinterested shareholders are required to vote in favour to meet the two-thirds voting threshold.

HSCEI Dividend Futures: 2022 Fair Value Update & CNOOC/Sunac/JD.com Adjustments

Most companies have announced their final dividends for 2021 and most of those have announced ex-dates. Banks and oil companies have announced higher dividends than last year.
CNOOC Ltd (883 HK) has not declared a dividend yet due to its IPO, while Sunac China Holdings (1918 HK)‘s suspension could lead to index deletion in June or July.
Using current/proforma index compositions and conservative estimates for interim dividends, we estimate fair value at 240.73 DIPS for 2022. This is a sell at the last close or higher.

JPX-Nikkei 400 Rebalance 2022: Leaderboard End-Mar 2022

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 potential forward inclusions and removals every month.
Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022 based on trading data as of end-March 2022.

Irongate Enters into an SIA with Charter Hall and PGGM

Irongate Group (IAP AU) has entered into an SIA with Charter Hall and PGGM. The offer of A$1.90 and maximum FY22 distribution of 4.67 cents implies a total of A$1.9467.
The scheme booklet will be dispatched in May with an implementation date in late July. The offer price is attractive in terms of multiples and security prices.
At the last close and for the July-end implementation date, the gross and annualised spread of the total offer is 1.4% and 4.2%, respectively.

S&P BSE Indices (SENSEX Family): Quiddity Leaderboard for June 2022 Rebalance

By Janaghan Jeyakumar, CFA

The S&P BSE family of indices represents the performance of stocks listed on the Bombay Stock Exchange (BSE) across various sizes, themes, industries, and strategies.
This series will mainly focus on the following indices of the S&P BSE family: S&P BSE 500, S&P BSE 200, S&P BSE 100, and S&P BSE SENSEX.
In this insight, we take a look at the leading candidates who could become Adds/Deletes during the June 2022 Semi-annual Rebalance.

Before it’s here, it’s on Smartkarma

Mar 30

Event-Driven: Olam Group, Uniti Group Ltd, Shanghai Jin Jiang Capital Company Limited, Razer Inc, Apollo Hospitals Enterprise, S&P BSE SENSEX Index, KakaoBank and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Olam Teams Up With Saudi Arabia’s SALIC
Uniti (UWL AU): Macquarie Hung Out To Dry As Morrison/Brookfield Up Bid
Jin Jiang Capital (2006 HK): Tardy, But Pre-Con Approvals Were Never In Doubt
Razer (1337 HK): Spread To Tighten On Potential Headcount Removal
NIFTY Index Rebalance: Flows at the Close Today
Razer’s Scheme Meeting on 26 April, Headcount Test Still Applicable, IFA Opinion
Uniti’s Revised A$5.00 Offer from Morrison/Brookfield
S&P BSE Indices (SENSEX Family): Quiddity Primer
Krafton & Kakao Bank: Upweight-Triggered Combined Flow for MSCI Standard & KOSPI 200

Olam Teams Up With Saudi Arabia’s SALIC

Ten days after Olam Group (OLG SP)‘s restructuring became effective, Saudi-backed SALIC, entered into an SPA to acquire 35.4% of Olam Agri (OGA).
The proposed US$1.24bn investment implied an equity value of US3.5bn for the bulk agricultural commodity player.
The OFI unit, which focuses on food ingredients (cocoa, coffee, nuts, and spices), is still seeking a listing in London. OGA is expected to go public six months after OFI.

Uniti (UWL AU): Macquarie Hung Out To Dry As Morrison/Brookfield Up Bid

Morrison, now with Brookfield on a 50/50 basis, have matched Macquarie Asset Management’s Real Assets division / Public Sector Pension Investment Board’s $5.00/share Offer for Uniti Group Ltd (UWL AU).
The revised proposal was predicated on Uniti severing talks with Macquarie as it may get access to competitively sensitive information. Uniti’s board has acquiesced – “at this time“.
Share pulled back on the news and closed at a 7.8% gross spread to the indicative terms.

Jin Jiang Capital (2006 HK): Tardy, But Pre-Con Approvals Were Never In Doubt

Hotel operator Shanghai Jin Jiang Capital Company Limited (2006 HK) announced yesterday that all pre-conditions to the Offer from Shanghai SASAC have been satisfied.
The Composite Document is expected to be dispatched on or before the 1 April.
Based on precedents for the privatisation of PRC incorporated companies, absent a tendering condition, payment is expected around the third week of May, on the assumption the vote gets up.

Razer (1337 HK): Spread To Tighten On Potential Headcount Removal

Razer Inc (1337 HK)‘s Scheme Document is now out. The Court Meeting will be held on the 26 April. The IFA declares the Offer to be fair and reasonable.
More importantly, the Document flags the abolishment of the headcount test may become law ahead of the shareholder meeting. That is a game-changer.
Trading at a wide spread of 14.2%. This will narrow on this latest development.

NIFTY Index Rebalance: Flows at the Close Today

The changes to the NIFTY Index (NIFTY INDEX), Nifty Bank Index (NSEBANK INDEX) and NIFTY NEXT50 Indices were announced on 24 February and will be implemented at the close today.
There is a fair amount to trade on the NIFTY Index (NIFTY INDEX) and Nifty Bank Index (NSEBANK INDEX) stocks given the sizeable passive assets that track the indices.
There is pre-positioning on some of the names and there could be opportunities to build positions to play for a reversal.

Razer’s Scheme Meeting on 26 April, Headcount Test Still Applicable, IFA Opinion

Razer Inc (1337 HK)‘s scheme document is out with the scheme meeting scheduled for 26 April. The IFA considers the offer to be fair and reasonable.
The headcount test, the key risk, applies unless the amended Cayman Islands Act becomes law before the court meeting date on 26 April. The legislative timetable has not been set.
Current deal probability implies a 65% chance of success, which fairly reflects the deal risk in our view. At last close, the gross spread is 14.2%.

Uniti’s Revised A$5.00 Offer from Morrison/Brookfield

The Morrison/Brookfield’s revised offer is A$5.00 cash per share which is in line with the offer from the Connect consortium. At last close, the gross spread is 7.8%.
The Board has decided to engage with Morrison/Brookfield but not with the Connect consortium. The Connect Consortium is said to have walked away, according to press reports.
Nevertheless, the emergence of another bidder cannot be ruled out as Uniti Group Ltd (UWL AU)’s recurring revenues, cash flows and strong balance sheet is enticing for private equity bidders.

S&P BSE Indices (SENSEX Family): Quiddity Primer

By Janaghan Jeyakumar, CFA

The S&P BSE family of indices represents the performance of stocks listed on the Bombay Stock Exchange (BSE) across various sizes, themes, industries, and strategies.
This series will mainly focus on the following indices of the S&P BSE family: S&P BSE 500, S&P BSE 200, S&P BSE 100, and S&P BSE SENSEX.
In this insight, we take a brief look at the constituent selection methodology and the historical price performance of Index Rebalance Events for the above-mentioned indices.

Krafton & Kakao Bank: Upweight-Triggered Combined Flow for MSCI Standard & KOSPI 200

By the 2nd Thursday of June, we can expect a passive inflow of 4.08x ADTV for Krafton. It represents 1.14M shares and amounts to ₩311B.
Kakao Bank will face a passive inflow of 9.89x ADTV, representing 17.5M shares and close to ₩871B.
With this kind of passive inflow size, they will likely act as a very substantial short-term stock momentum for Krafton and Kakao Bank.

Before it’s here, it’s on Smartkarma

Mar 29

Event-Driven: Orient Overseas International, KT Corp, JD.com Inc., Shanghai Jin Jiang Capital Company Limited, CIMIC Group Ltd, Avast PLC, Hanjin KAL Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MSCI May 2022 Index Rebalance Preview: Three Weeks to Start of Review Period
KT (030200): MSCI Inclusion-Triggered Foreign Buying Flow Scenario
JD.com (9618 HK): Passive Hang Seng Buying in June
Jin Jiang Capital’s Offer Risk/Reward – Pre-Condition Satisfied
IE Says Fair And Reasonable In CIMIC’s Target Statement
NortonLifeLock/Avast: CMA In-Depth Investigation, Spread
Hoban Construction Acquires a 17.4% Stake in HanjinKal

MSCI May 2022 Index Rebalance Preview: Three Weeks to Start of Review Period

Given the market volatility, there have been quite a few changes to the potential inclusions and exclusions at the MSCI May SAIR, especially for China.
There are now three weeks to the start of the review period and we see 40 potential inclusions and 49 potential deletions. Most of the expected changes are in China.
The largest potential inclusions are Powerchip Semiconductor Manufacturing, Orient Overseas International, Pop Mart International, Eva Airways, China Airlines, Emtek, KT Corp, Sumber Alfaria Trijaya, Hyundai Heavy Industries and Xtep International.

KT (030200): MSCI Inclusion-Triggered Foreign Buying Flow Scenario

If KT’s MSCI inclusion fails, a foreign buying of 3.25x ADTV will occur until this Thursday. If successful, a foreign inflow of 5.51x ADTV will be seen until end-May.
I’d not consider SKT as a short-hedge instrument. It is questionable whether the extent and timing of SKT’s FTSE passive selling-triggered price correction will adequately serve as a short hedge.
Instead, betting that the market preference for recession-proof industries does not change in the short term, I will use the KOSPI 200 futures as a short hedge instrument.

JD.com (9618 HK): Passive Hang Seng Buying in June

JD.com Inc. (9618 HK) shares from the Tencent (700 HK) in-specie dividend settled on 25 March. That has increased the number of CCASS shares and the Hong Kong free float.
Given the large trading volumes in JD.com Inc. (9618 HK) on 25 March and 28 March, we expect most of the forced selling from the ADR allotment is done.
There will be selling in JD.com Inc. (9618 HK) from active investors and the overhang from the Prosus (PRX NA) holding. Buying from HSI/HSCEI trackers in June could help a bit.

Jin Jiang Capital’s Offer Risk/Reward – Pre-Condition Satisfied

Shanghai Jin Jiang Capital Company Limited (2006 HK)’s privatisation offer from Jin Jiang International Holding is HK$3.10 per H share. The pre-condition was fulfilled on 28 March.
The key conditions for the delisting will be approval by at least 75% of independent H-shareholders (<10% of all independent H-shareholders rejection). There is no minimum acceptance condition.
At last close and for a May end effective date (composite document despatched on 1 April), the gross and annualised spread to the offer is 4.7% and 32.1%, respectively.

IE Says Fair And Reasonable In CIMIC’s Target Statement

On the 23 February, Actividades de Construcción y Servicios (ACS SM), via 52.3%-held Hochtief AG (HOT GR) offered $22/share for all CIMIC (CIM AU) shares it does not own.
The Independent Expert (Grant Thornton) has assessed the Offer and concluded it to be fair and reasonable.
The Offer is unconditional. The close of the Offer, unless extended, is the 11 April.

NortonLifeLock/Avast: CMA In-Depth Investigation, Spread

By Jesus Rodriguez Aguilar

The British competition regulator questions the acquisition of cybersecurity company Avast PLC (AVST LN) by NortonLifeLock (NLOK US). and refers the transaction for an in-depth phase 2 investigation.
The combination would not hold more than c.31% of the UK antivirus market and probably less than 30% in malware protection. The CMA investigation should take 20-24 weeks.
Deal closing could happen during Q4 2022. Spread on the majority cash option is 11.9%, spread on the majority stock option is 3.9%.

Hoban Construction Acquires a 17.4% Stake in HanjinKal

By Douglas Kim

On 28 March, it was reported that Hoban Construction will acquire a 17.43% stake in Hanjin KAL Corp (180640 KS) from KCGI becoming the second largest shareholder of the company.
There are some further possibilities of Hoban Construction forming an alliance with Bando Construction later on which could make the shareholding structure of HanjinKal very interesting.
There has been an increased increase in the travel/leisure related plays (including HanjinKal) with the opening up of travel and fewer COVID restrictions in some countries including in South Korea.

Before it’s here, it’s on Smartkarma

Mar 28

Event-Driven: KT Corp, Daiho Corp, KakaoBank, Mapletree Commercial Trust, GOLFZON, AKM Industrial, Yashili International Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

KT Corp (030200 KS): Potential MSCI Inclusion in May
Daiho Corp (1822) A GIANT Transaction Which Is Not What It Looks Like. Smells Bad.
KOSPI 200 Index Rebalancing: Constituents Subject to Float Rate Increase
Noodling MNACT Vs MCT Deal Risk… Even the Complications Have Complications.
KOSDAQ150 Index Rebalance Preview (June): Potential Inclusions Starting to Outperform
AKM Industrial’s Offer Spread Risk/Reward
Merger Arb Mondays – Yashili, Razer, 51job, Sezzle, Link, Uniti, Guodian, Jin Jiang

KT Corp (030200 KS): Potential MSCI Inclusion in May

NTT Docomo Inc (9437 JP) sold its entire holding of 14.26m shares in KT Corp (030200 KS) to Shinhan Group in January as part of a strategic alliance.
That increased the foreign room in KT Corp (030200 KS) to above 15% which can result in the stock being included in the MSCI Korea Index at the May SAIR.
SK Telecom (017670 KS), on the other hand, will see passive selling from FTSE All-World/All-Cap trackers in June due to its foreign room remaining below 10%.

Daiho Corp (1822) A GIANT Transaction Which Is Not What It Looks Like. Smells Bad.

Daiho Corp (1822 JP) has announced a deal which is not quite what it looks like.
And despite a buyback of more than 50% of shares outstanding, and an “accretive” sale to another party at a higher price, it is a governance disaster.
And existing shareholders have an out, but it is complicated. If you own the stock, or you look at risk arb, or activism, this may be worth a read.

KOSPI 200 Index Rebalancing: Constituents Subject to Float Rate Increase

Nine constituents will likely face an increase in the float rate: five stocks for the sale of the majority shareholder’s shares and four names for the IPO lockup release.
Kakao Bank (6.35x), LG Corp (003550 KS) (2.62x), Krafton (2.09x), and Woori Financial Group (316140 KS) (1.74x) are expected to have the most significant impact.
In general, float rate changes show price movement by passive flow similar to new changes (adds/deletes). So, we need to consider gradually building up positions two months before the rebalancing.

Noodling MNACT Vs MCT Deal Risk… Even the Complications Have Complications.

The MNACT/MCT deal has weird parameters which make it complicated as a risk arb situation, and as a way to think about relative value of MCT and MNACT vs Peers
Relative buying and selling pressure changes between the two names and their peer baskets depending on a) the May vote, b) index provider discretion, and c) MCT’s price in July.
Then it may depend on relative price movement before then too. It’s complicated.

KOSDAQ150 Index Rebalance Preview (June): Potential Inclusions Starting to Outperform

With over 80% of the averaging in the review period complete, we see 15 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
11 of the 15 changes are high/medium probability and it will take large moves over the rest of the review period for these stocks to drop out of the list.
Four potential inclusions have more than 3 days of ADV to buy from passives, while nine potential deletions have more than 3 days of ADV to sell from passives.

AKM Industrial’s Offer Spread Risk/Reward

AKM Industrial (1639 HK)’s privatisation offer from Alpha Luck and AKM Meadville of HK$1.8345 consists of a base offer (HK$1.82) and a final dividend (HK1.45 cents).
Approval from the State Administration of Foreign Exchange is the remaining pre-condition. The Court hearing of the petition for the sanction of the scheme is set for 19 July.
At last close and for a July end effective date, the gross and annualised spread to the total offer of HK$1.8345 is 3.6% and 11.2%, respectively.

Merger Arb Mondays – Yashili, Razer, 51job, Sezzle, Link, Uniti, Guodian, Jin Jiang

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore and the US (Chinese ADRs only).
This week, the highest gross spreads are Yashili International Holdings (1230 HK), Razer Inc (1337 HK), 51 Job Inc Adr (JOBS US), Sezzle Inc (SZL AU)
Lowest gross spreads CIMIC Group Ltd (CIM AU), Z Energy Ltd (ZEL NZ), China Logistics Property Holdings (1589 HK), Virtus Health (VRT AU), Mapletree North Asia Commercial Trust (MAGIC SP)

Before it’s here, it’s on Smartkarma

Mar 27

Event-Driven: Toshiba Corp, Crown Resorts, JD.com Inc., Singapore Press Holdings, Nexon GT Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Last Week in Event SPACE: Toshiba, Mapletree, Link Admin, Cayman’s Headcount, Razer, Crown Resorts
Crown Resorts’ Offer Spread Risk/Reward – The Perth Commission Report
Index Rebalance & ETF Flow Recap: MSCI, S&P/ASX, KOSPI200, China A50, JD.com, Mapletree
Asia-Pac Weekly Risk Arb Wrap: Link Admin, Uniti, Mapletree, Singapore Press, DTAC/TRUE
KOSDAQ150 Rebalance in June 2022 Amid Ongoing War in Ukraine

Last Week in Event SPACE: Toshiba, Mapletree, Link Admin, Cayman’s Headcount, Razer, Crown Resorts

Toshiba (6502 JP)‘s activists are stuck. So are management. 3+ years since the last big buyback, 3 new CEOs and we are back to the drawing board for both management/activists.
Quarz and Mapletree North Asia Commercial Trust (MAGIC SP) holders “win” to get a Cash-Only Consideration bump to 1.0x Price/Sep2021 NAV at S$1.1949/unit. This gets them out at NAV.
Regulatory overhang sees Link Administration Holdings (LNK AU)‘s spread to terms trading wide.

Crown Resorts’ Offer Spread Risk/Reward – The Perth Commission Report

The Perth commission report found Crown Resorts (CWN AU) not suitable to operate Crown Perth but did not call for the gaming licence to be revoked.
The key conditions precedent for the Blackstone deal are shareholder, gaming regulatory and FIRB approval. The scheme meeting is targeted to be held before the end of June 2022.
At the last close price of A$12.58, the gross and annualised spread for a 30 June implementation is 4.1% and 16.94%, respectively.

Index Rebalance & ETF Flow Recap: MSCI, S&P/ASX, KOSPI200, China A50, JD.com, Mapletree

The coming week has the implementation of the NIFTY indices at the close on 30 March and the Nikkei 225 (NKY INDEX) implementation at the close on 1 April.
31 March is the review cut-off date for the June rebalance of the Hang Seng indices. We expect one change to the HSCEI/HSTECH and few adds to the HSI.
There were large inflows to the Ishares Core Msci Emerging (IEMG US), iShares MSCI Emerging Markets (EEM US) and KraneShares CSI China Internet ETF (KWEB US) ETFs during the week.

Asia-Pac Weekly Risk Arb Wrap: Link Admin, Uniti, Mapletree, Singapore Press, DTAC/TRUE

There are 40 – mostly firm – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal this week: INFRONEER Holdings (5076 JP) taking over the rest of a boring, old construction company Toyo Construction (1890 JP).
Key updates took place for: Link (LNK AU), Uniti (UWL AU), Mapletree Commercial (MCT SP) /Mapletree North (MAGIC SP), Singapore Press (SPH SP), DTAC TB / TRUE TB

KOSDAQ150 Rebalance in June 2022 Amid Ongoing War in Ukraine

By Douglas Kim

We discuss the potential additions and deletions in the upcoming June 2022 KOSDAQ150 rebalance. The ongoing war in Ukraine has impacted the potential additions/deletion candidates in KOSDAQ150.
The recent new additions (among potential inclusions) include Nexon GT Co Ltd (041140 KS) and Netgames (225570 KS), and SNK Corp (950180 KS).
The top 10 potential exclusions are down on average 25.7% YTD, underperforming KOSDAQ which is down 9.6% in the same period.

Before it’s here, it’s on Smartkarma