Category

Utilities Sector

Mar 29
0

Brief Utlilities: M&A: A Round-Up of Deals in February 2019 and more

By | Utilities Sector

In this briefing:

  1. M&A: A Round-Up of Deals in February 2019

1. M&A: A Round-Up of Deals in February 2019

For the month of February, thirteen new deals were discussed on Smartkarma with an overall deal size of US$12.3bn.

This overall number includes the “offer” for Hanergy Thin Film Power (566 HK) which has no value, as yet, attached to the scrip component.

A firm number for Glow Energy Pcl (GLOW TB) has yet to be announced, which could result in a US$4bn+ deal.

The average premium to last close for the new deals was 27.5%.

New Deals

Industry

Deal size (US$mn)

Premium

Deal Type

Australia
Ruralco Holdings (RHL AU)Agriculture33644.0%Scheme
HK
Hanergy Thin Film Power (566 HK)Semiconductor Equipment––Scheme
Xingfa Aluminium (98 HK)Aluminum2022.9%Off-Mkt
Japan
Veriserve Corp (3724 JP)IT Consulting14343.6%Off-Mkt
Jiec Co Ltd (4291 JP)Software17039.3%Off-Mkt
Nd Software (3794 JP)Software27028.7%Off-Mkt
U Shin Ltd (6985 JP)Auto Parts and Equipment28828.3%Off-Mkt
Thailand
Golden Land Prop Dvlp (GOLD TB)Diversified Real Estate6322.4%Off-Mkt
Glow Energy Pcl (GLOW TB)IPP and Energy Traders4,000–Tender Offer (?)
UK
Dairy Crest (DCG LN)Dairy Products1,27212.0%Scheme
Ophir Energy (OPHR LN)Oil & Gas E&P51166.0%Scheme
RPC Group PLC (RPC LN)Financials4,10616.0%Scheme
China
Sichuan Swellfun Co Ltd A (600779 CH)Alcoholic Beverages33019.3%Off-Mkt
Source: Company announcements

Brief Summary of News in February of Arb Situations On Our Radar

Australia

Comments (with links)

Eclipx (ECX AU)
At the Eclipx Group 2019 AGM, the Chairman mentioned that it was the board unanimously endorses this proposal and that a revised timetable will be announced when the contents of the Scheme Book are agreed upon with MMS.
Graincorp Ltd A (GNC AU)
At the GrainCorp 2019 AGM, the Chairman announced that the engagement between the two parties remains active, and the proposal is still indicative and non-binding.
Greencross Ltd (GXL AU)
On 6th February 2019, Greencross held a scheme meeting at which the shareholders approved the scheme of arrangement (99.67% of Greencross shareholders present and voting at the Scheme Meeting voted in favour). A dividend of AUD 0.19 was announced on 7th February (ex-date: 12-Feb-2019), to be paid on 20th February 2019, conditional on court approval of the scheme. The scheme received court approval on 11th February 2019, along with which the company suspended the trading of its shares on ASX from the close of trading on 11th February 2019. The Scheme was implemented on 27th February 2019.
Healthscope Ltd (HSO AU)
On 1st February 2019 it was announced that Healthscope entered into an Implementation Deed with Brookfield, where Brookfield is to acquire all of the shares of Healthscope through a scheme at A$2.5/share and an off-market takeover offer A$4.2/share. A dividend of A$ 0.035 (ex-date:04-Mar-2019) announced on 14th February 2019, is included in the offer price.
MYOB Group Ltd (MYO AU)
The “go-shop” period in relation to the KKR Scheme, which allowed MYOB and its advisers to solicit a superior competing proposal, ended on 22nd February 2019, without any superior proposals emerging. As a result, the Directors of MYOB have reaffirmed their recommendation of the scheme. The Scheme Booklet is expected to be released in mid – late March 2019, with the Scheme meeting expected to be held in late April 2019.
Navitas Ltd (NVT AU)
On 18th February 2019, when the exclusivity period granted to BGH Consortium was to expire, Navitas announced that the exclusivity period is extended to 1st March 2019. This extension was granted in order to carry out a limited set of remaining due diligence, as per the announcement. The Directors of Navitas continue to unanimously recommend the Scheme.
Propertylink Group (PLG AU)
On 20th February 2019, the company announced the offer becoming unconditional, along with which it was announced that ESR has an interest of 74.78% of Propertylink and that Centuria Capital Group in respect of their 19.51% ownership. The offer has been extended to the 8th March.
Ruralco Holdings (RHL AU)
Ruralco has announced it has entered into a Scheme Implementation Deed in which Nutrien Ltd (NTR CN) has agreed to take Ruralco private at $4.40/share – a 44% premium to last close and the one-month VWAP.
Sigma Healthcare (SIG AU)
In a market update released by Sigma Healthcare, on 11th February 2019, it was announced that high level due diligence is still underway with regard to the potential merger proposal.

Hong Kong

Comments (with links)

Hanergy Thin Film Power (566 HK)
Hanergy announced on 26th February 2019, the intention of HMEH to privatise the company by way of a Scheme, at one SPV share for every Hanergy share. No price was given for the SPV.
Harbin Electric Co Ltd H (1133 HK)
The deadline to despatch the Composite Document was further extended to 29th March 2019, from its previous extension – 22nd February 2019.
Hopewell Holdings (54 HK)
The scheme document for the privatisation of Hopewell Holdings was dispatched on 24th February 2019.
New Sports Group (299 HK)

The deadline to despatch the Composite Document has been extended to either 30th April 2019 or 7 days after the date of fulfilment of the conditions, whichever is earlier. This extension is required in order to prepare the Goldjoy Circular to convene the EGM and because completion is subject to the conditions of the Sale and Purchase Agreement being fulfilled.

Xingfa Aluminium (98 HK)

On 13th February 2019, major shareholder of Xingfa Aluminium – Guangxin Aluminium, acquired 5,000 shares in Xingfa, which triggered the launch of a Madatory General Offer, as Guangxin’s stake in Xingfa exceeded 30%. The offer price is HK$5.60 cash/share.

India

Comments (with links)

Bharat Financial Inclusion (BHAFIN IN)
The transaction is expected to close today
Glaxosmithkline Consumer Healthcare (SKB IN)

No Feb update

Gruh Finance (GRHF IN)
No Feb update

Indonesia

Comments

Bank Danamon Indonesia (BDMN IJ)
Based on the original schedule, BDMN has today gone ex-rights on being able to vote in the Shareholder Meeting on March 26 and also ex-rights on the ability to select the cash payment for your shares.

Japan

Comments (with links)

Clarion Co Ltd (6796 JP)
The offer closed today
Descente Ltd (8114 JP)

On the 7th Feb, Descente announced that it was opposed to the deal. They can’t do much because the deal is launched. Shortly after, the employees union, a group of ex-employees, and a former president all came out against Itochu’s Tender Offer. On the 26th, the company announced that it would bring forward its announcement of its Medium Term Plan by a couple of months.

Jiec Co Ltd (4291 JP)

No update since launch on 31 January

Kabu.Com Securities (8703 JP)
On 12th February 2019, KDDI Corp announced that they intend to conduct a Tender offer for a minimum 45,758,400 shares of Kabu.Com Securities at ¥559/share. If they are able to acquire the minimum, it would lead to a Two Step Squeezeout, because when KDDI’s holding is combined with that of MUFJ Securities’, their total holding reaches 66.67%.
Kosaido Co Ltd (7868 JP)
On 4th February 2019 after the close, Reno KK filed a Large Shareholder Report declaring a 5.83% position as of 28th January 2019, following which, on the 5th of February they announced that they had purchased an additional 2.49% on the 29th of January, increasing their holding to 8.31%. On the days that followed, along with their joint holder Aoyama Fudosan, the Reno group increased their stake to 9.55% by 1st February 2019 (which was announced on 8th February 2019). On 18th February, an article was published on toyokeizai.net which suggested that Mr. Nakatsuji (longstanding external shareholder) and Sakurai Mie (leader shareholder and descendent of the founder of Kosaido), were against the takeover. It was announced on 26th February 2019, that the tender offer close date had extended to 12th March 2019, from 1st March 2019.
Nexon Co Ltd (3659 JP)
Reportedly Amazon.com Inc (AMZN US) and Comcast will enter the race and have submitted initial bids to acquire Nexon. EA was also mooted as a participant in first round bidding.
Nd Software (3794 JP)
On the 8 Feb, ND Software announced a Management Buy Out (MBO) sponsored by both the existing president, who owns 20%, and J-Will Partners to take the company private at ¥1700/share, which is a 28.7% premium to last trade and comes out to be roughly 7.2x trailing 12-month EV/EBITDA.
Pioneer Corp (6773 JP)
Pioneer has received all anti-trust approvals
Shinmaywa Industries (7224 JP)
The results of the Tender Offer was released on 20th February 2019. There were 32.43 million shares tendered, while the Tender Offer was only to buy 26.6666 million shares, which led to an 82.23% pro-ration. Following the closing of the Tender Offer, the Murakami grouping will own 4% of shares out and 5.7% of voting rights remaining.
U Shin Ltd (6985 JP)
On 14th February 2019, Minebea Mitsumi announced the launch of their Tender Offer to acquire U Shin Ltd at ¥985/share. The offer opened on 15th February 2019, and will close on 10th April 2019. The intention to make an offer to acquire U Shin Ltd was first announced back in November 2018.
Veriserve Corp (3724 JP)
After market close on 31st January 2019, Sumitomo Corp (8053 JP) consolidated subsidiary SCSK Corp (9719 JP) announced a Tender Offer to buy out minorities in Veriserve Corp (3724 JP). At the time of announcement, SCSK held 2,900,000 shares or 55.59% of voting rights. The Tender Offer is at ¥6,700/share

New Zealand

Comments

Trade Me (TME NZ)

No Feb update

Singapore

Comments (with links)

Ascendas-Singbridge
No Feb update
Courts Asia Ltd (COURTS SP)
The formal offer document was despatched on 1st February 2019, with the first closing date scheduled for 1st March 2019. On the same day a couple of hours later, due to irrevocable involved, the 50% shareholder acceptance condition was met, and the offer was declared unconditional. This allowed the company to extend the closing date of the offer to 15th March 2019 (final closing date).
M1 Ltd (M1 SP)
On 15th February 2019, an announcement was published declaring the offer unconditional, this led to the extension of the closing date to 4th March 2019.
Pci Ltd (PCI SP)
Singapore Exchange Securities Trading Limited approved PCI Limited’s application to delist the company from the official list of the SGX-ST, when the scheme becomes effective and binding in accordance with its terms

South Korea

Comments

Hyundai Oilbank
No update

Taiwan

Comments

Yungtay Engineering (1507 TT)
On the 14th of February the company announced that in the board meeting held on 29th January 2019, two independent directors objected to the terms of the Tender Offer which had been agreed. There is reportedly an investigation into shareholder rights being conducted. It is to note that in the 14th Feb release, it became clear that Otis Elevator had bid TWD 63/share for Yungtay but the directors had not approved the bid.

Thailand

Comments (with links)

Delta Electronics Thai (DELTA TB)
On 13th February 2019, Delta announced that the conditions precedent of the Conditional Voluntary Tender Offer was fully satisfied, following which on 18th February 2019 the Intention to Make a Tender Offer (Form 247-3) was announced along with the FY18 Dividend of Bt 2.30/share (which will be added). The Offer document was released on 22nd February 2019, announcing the Tender offer period – from 26-Feb-2019 to 01-Apr-2019.
Glow Energy Pcl (GLOW TB)
In the “Management Discussions” attached to FY18 earnings of Global Power Synergy Company Ltd, they mentioned that they are collaborating with GLOW in order to decide on tender offer price for GLOW’s shares, after taking into consideration the disposal of one of GLOW’s plants.
Golden Land Prop Dvlp (GOLD TB)
On 25th February 2019, Golden Land Prop Dvlp announced that they had received information that Frasers Property intends to make a Voluntary Tender Offer to acquire all of Golden Land Prop Dvlp’s shares at Bt 8.5/share.
Thanachart Capital (TCAP TB)
Thanachart Capital Public Company Limited (TCAP), as a major shareholder of Thanachart Bank Company Limited, announced on 26th February 2019, that they entered the Non-binding Memorandums of Understanding, in relation to the merger between Thanachart and TMB.

Europe/UK

Comments (with links)

Amer Sports Oyj (AMEAS FH)
On 21st February 2019, the offer period expiry date was extended to 7th March 2019 (previously 28th February 2019). As per the announcement on 22nd February 2019, the Anta Sports shareholders approved the deal to buy Amer Sports, with 99.19% of votes cast being for the deal. A couple of days later, on 25th February 2019, Mexico’s regulator approved the takeover, and this was the last of the approvals.
Ceva Logistics AG (CEVA SW)
No Feb update
Dairy Crest (DCG LN)
On 22nd February 2019, an announcement was released with the news that Saputo Inc had offered £6.20 cash/per share, to acquire all of the shares of Dairy Crest by way of a Scheme of Arrangement.
Diageo Plc (DGE LN)
On 26th February 2019, Diageo made an announcement stating that they had been approached by Sichuan Swellfun, with a possible partial tender offer to increase their stake in Diageo to 70% (from 60%) at RMB 45/share.
Earthport plc (EPO LN)
Visa announced an increase in their offer to £0.37/share (from £0.30/share), on 7th February 2019. The following day Mastercard issued a stated that they were considering their options. On 11th February 2019, Visa posted their Offer Document, following which Mastercard announced that they no longer have any letters of intent acceptiig their offer. An announcement on 21st February 2019, mentioned that both the Court Meeting and General Meeting have been adjourned by the Chairman and the new date will be announced in due course. On 27th February 2019, the offer was extended to remain open till 8th March 2019.
Ophir Energy (OPHR LN)
It was announced on 30th January 2019 that Medco Energi Internasional T had reached an agreement to acquire Ophir Energy at an offer price of £0.55/share, by way of a Scheme of Arrangement.Petrus Advisors (3.5% shareholder) dialed up the pressure on its opposition for this offer, with a letter addressed to Ophir’s Chairman, on 19th February 2019.
Oslo Børs VPS Holding ASA
On 4th February Nasdaq AB published the Public Offer document, according to which the acceptance period is from 4th February 2019 to 4th
March 2019.
Panalpina Welttransport Holdin (PWTN SW)
On 4th February 2019, Panalpina disclosed that their largest shareholder, the Ernst Göhner Foundation, does not support DSV’s indicative offer, which was made in January 2019. Following an announcement by Panalpina on 15th February 2019, regarding Panalpina pursuing a private combination with Agility Group, DSV informed the market that on 6th February 2019, they put forward an all-cash offer of CHF 180/share.
RPC Group PLC (RPC LN)
On the morning of January 23rd, 2019, after five PUSU extensions, RPC announced the recommended final cash offer by Apollo for 782p per share, or £3.323 billion.

 

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Mar 29
0

Brief Utlilities: China Power New Energy To Be Delisted After SOE Injection Abandoned and more

By | Utilities Sector

In this briefing:

  1. China Power New Energy To Be Delisted After SOE Injection Abandoned
  2. Corporate Governance in Global Emerging Markets: 70 Energy Companies – Korean Co Gets Lowest Score
  3. Xinyi Energy IPO Preview: Second Time Lucky?
  4. HK Connect Discovery Weekly: Mainland Investors Buying WH Group (2019-03-22)
  5. Last Week in GER Research: Navitas, Mindtree, PG&E, Delta Electronics, GDS, Myob, Sigma and Ruhnn

1. China Power New Energy To Be Delisted After SOE Injection Abandoned

Price

SOE State Power Investment Corporation (SPIC) is seeking to privatise China Power New Energy Development Co (735 HK) by way of a Scheme at $5.45/share, a 41.9% premium to last close and a 78.1% premium to the 30-day average.

A scrip alternative (6 New shares for one Scheme shares) into an unlisted vehicle under SPIC is also available.

China Three Gorges, CPNED’s largest shareholder with 27.10%, have given an irrevocable undertaking to vote for the Scheme and to elect the share alternative.

However, China Three Gorges is presumably required to abstain from voting at the court meeting, as it is deemed to be acting in concert with the SPIC under class (1) of the definition of the acting in concert in the Takeovers Code. The announcement does not make this clear.

Assuming China Three Gorges does abstain, a 10% blocking stake at the court meeting is equivalent to 4.48% of shares out or 53mn shares.

This looks like a pretty clean deal. It is priced above the highest close since its listing by way of introduction on the 18 July 2017, while the excitement over the potential injection of all nuclear power assets and businesses from State Nuclear Power Technology Company has been removed after the restructuring was cancelled in July last year.

The stock is currently trading at an attractive gross/annualised spread of 8.3%/28.9% conservatively assuming a late July completion, and inclusive of the final dividend. 

2. Corporate Governance in Global Emerging Markets: 70 Energy Companies – Korean Co Gets Lowest Score

  • Our proprietary corporate governance scoring system now covers over 1,800 stocks including 70 Electricity, Alternative Energy, Distribution, Water and Utilities companies in Emerging Markets.
  • This report includes the Energy and Utilities names currently under coverage.
    The lowest score in this group is Korea Gas (44/100).
  • We have found that scores below 50/100 indicate poor corporate governance and higher risk of fraud.
  • Korean companies often have lower scores as a result of a lack of board independence and convoluted corporate structure.
  • Of the groupings presented here Alternative Energy has the highest average score at 64/100.
    We welcome requests from clients of names they want to see added to the universe.

3. Xinyi Energy IPO Preview: Second Time Lucky?

Fig%204

Xinyi Energy Holdings Ltd (1671746D HK) has filed IPO prospectus once again to list its solar generation business that was spun-off from its parent company Xinyi Solar Holding Ltd. Xinyi Energy has 9 operational solar farms with a total capacity of ~950MW.

The company is set to acquire additional solar farms of 540MW capacity from its parent company in a separate transaction post IPO.

Xinyi Energy has not indicated the size and pricing of its offer, however, according to various media reports the company is expected to raise nearly HK$570M (around 12% of the previous offering of HK$4.5B). A significant portion of IPO proceeds is expected to be utilised towards upfront payment of 50% for acquiring solar farms from its parent company and the remainder for working capital and debt repayment. Although we have a positive view of the solar energy sector, the IPO pricing will determine our overall view of the company.

4. HK Connect Discovery Weekly: Mainland Investors Buying WH Group (2019-03-22)

Hscei%20outflow%2003 22

In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainland investors in the past seven days.

We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.

In this insight, we highlight the WH Group, which led the inflows last week. 

5. Last Week in GER Research: Navitas, Mindtree, PG&E, Delta Electronics, GDS, Myob, Sigma and Ruhnn

Below is a recap of the key Event-driven, IPO and placement research produced by the Global Equity Research team. This week we highlight Arun’s analysis on the takeover deals for Navitas Ltd (NVT AU) and Mindtree Ltd (MTCL IN) and the valuation range for Delta Electronics Thai (DELTA TB) . In addition, Arun recommends taking the Gds Holdings (Adr) (GDS US) placement while recommending the deal for MYOB Group Ltd (MYO AU) and contends investors may need to be patient for the rejected Sigma Healthcare (SIG AU) deal. Venkat looks into the bankruptcy arbitrage situation for P G & E Corp (PCG US) and contends PG&E has no equity value due to pending litigation risks. Finally, Arun initiates on the IPO of Chinese e-commerce company Ruhnn Holding Ltd (RUHN US)

Best of luck for the new week – Arun, Venkat and Rickin

Get Straight to the Source on Smartkarma

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Mar 27
0

Brief Utlilities: Corporate Governance in Global Emerging Markets: 70 Energy Companies – Korean Co Gets Lowest Score and more

By | Utilities Sector

In this briefing:

  1. Corporate Governance in Global Emerging Markets: 70 Energy Companies – Korean Co Gets Lowest Score
  2. Xinyi Energy IPO Preview: Second Time Lucky?
  3. HK Connect Discovery Weekly: Mainland Investors Buying WH Group (2019-03-22)
  4. Last Week in GER Research: Navitas, Mindtree, PG&E, Delta Electronics, GDS, Myob, Sigma and Ruhnn
  5. SPCG: Laying Foundations for Next Stage of Growth

1. Corporate Governance in Global Emerging Markets: 70 Energy Companies – Korean Co Gets Lowest Score

  • Our proprietary corporate governance scoring system now covers over 1,800 stocks including 70 Electricity, Alternative Energy, Distribution, Water and Utilities companies in Emerging Markets.
  • This report includes the Energy and Utilities names currently under coverage.
    The lowest score in this group is Korea Gas (44/100).
  • We have found that scores below 50/100 indicate poor corporate governance and higher risk of fraud.
  • Korean companies often have lower scores as a result of a lack of board independence and convoluted corporate structure.
  • Of the groupings presented here Alternative Energy has the highest average score at 64/100.
    We welcome requests from clients of names they want to see added to the universe.

2. Xinyi Energy IPO Preview: Second Time Lucky?

Fig%204

Xinyi Energy Holdings Ltd (1671746D HK) has filed IPO prospectus once again to list its solar generation business that was spun-off from its parent company Xinyi Solar Holding Ltd. Xinyi Energy has 9 operational solar farms with a total capacity of ~950MW.

The company is set to acquire additional solar farms of 540MW capacity from its parent company in a separate transaction post IPO.

Xinyi Energy has not indicated the size and pricing of its offer, however, according to various media reports the company is expected to raise nearly HK$570M (around 12% of the previous offering of HK$4.5B). A significant portion of IPO proceeds is expected to be utilised towards upfront payment of 50% for acquiring solar farms from its parent company and the remainder for working capital and debt repayment. Although we have a positive view of the solar energy sector, the IPO pricing will determine our overall view of the company.

3. HK Connect Discovery Weekly: Mainland Investors Buying WH Group (2019-03-22)

Hscei%20outflow%2003 22

In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainland investors in the past seven days.

We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.

In this insight, we highlight the WH Group, which led the inflows last week. 

4. Last Week in GER Research: Navitas, Mindtree, PG&E, Delta Electronics, GDS, Myob, Sigma and Ruhnn

Below is a recap of the key Event-driven, IPO and placement research produced by the Global Equity Research team. This week we highlight Arun’s analysis on the takeover deals for Navitas Ltd (NVT AU) and Mindtree Ltd (MTCL IN) and the valuation range for Delta Electronics Thai (DELTA TB) . In addition, Arun recommends taking the Gds Holdings (Adr) (GDS US) placement while recommending the deal for MYOB Group Ltd (MYO AU) and contends investors may need to be patient for the rejected Sigma Healthcare (SIG AU) deal. Venkat looks into the bankruptcy arbitrage situation for P G & E Corp (PCG US) and contends PG&E has no equity value due to pending litigation risks. Finally, Arun initiates on the IPO of Chinese e-commerce company Ruhnn Holding Ltd (RUHN US)

Best of luck for the new week – Arun, Venkat and Rickin

5. SPCG: Laying Foundations for Next Stage of Growth

Sp3

We initiate coverage of SPCG with a BUY rating and a 2019E target price of Bt22.80, derived from a discounted cash flow valuation (WACC 7.0% and terminal growth of 1.0%). This is equivalent to 8.4x PE’19E.

The story:

  • Promising industry outlook
  • Striding toward overseas opportunities
  • Expiring adder should have been priced in already
  • Expected stable earnings in 2019-21E

Risks:   Single source supplier

                Forex fluctuation

                Uncertainty about sunlight

Get Straight to the Source on Smartkarma

Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.



Mar 25
0

Brief Utlilities: GLOW’s Done Deal As SPA (Almost) Completes and more

By | Utilities Sector

In this briefing:

  1. GLOW’s Done Deal As SPA (Almost) Completes
  2. TTW: Cut 2019-2023 Earnings on the Rise of Depreciation Expenses
  3. China Gas Placement – Larger Deals Traded Flat but Good Track Record Should Help
  4. M&A: A Round-Up of Deals in February 2019

1. GLOW’s Done Deal As SPA (Almost) Completes

Price%20mar

The revised SPA between Engie SA (ENGI FP) and Global Power Synergy Company Ltd (GPSC TB) is expected to the close this week, triggering a mandatory Tender offer for Glow Energy Pcl (GLOW TB).

The revision was a remedial requirement (announced on the 27 Dec) after the Office of the Energy Regulatory Commission (ERC) resolved to approve, in principle, the proposed merger of GSPC and GLOW, provided GLOW sells Glow SPP1 before or at the same time as the merger. The ERC had previously rejected the merger on the 11 October.

The divestment of SPP1 to B Grimm Power (BGRIM TB) for Bt3.3bn (~2.5% of GLOW’s market cap at the time) was announced on the 22 February and was completed yesterday. 

Subsequent to the SPP1 sale, the purchase price under the SPA was adjusted to Bt91.9906/share, a ~3% decline from the initial Bt94.892/share price under the original SPA.

My discussions with GLOW indicate the SPA is expected to complete this week – i.e. Engie crosses its 69.11% holding in GLOW to GPSC – and that the 247-3 and 247-4 forms will be submitted by GPSC in “around” 1-2 weeks after the close of the main transaction. The ERC signed off on the SPA last Friday.

Assuming late-May payment, this is currently trading at a gross/annualised spread of 1.6%/8.8%.

2. TTW: Cut 2019-2023 Earnings on the Rise of Depreciation Expenses

Picture2

We maintain our positive view toward its long-term outlook on the backs of potential growth from its location and secured contract with government agency. Maintain a BUY rating with a new target price of Bt16.8 (SOTP).

The story:

  • We cut our 2019-2021 earnings forecast by 12-13% to factor in rising depreciation expenses caused by its shortening depreciated years of PTW’s assets.
  • Our new target price of Bt16.8 is derived from Some-of-the-parts (SOTP) which comprises (1) Bt13.8 from core business (tap water supply under both TTW and PTW) based on DCF(6.7%WACC, 0%TG) and (2) Bt3.0 from CKP based on IFA report.

3. China Gas Placement – Larger Deals Traded Flat but Good Track Record Should Help

Overall

A shareholder of China Gas Holdings (384 HK) is looking to sell about 142m shares worth approximatel US$443m. This is a clean-up trade.

The deal scores well on our framework owing to its pristine track record of outperformance and decent earnings momentum. It is also a clean-up trade, hence, no overhang on its share price.

However, the performance of prev deals show that placements larger than HK$3bn tend to perform flat over one-month period whereas placements with smaller deal size did well. 

4. M&A: A Round-Up of Deals in February 2019

For the month of February, thirteen new deals were discussed on Smartkarma with an overall deal size of US$12.3bn.

This overall number includes the “offer” for Hanergy Thin Film Power (566 HK) which has no value, as yet, attached to the scrip component.

A firm number for Glow Energy Pcl (GLOW TB) has yet to be announced, which could result in a US$4bn+ deal.

The average premium to last close for the new deals was 27.5%.

New Deals

Industry

Deal size (US$mn)

Premium

Deal Type

Australia
Ruralco Holdings (RHL AU)Agriculture33644.0%Scheme
HK
Hanergy Thin Film Power (566 HK)Semiconductor Equipment––Scheme
Xingfa Aluminium (98 HK)Aluminum2022.9%Off-Mkt
Japan
Veriserve Corp (3724 JP)IT Consulting14343.6%Off-Mkt
Jiec Co Ltd (4291 JP)Software17039.3%Off-Mkt
Nd Software (3794 JP)Software27028.7%Off-Mkt
U Shin Ltd (6985 JP)Auto Parts and Equipment28828.3%Off-Mkt
Thailand
Golden Land Prop Dvlp (GOLD TB)Diversified Real Estate6322.4%Off-Mkt
Glow Energy Pcl (GLOW TB)IPP and Energy Traders4,000–Tender Offer (?)
UK
Dairy Crest (DCG LN)Dairy Products1,27212.0%Scheme
Ophir Energy (OPHR LN)Oil & Gas E&P51166.0%Scheme
RPC Group PLC (RPC LN)Financials4,10616.0%Scheme
China
Sichuan Swellfun Co Ltd A (600779 CH)Alcoholic Beverages33019.3%Off-Mkt
Source: Company announcements

Brief Summary of News in February of Arb Situations On Our Radar

Australia

Comments (with links)

Eclipx (ECX AU)
At the Eclipx Group 2019 AGM, the Chairman mentioned that it was the board unanimously endorses this proposal and that a revised timetable will be announced when the contents of the Scheme Book are agreed upon with MMS.
Graincorp Ltd A (GNC AU)
At the GrainCorp 2019 AGM, the Chairman announced that the engagement between the two parties remains active, and the proposal is still indicative and non-binding.
Greencross Ltd (GXL AU)
On 6th February 2019, Greencross held a scheme meeting at which the shareholders approved the scheme of arrangement (99.67% of Greencross shareholders present and voting at the Scheme Meeting voted in favour). A dividend of AUD 0.19 was announced on 7th February (ex-date: 12-Feb-2019), to be paid on 20th February 2019, conditional on court approval of the scheme. The scheme received court approval on 11th February 2019, along with which the company suspended the trading of its shares on ASX from the close of trading on 11th February 2019. The Scheme was implemented on 27th February 2019.
Healthscope Ltd (HSO AU)
On 1st February 2019 it was announced that Healthscope entered into an Implementation Deed with Brookfield, where Brookfield is to acquire all of the shares of Healthscope through a scheme at A$2.5/share and an off-market takeover offer A$4.2/share. A dividend of A$ 0.035 (ex-date:04-Mar-2019) announced on 14th February 2019, is included in the offer price.
MYOB Group Ltd (MYO AU)
The “go-shop” period in relation to the KKR Scheme, which allowed MYOB and its advisers to solicit a superior competing proposal, ended on 22nd February 2019, without any superior proposals emerging. As a result, the Directors of MYOB have reaffirmed their recommendation of the scheme. The Scheme Booklet is expected to be released in mid – late March 2019, with the Scheme meeting expected to be held in late April 2019.
Navitas Ltd (NVT AU)
On 18th February 2019, when the exclusivity period granted to BGH Consortium was to expire, Navitas announced that the exclusivity period is extended to 1st March 2019. This extension was granted in order to carry out a limited set of remaining due diligence, as per the announcement. The Directors of Navitas continue to unanimously recommend the Scheme.
Propertylink Group (PLG AU)
On 20th February 2019, the company announced the offer becoming unconditional, along with which it was announced that ESR has an interest of 74.78% of Propertylink and that Centuria Capital Group in respect of their 19.51% ownership. The offer has been extended to the 8th March.
Ruralco Holdings (RHL AU)
Ruralco has announced it has entered into a Scheme Implementation Deed in which Nutrien Ltd (NTR CN) has agreed to take Ruralco private at $4.40/share – a 44% premium to last close and the one-month VWAP.
Sigma Healthcare (SIG AU)
In a market update released by Sigma Healthcare, on 11th February 2019, it was announced that high level due diligence is still underway with regard to the potential merger proposal.

Hong Kong

Comments (with links)

Hanergy Thin Film Power (566 HK)
Hanergy announced on 26th February 2019, the intention of HMEH to privatise the company by way of a Scheme, at one SPV share for every Hanergy share. No price was given for the SPV.
Harbin Electric Co Ltd H (1133 HK)
The deadline to despatch the Composite Document was further extended to 29th March 2019, from its previous extension – 22nd February 2019.
Hopewell Holdings (54 HK)
The scheme document for the privatisation of Hopewell Holdings was dispatched on 24th February 2019.
New Sports Group (299 HK)

The deadline to despatch the Composite Document has been extended to either 30th April 2019 or 7 days after the date of fulfilment of the conditions, whichever is earlier. This extension is required in order to prepare the Goldjoy Circular to convene the EGM and because completion is subject to the conditions of the Sale and Purchase Agreement being fulfilled.

Xingfa Aluminium (98 HK)

On 13th February 2019, major shareholder of Xingfa Aluminium – Guangxin Aluminium, acquired 5,000 shares in Xingfa, which triggered the launch of a Madatory General Offer, as Guangxin’s stake in Xingfa exceeded 30%. The offer price is HK$5.60 cash/share.

India

Comments (with links)

Bharat Financial Inclusion (BHAFIN IN)
The transaction is expected to close today
Glaxosmithkline Consumer Healthcare (SKB IN)

No Feb update

Gruh Finance (GRHF IN)
No Feb update

Indonesia

Comments

Bank Danamon Indonesia (BDMN IJ)
Based on the original schedule, BDMN has today gone ex-rights on being able to vote in the Shareholder Meeting on March 26 and also ex-rights on the ability to select the cash payment for your shares.

Japan

Comments (with links)

Clarion Co Ltd (6796 JP)
The offer closed today
Descente Ltd (8114 JP)

On the 7th Feb, Descente announced that it was opposed to the deal. They can’t do much because the deal is launched. Shortly after, the employees union, a group of ex-employees, and a former president all came out against Itochu’s Tender Offer. On the 26th, the company announced that it would bring forward its announcement of its Medium Term Plan by a couple of months.

Jiec Co Ltd (4291 JP)

No update since launch on 31 January

Kabu.Com Securities (8703 JP)
On 12th February 2019, KDDI Corp announced that they intend to conduct a Tender offer for a minimum 45,758,400 shares of Kabu.Com Securities at ¥559/share. If they are able to acquire the minimum, it would lead to a Two Step Squeezeout, because when KDDI’s holding is combined with that of MUFJ Securities’, their total holding reaches 66.67%.
Kosaido Co Ltd (7868 JP)
On 4th February 2019 after the close, Reno KK filed a Large Shareholder Report declaring a 5.83% position as of 28th January 2019, following which, on the 5th of February they announced that they had purchased an additional 2.49% on the 29th of January, increasing their holding to 8.31%. On the days that followed, along with their joint holder Aoyama Fudosan, the Reno group increased their stake to 9.55% by 1st February 2019 (which was announced on 8th February 2019). On 18th February, an article was published on toyokeizai.net which suggested that Mr. Nakatsuji (longstanding external shareholder) and Sakurai Mie (leader shareholder and descendent of the founder of Kosaido), were against the takeover. It was announced on 26th February 2019, that the tender offer close date had extended to 12th March 2019, from 1st March 2019.
Nexon Co Ltd (3659 JP)
Reportedly Amazon.com Inc (AMZN US) and Comcast will enter the race and have submitted initial bids to acquire Nexon. EA was also mooted as a participant in first round bidding.
Nd Software (3794 JP)
On the 8 Feb, ND Software announced a Management Buy Out (MBO) sponsored by both the existing president, who owns 20%, and J-Will Partners to take the company private at ¥1700/share, which is a 28.7% premium to last trade and comes out to be roughly 7.2x trailing 12-month EV/EBITDA.
Pioneer Corp (6773 JP)
Pioneer has received all anti-trust approvals
Shinmaywa Industries (7224 JP)
The results of the Tender Offer was released on 20th February 2019. There were 32.43 million shares tendered, while the Tender Offer was only to buy 26.6666 million shares, which led to an 82.23% pro-ration. Following the closing of the Tender Offer, the Murakami grouping will own 4% of shares out and 5.7% of voting rights remaining.
U Shin Ltd (6985 JP)
On 14th February 2019, Minebea Mitsumi announced the launch of their Tender Offer to acquire U Shin Ltd at ¥985/share. The offer opened on 15th February 2019, and will close on 10th April 2019. The intention to make an offer to acquire U Shin Ltd was first announced back in November 2018.
Veriserve Corp (3724 JP)
After market close on 31st January 2019, Sumitomo Corp (8053 JP) consolidated subsidiary SCSK Corp (9719 JP) announced a Tender Offer to buy out minorities in Veriserve Corp (3724 JP). At the time of announcement, SCSK held 2,900,000 shares or 55.59% of voting rights. The Tender Offer is at ¥6,700/share

New Zealand

Comments

Trade Me (TME NZ)

No Feb update

Singapore

Comments (with links)

Ascendas-Singbridge
No Feb update
Courts Asia Ltd (COURTS SP)
The formal offer document was despatched on 1st February 2019, with the first closing date scheduled for 1st March 2019. On the same day a couple of hours later, due to irrevocable involved, the 50% shareholder acceptance condition was met, and the offer was declared unconditional. This allowed the company to extend the closing date of the offer to 15th March 2019 (final closing date).
M1 Ltd (M1 SP)
On 15th February 2019, an announcement was published declaring the offer unconditional, this led to the extension of the closing date to 4th March 2019.
Pci Ltd (PCI SP)
Singapore Exchange Securities Trading Limited approved PCI Limited’s application to delist the company from the official list of the SGX-ST, when the scheme becomes effective and binding in accordance with its terms

South Korea

Comments

Hyundai Oilbank
No update

Taiwan

Comments

Yungtay Engineering (1507 TT)
On the 14th of February the company announced that in the board meeting held on 29th January 2019, two independent directors objected to the terms of the Tender Offer which had been agreed. There is reportedly an investigation into shareholder rights being conducted. It is to note that in the 14th Feb release, it became clear that Otis Elevator had bid TWD 63/share for Yungtay but the directors had not approved the bid.

Thailand

Comments (with links)

Delta Electronics Thai (DELTA TB)
On 13th February 2019, Delta announced that the conditions precedent of the Conditional Voluntary Tender Offer was fully satisfied, following which on 18th February 2019 the Intention to Make a Tender Offer (Form 247-3) was announced along with the FY18 Dividend of Bt 2.30/share (which will be added). The Offer document was released on 22nd February 2019, announcing the Tender offer period – from 26-Feb-2019 to 01-Apr-2019.
Glow Energy Pcl (GLOW TB)
In the “Management Discussions” attached to FY18 earnings of Global Power Synergy Company Ltd, they mentioned that they are collaborating with GLOW in order to decide on tender offer price for GLOW’s shares, after taking into consideration the disposal of one of GLOW’s plants.
Golden Land Prop Dvlp (GOLD TB)
On 25th February 2019, Golden Land Prop Dvlp announced that they had received information that Frasers Property intends to make a Voluntary Tender Offer to acquire all of Golden Land Prop Dvlp’s shares at Bt 8.5/share.
Thanachart Capital (TCAP TB)
Thanachart Capital Public Company Limited (TCAP), as a major shareholder of Thanachart Bank Company Limited, announced on 26th February 2019, that they entered the Non-binding Memorandums of Understanding, in relation to the merger between Thanachart and TMB.

Europe/UK

Comments (with links)

Amer Sports Oyj (AMEAS FH)
On 21st February 2019, the offer period expiry date was extended to 7th March 2019 (previously 28th February 2019). As per the announcement on 22nd February 2019, the Anta Sports shareholders approved the deal to buy Amer Sports, with 99.19% of votes cast being for the deal. A couple of days later, on 25th February 2019, Mexico’s regulator approved the takeover, and this was the last of the approvals.
Ceva Logistics AG (CEVA SW)
No Feb update
Dairy Crest (DCG LN)
On 22nd February 2019, an announcement was released with the news that Saputo Inc had offered £6.20 cash/per share, to acquire all of the shares of Dairy Crest by way of a Scheme of Arrangement.
Diageo Plc (DGE LN)
On 26th February 2019, Diageo made an announcement stating that they had been approached by Sichuan Swellfun, with a possible partial tender offer to increase their stake in Diageo to 70% (from 60%) at RMB 45/share.
Earthport plc (EPO LN)
Visa announced an increase in their offer to £0.37/share (from £0.30/share), on 7th February 2019. The following day Mastercard issued a stated that they were considering their options. On 11th February 2019, Visa posted their Offer Document, following which Mastercard announced that they no longer have any letters of intent acceptiig their offer. An announcement on 21st February 2019, mentioned that both the Court Meeting and General Meeting have been adjourned by the Chairman and the new date will be announced in due course. On 27th February 2019, the offer was extended to remain open till 8th March 2019.
Ophir Energy (OPHR LN)
It was announced on 30th January 2019 that Medco Energi Internasional T had reached an agreement to acquire Ophir Energy at an offer price of £0.55/share, by way of a Scheme of Arrangement.Petrus Advisors (3.5% shareholder) dialed up the pressure on its opposition for this offer, with a letter addressed to Ophir’s Chairman, on 19th February 2019.
Oslo Børs VPS Holding ASA
On 4th February Nasdaq AB published the Public Offer document, according to which the acceptance period is from 4th February 2019 to 4th
March 2019.
Panalpina Welttransport Holdin (PWTN SW)
On 4th February 2019, Panalpina disclosed that their largest shareholder, the Ernst Göhner Foundation, does not support DSV’s indicative offer, which was made in January 2019. Following an announcement by Panalpina on 15th February 2019, regarding Panalpina pursuing a private combination with Agility Group, DSV informed the market that on 6th February 2019, they put forward an all-cash offer of CHF 180/share.
RPC Group PLC (RPC LN)
On the morning of January 23rd, 2019, after five PUSU extensions, RPC announced the recommended final cash offer by Apollo for 782p per share, or £3.323 billion.

 

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Mar 25
0

Brief Utlilities: Xinyi Energy IPO Preview: Second Time Lucky? and more

By | Utilities Sector

In this briefing:

  1. Xinyi Energy IPO Preview: Second Time Lucky?
  2. HK Connect Discovery Weekly: Mainland Investors Buying WH Group (2019-03-22)
  3. Last Week in GER Research: Navitas, Mindtree, PG&E, Delta Electronics, GDS, Myob, Sigma and Ruhnn
  4. SPCG: Laying Foundations for Next Stage of Growth
  5. PG&E: Turnaround; A Mission Impossible Task

1. Xinyi Energy IPO Preview: Second Time Lucky?

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Xinyi Energy Holdings Ltd (1671746D HK) has filed IPO prospectus once again to list its solar generation business that was spun-off from its parent company Xinyi Solar Holding Ltd. Xinyi Energy has 9 operational solar farms with a total capacity of ~950MW.

The company is set to acquire additional solar farms of 540MW capacity from its parent company in a separate transaction post IPO.

Xinyi Energy has not indicated the size and pricing of its offer, however, according to various media reports the company is expected to raise nearly HK$570M (around 12% of the previous offering of HK$4.5B). A significant portion of IPO proceeds is expected to be utilised towards upfront payment of 50% for acquiring solar farms from its parent company and the remainder for working capital and debt repayment. Although we have a positive view of the solar energy sector, the IPO pricing will determine our overall view of the company.

2. HK Connect Discovery Weekly: Mainland Investors Buying WH Group (2019-03-22)

Flow%20 %20by%20sector%2003 22

In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainland investors in the past seven days.

We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.

In this insight, we highlight the WH Group, which led the inflows last week. 

3. Last Week in GER Research: Navitas, Mindtree, PG&E, Delta Electronics, GDS, Myob, Sigma and Ruhnn

Below is a recap of the key Event-driven, IPO and placement research produced by the Global Equity Research team. This week we highlight Arun’s analysis on the takeover deals for Navitas Ltd (NVT AU) and Mindtree Ltd (MTCL IN) and the valuation range for Delta Electronics Thai (DELTA TB) . In addition, Arun recommends taking the Gds Holdings (Adr) (GDS US) placement while recommending the deal for MYOB Group Ltd (MYO AU) and contends investors may need to be patient for the rejected Sigma Healthcare (SIG AU) deal. Venkat looks into the bankruptcy arbitrage situation for P G & E Corp (PCG US) and contends PG&E has no equity value due to pending litigation risks. Finally, Arun initiates on the IPO of Chinese e-commerce company Ruhnn Holding Ltd (RUHN US)

Best of luck for the new week – Arun, Venkat and Rickin

4. SPCG: Laying Foundations for Next Stage of Growth

Sp3

We initiate coverage of SPCG with a BUY rating and a 2019E target price of Bt22.80, derived from a discounted cash flow valuation (WACC 7.0% and terminal growth of 1.0%). This is equivalent to 8.4x PE’19E.

The story:

  • Promising industry outlook
  • Striding toward overseas opportunities
  • Expiring adder should have been priced in already
  • Expected stable earnings in 2019-21E

Risks:   Single source supplier

                Forex fluctuation

                Uncertainty about sunlight

5. PG&E: Turnaround; A Mission Impossible Task

Fig%204

We write this note to provide P G & E Corp (PCG US) current state of affairs. First and foremost, we believe that the equity value is zero as the company restructures under chapter 11 bankruptcy code. Most companies that enter chapter 11 bankruptcy either face operational or financial headwinds. PG&E problems are compounded by complications of litigation and regulatory risk along with operational and financial risks.

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Mar 25
0

Brief Utlilities: TTW: Cut 2019-2023 Earnings on the Rise of Depreciation Expenses and more

By | Utilities Sector

In this briefing:

  1. TTW: Cut 2019-2023 Earnings on the Rise of Depreciation Expenses
  2. China Gas Placement – Larger Deals Traded Flat but Good Track Record Should Help
  3. M&A: A Round-Up of Deals in February 2019

1. TTW: Cut 2019-2023 Earnings on the Rise of Depreciation Expenses

Picture2

We maintain our positive view toward its long-term outlook on the backs of potential growth from its location and secured contract with government agency. Maintain a BUY rating with a new target price of Bt16.8 (SOTP).

The story:

  • We cut our 2019-2021 earnings forecast by 12-13% to factor in rising depreciation expenses caused by its shortening depreciated years of PTW’s assets.
  • Our new target price of Bt16.8 is derived from Some-of-the-parts (SOTP) which comprises (1) Bt13.8 from core business (tap water supply under both TTW and PTW) based on DCF(6.7%WACC, 0%TG) and (2) Bt3.0 from CKP based on IFA report.

2. China Gas Placement – Larger Deals Traded Flat but Good Track Record Should Help

Overall

A shareholder of China Gas Holdings (384 HK) is looking to sell about 142m shares worth approximatel US$443m. This is a clean-up trade.

The deal scores well on our framework owing to its pristine track record of outperformance and decent earnings momentum. It is also a clean-up trade, hence, no overhang on its share price.

However, the performance of prev deals show that placements larger than HK$3bn tend to perform flat over one-month period whereas placements with smaller deal size did well. 

3. M&A: A Round-Up of Deals in February 2019

For the month of February, thirteen new deals were discussed on Smartkarma with an overall deal size of US$12.3bn.

This overall number includes the “offer” for Hanergy Thin Film Power (566 HK) which has no value, as yet, attached to the scrip component.

A firm number for Glow Energy Pcl (GLOW TB) has yet to be announced, which could result in a US$4bn+ deal.

The average premium to last close for the new deals was 27.5%.

New Deals

Industry

Deal size (US$mn)

Premium

Deal Type

Australia
Ruralco Holdings (RHL AU)Agriculture33644.0%Scheme
HK
Hanergy Thin Film Power (566 HK)Semiconductor Equipment––Scheme
Xingfa Aluminium (98 HK)Aluminum2022.9%Off-Mkt
Japan
Veriserve Corp (3724 JP)IT Consulting14343.6%Off-Mkt
Jiec Co Ltd (4291 JP)Software17039.3%Off-Mkt
Nd Software (3794 JP)Software27028.7%Off-Mkt
U Shin Ltd (6985 JP)Auto Parts and Equipment28828.3%Off-Mkt
Thailand
Golden Land Prop Dvlp (GOLD TB)Diversified Real Estate6322.4%Off-Mkt
Glow Energy Pcl (GLOW TB)IPP and Energy Traders4,000–Tender Offer (?)
UK
Dairy Crest (DCG LN)Dairy Products1,27212.0%Scheme
Ophir Energy (OPHR LN)Oil & Gas E&P51166.0%Scheme
RPC Group PLC (RPC LN)Financials4,10616.0%Scheme
China
Sichuan Swellfun Co Ltd A (600779 CH)Alcoholic Beverages33019.3%Off-Mkt
Source: Company announcements

Brief Summary of News in February of Arb Situations On Our Radar

Australia

Comments (with links)

Eclipx (ECX AU)
At the Eclipx Group 2019 AGM, the Chairman mentioned that it was the board unanimously endorses this proposal and that a revised timetable will be announced when the contents of the Scheme Book are agreed upon with MMS.
Graincorp Ltd A (GNC AU)
At the GrainCorp 2019 AGM, the Chairman announced that the engagement between the two parties remains active, and the proposal is still indicative and non-binding.
Greencross Ltd (GXL AU)
On 6th February 2019, Greencross held a scheme meeting at which the shareholders approved the scheme of arrangement (99.67% of Greencross shareholders present and voting at the Scheme Meeting voted in favour). A dividend of AUD 0.19 was announced on 7th February (ex-date: 12-Feb-2019), to be paid on 20th February 2019, conditional on court approval of the scheme. The scheme received court approval on 11th February 2019, along with which the company suspended the trading of its shares on ASX from the close of trading on 11th February 2019. The Scheme was implemented on 27th February 2019.
Healthscope Ltd (HSO AU)
On 1st February 2019 it was announced that Healthscope entered into an Implementation Deed with Brookfield, where Brookfield is to acquire all of the shares of Healthscope through a scheme at A$2.5/share and an off-market takeover offer A$4.2/share. A dividend of A$ 0.035 (ex-date:04-Mar-2019) announced on 14th February 2019, is included in the offer price.
MYOB Group Ltd (MYO AU)
The “go-shop” period in relation to the KKR Scheme, which allowed MYOB and its advisers to solicit a superior competing proposal, ended on 22nd February 2019, without any superior proposals emerging. As a result, the Directors of MYOB have reaffirmed their recommendation of the scheme. The Scheme Booklet is expected to be released in mid – late March 2019, with the Scheme meeting expected to be held in late April 2019.
Navitas Ltd (NVT AU)
On 18th February 2019, when the exclusivity period granted to BGH Consortium was to expire, Navitas announced that the exclusivity period is extended to 1st March 2019. This extension was granted in order to carry out a limited set of remaining due diligence, as per the announcement. The Directors of Navitas continue to unanimously recommend the Scheme.
Propertylink Group (PLG AU)
On 20th February 2019, the company announced the offer becoming unconditional, along with which it was announced that ESR has an interest of 74.78% of Propertylink and that Centuria Capital Group in respect of their 19.51% ownership. The offer has been extended to the 8th March.
Ruralco Holdings (RHL AU)
Ruralco has announced it has entered into a Scheme Implementation Deed in which Nutrien Ltd (NTR CN) has agreed to take Ruralco private at $4.40/share – a 44% premium to last close and the one-month VWAP.
Sigma Healthcare (SIG AU)
In a market update released by Sigma Healthcare, on 11th February 2019, it was announced that high level due diligence is still underway with regard to the potential merger proposal.

Hong Kong

Comments (with links)

Hanergy Thin Film Power (566 HK)
Hanergy announced on 26th February 2019, the intention of HMEH to privatise the company by way of a Scheme, at one SPV share for every Hanergy share. No price was given for the SPV.
Harbin Electric Co Ltd H (1133 HK)
The deadline to despatch the Composite Document was further extended to 29th March 2019, from its previous extension – 22nd February 2019.
Hopewell Holdings (54 HK)
The scheme document for the privatisation of Hopewell Holdings was dispatched on 24th February 2019.
New Sports Group (299 HK)

The deadline to despatch the Composite Document has been extended to either 30th April 2019 or 7 days after the date of fulfilment of the conditions, whichever is earlier. This extension is required in order to prepare the Goldjoy Circular to convene the EGM and because completion is subject to the conditions of the Sale and Purchase Agreement being fulfilled.

Xingfa Aluminium (98 HK)

On 13th February 2019, major shareholder of Xingfa Aluminium – Guangxin Aluminium, acquired 5,000 shares in Xingfa, which triggered the launch of a Madatory General Offer, as Guangxin’s stake in Xingfa exceeded 30%. The offer price is HK$5.60 cash/share.

India

Comments (with links)

Bharat Financial Inclusion (BHAFIN IN)
The transaction is expected to close today
Glaxosmithkline Consumer Healthcare (SKB IN)

No Feb update

Gruh Finance (GRHF IN)
No Feb update

Indonesia

Comments

Bank Danamon Indonesia (BDMN IJ)
Based on the original schedule, BDMN has today gone ex-rights on being able to vote in the Shareholder Meeting on March 26 and also ex-rights on the ability to select the cash payment for your shares.

Japan

Comments (with links)

Clarion Co Ltd (6796 JP)
The offer closed today
Descente Ltd (8114 JP)

On the 7th Feb, Descente announced that it was opposed to the deal. They can’t do much because the deal is launched. Shortly after, the employees union, a group of ex-employees, and a former president all came out against Itochu’s Tender Offer. On the 26th, the company announced that it would bring forward its announcement of its Medium Term Plan by a couple of months.

Jiec Co Ltd (4291 JP)

No update since launch on 31 January

Kabu.Com Securities (8703 JP)
On 12th February 2019, KDDI Corp announced that they intend to conduct a Tender offer for a minimum 45,758,400 shares of Kabu.Com Securities at ¥559/share. If they are able to acquire the minimum, it would lead to a Two Step Squeezeout, because when KDDI’s holding is combined with that of MUFJ Securities’, their total holding reaches 66.67%.
Kosaido Co Ltd (7868 JP)
On 4th February 2019 after the close, Reno KK filed a Large Shareholder Report declaring a 5.83% position as of 28th January 2019, following which, on the 5th of February they announced that they had purchased an additional 2.49% on the 29th of January, increasing their holding to 8.31%. On the days that followed, along with their joint holder Aoyama Fudosan, the Reno group increased their stake to 9.55% by 1st February 2019 (which was announced on 8th February 2019). On 18th February, an article was published on toyokeizai.net which suggested that Mr. Nakatsuji (longstanding external shareholder) and Sakurai Mie (leader shareholder and descendent of the founder of Kosaido), were against the takeover. It was announced on 26th February 2019, that the tender offer close date had extended to 12th March 2019, from 1st March 2019.
Nexon Co Ltd (3659 JP)
Reportedly Amazon.com Inc (AMZN US) and Comcast will enter the race and have submitted initial bids to acquire Nexon. EA was also mooted as a participant in first round bidding.
Nd Software (3794 JP)
On the 8 Feb, ND Software announced a Management Buy Out (MBO) sponsored by both the existing president, who owns 20%, and J-Will Partners to take the company private at ¥1700/share, which is a 28.7% premium to last trade and comes out to be roughly 7.2x trailing 12-month EV/EBITDA.
Pioneer Corp (6773 JP)
Pioneer has received all anti-trust approvals
Shinmaywa Industries (7224 JP)
The results of the Tender Offer was released on 20th February 2019. There were 32.43 million shares tendered, while the Tender Offer was only to buy 26.6666 million shares, which led to an 82.23% pro-ration. Following the closing of the Tender Offer, the Murakami grouping will own 4% of shares out and 5.7% of voting rights remaining.
U Shin Ltd (6985 JP)
On 14th February 2019, Minebea Mitsumi announced the launch of their Tender Offer to acquire U Shin Ltd at ¥985/share. The offer opened on 15th February 2019, and will close on 10th April 2019. The intention to make an offer to acquire U Shin Ltd was first announced back in November 2018.
Veriserve Corp (3724 JP)
After market close on 31st January 2019, Sumitomo Corp (8053 JP) consolidated subsidiary SCSK Corp (9719 JP) announced a Tender Offer to buy out minorities in Veriserve Corp (3724 JP). At the time of announcement, SCSK held 2,900,000 shares or 55.59% of voting rights. The Tender Offer is at ¥6,700/share

New Zealand

Comments

Trade Me (TME NZ)

No Feb update

Singapore

Comments (with links)

Ascendas-Singbridge
No Feb update
Courts Asia Ltd (COURTS SP)
The formal offer document was despatched on 1st February 2019, with the first closing date scheduled for 1st March 2019. On the same day a couple of hours later, due to irrevocable involved, the 50% shareholder acceptance condition was met, and the offer was declared unconditional. This allowed the company to extend the closing date of the offer to 15th March 2019 (final closing date).
M1 Ltd (M1 SP)
On 15th February 2019, an announcement was published declaring the offer unconditional, this led to the extension of the closing date to 4th March 2019.
Pci Ltd (PCI SP)
Singapore Exchange Securities Trading Limited approved PCI Limited’s application to delist the company from the official list of the SGX-ST, when the scheme becomes effective and binding in accordance with its terms

South Korea

Comments

Hyundai Oilbank
No update

Taiwan

Comments

Yungtay Engineering (1507 TT)
On the 14th of February the company announced that in the board meeting held on 29th January 2019, two independent directors objected to the terms of the Tender Offer which had been agreed. There is reportedly an investigation into shareholder rights being conducted. It is to note that in the 14th Feb release, it became clear that Otis Elevator had bid TWD 63/share for Yungtay but the directors had not approved the bid.

Thailand

Comments (with links)

Delta Electronics Thai (DELTA TB)
On 13th February 2019, Delta announced that the conditions precedent of the Conditional Voluntary Tender Offer was fully satisfied, following which on 18th February 2019 the Intention to Make a Tender Offer (Form 247-3) was announced along with the FY18 Dividend of Bt 2.30/share (which will be added). The Offer document was released on 22nd February 2019, announcing the Tender offer period – from 26-Feb-2019 to 01-Apr-2019.
Glow Energy Pcl (GLOW TB)
In the “Management Discussions” attached to FY18 earnings of Global Power Synergy Company Ltd, they mentioned that they are collaborating with GLOW in order to decide on tender offer price for GLOW’s shares, after taking into consideration the disposal of one of GLOW’s plants.
Golden Land Prop Dvlp (GOLD TB)
On 25th February 2019, Golden Land Prop Dvlp announced that they had received information that Frasers Property intends to make a Voluntary Tender Offer to acquire all of Golden Land Prop Dvlp’s shares at Bt 8.5/share.
Thanachart Capital (TCAP TB)
Thanachart Capital Public Company Limited (TCAP), as a major shareholder of Thanachart Bank Company Limited, announced on 26th February 2019, that they entered the Non-binding Memorandums of Understanding, in relation to the merger between Thanachart and TMB.

Europe/UK

Comments (with links)

Amer Sports Oyj (AMEAS FH)
On 21st February 2019, the offer period expiry date was extended to 7th March 2019 (previously 28th February 2019). As per the announcement on 22nd February 2019, the Anta Sports shareholders approved the deal to buy Amer Sports, with 99.19% of votes cast being for the deal. A couple of days later, on 25th February 2019, Mexico’s regulator approved the takeover, and this was the last of the approvals.
Ceva Logistics AG (CEVA SW)
No Feb update
Dairy Crest (DCG LN)
On 22nd February 2019, an announcement was released with the news that Saputo Inc had offered £6.20 cash/per share, to acquire all of the shares of Dairy Crest by way of a Scheme of Arrangement.
Diageo Plc (DGE LN)
On 26th February 2019, Diageo made an announcement stating that they had been approached by Sichuan Swellfun, with a possible partial tender offer to increase their stake in Diageo to 70% (from 60%) at RMB 45/share.
Earthport plc (EPO LN)
Visa announced an increase in their offer to £0.37/share (from £0.30/share), on 7th February 2019. The following day Mastercard issued a stated that they were considering their options. On 11th February 2019, Visa posted their Offer Document, following which Mastercard announced that they no longer have any letters of intent acceptiig their offer. An announcement on 21st February 2019, mentioned that both the Court Meeting and General Meeting have been adjourned by the Chairman and the new date will be announced in due course. On 27th February 2019, the offer was extended to remain open till 8th March 2019.
Ophir Energy (OPHR LN)
It was announced on 30th January 2019 that Medco Energi Internasional T had reached an agreement to acquire Ophir Energy at an offer price of £0.55/share, by way of a Scheme of Arrangement.Petrus Advisors (3.5% shareholder) dialed up the pressure on its opposition for this offer, with a letter addressed to Ophir’s Chairman, on 19th February 2019.
Oslo Børs VPS Holding ASA
On 4th February Nasdaq AB published the Public Offer document, according to which the acceptance period is from 4th February 2019 to 4th
March 2019.
Panalpina Welttransport Holdin (PWTN SW)
On 4th February 2019, Panalpina disclosed that their largest shareholder, the Ernst Göhner Foundation, does not support DSV’s indicative offer, which was made in January 2019. Following an announcement by Panalpina on 15th February 2019, regarding Panalpina pursuing a private combination with Agility Group, DSV informed the market that on 6th February 2019, they put forward an all-cash offer of CHF 180/share.
RPC Group PLC (RPC LN)
On the morning of January 23rd, 2019, after five PUSU extensions, RPC announced the recommended final cash offer by Apollo for 782p per share, or £3.323 billion.

 

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Mar 25
0

Brief Utlilities: HK Connect Discovery Weekly: Mainland Investors Buying WH Group (2019-03-22) and more

By | Utilities Sector

In this briefing:

  1. HK Connect Discovery Weekly: Mainland Investors Buying WH Group (2019-03-22)
  2. Last Week in GER Research: Navitas, Mindtree, PG&E, Delta Electronics, GDS, Myob, Sigma and Ruhnn
  3. SPCG: Laying Foundations for Next Stage of Growth
  4. PG&E: Turnaround; A Mission Impossible Task
  5. GLOW’s Done Deal As SPA (Almost) Completes

1. HK Connect Discovery Weekly: Mainland Investors Buying WH Group (2019-03-22)

Mid%20cap%20outflow%2003 22

In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainland investors in the past seven days.

We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.

In this insight, we highlight the WH Group, which led the inflows last week. 

2. Last Week in GER Research: Navitas, Mindtree, PG&E, Delta Electronics, GDS, Myob, Sigma and Ruhnn

Below is a recap of the key Event-driven, IPO and placement research produced by the Global Equity Research team. This week we highlight Arun’s analysis on the takeover deals for Navitas Ltd (NVT AU) and Mindtree Ltd (MTCL IN) and the valuation range for Delta Electronics Thai (DELTA TB) . In addition, Arun recommends taking the Gds Holdings (Adr) (GDS US) placement while recommending the deal for MYOB Group Ltd (MYO AU) and contends investors may need to be patient for the rejected Sigma Healthcare (SIG AU) deal. Venkat looks into the bankruptcy arbitrage situation for P G & E Corp (PCG US) and contends PG&E has no equity value due to pending litigation risks. Finally, Arun initiates on the IPO of Chinese e-commerce company Ruhnn Holding Ltd (RUHN US)

Best of luck for the new week – Arun, Venkat and Rickin

3. SPCG: Laying Foundations for Next Stage of Growth

Sp3

We initiate coverage of SPCG with a BUY rating and a 2019E target price of Bt22.80, derived from a discounted cash flow valuation (WACC 7.0% and terminal growth of 1.0%). This is equivalent to 8.4x PE’19E.

The story:

  • Promising industry outlook
  • Striding toward overseas opportunities
  • Expiring adder should have been priced in already
  • Expected stable earnings in 2019-21E

Risks:   Single source supplier

                Forex fluctuation

                Uncertainty about sunlight

4. PG&E: Turnaround; A Mission Impossible Task

Fig%204

We write this note to provide P G & E Corp (PCG US) current state of affairs. First and foremost, we believe that the equity value is zero as the company restructures under chapter 11 bankruptcy code. Most companies that enter chapter 11 bankruptcy either face operational or financial headwinds. PG&E problems are compounded by complications of litigation and regulatory risk along with operational and financial risks.

5. GLOW’s Done Deal As SPA (Almost) Completes

Price%20mar

The revised SPA between Engie SA (ENGI FP) and Global Power Synergy Company Ltd (GPSC TB) is expected to the close this week, triggering a mandatory Tender offer for Glow Energy Pcl (GLOW TB).

The revision was a remedial requirement (announced on the 27 Dec) after the Office of the Energy Regulatory Commission (ERC) resolved to approve, in principle, the proposed merger of GSPC and GLOW, provided GLOW sells Glow SPP1 before or at the same time as the merger. The ERC had previously rejected the merger on the 11 October.

The divestment of SPP1 to B Grimm Power (BGRIM TB) for Bt3.3bn (~2.5% of GLOW’s market cap at the time) was announced on the 22 February and was completed yesterday. 

Subsequent to the SPP1 sale, the purchase price under the SPA was adjusted to Bt91.9906/share, a ~3% decline from the initial Bt94.892/share price under the original SPA.

My discussions with GLOW indicate the SPA is expected to complete this week – i.e. Engie crosses its 69.11% holding in GLOW to GPSC – and that the 247-3 and 247-4 forms will be submitted by GPSC in “around” 1-2 weeks after the close of the main transaction. The ERC signed off on the SPA last Friday.

Assuming late-May payment, this is currently trading at a gross/annualised spread of 1.6%/8.8%.

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Mar 25
0

Brief Utlilities: China Gas Placement – Larger Deals Traded Flat but Good Track Record Should Help and more

By | Utilities Sector

In this briefing:

  1. China Gas Placement – Larger Deals Traded Flat but Good Track Record Should Help
  2. M&A: A Round-Up of Deals in February 2019

1. China Gas Placement – Larger Deals Traded Flat but Good Track Record Should Help

Overall

A shareholder of China Gas Holdings (384 HK) is looking to sell about 142m shares worth approximatel US$443m. This is a clean-up trade.

The deal scores well on our framework owing to its pristine track record of outperformance and decent earnings momentum. It is also a clean-up trade, hence, no overhang on its share price.

However, the performance of prev deals show that placements larger than HK$3bn tend to perform flat over one-month period whereas placements with smaller deal size did well. 

2. M&A: A Round-Up of Deals in February 2019

For the month of February, thirteen new deals were discussed on Smartkarma with an overall deal size of US$12.3bn.

This overall number includes the “offer” for Hanergy Thin Film Power (566 HK) which has no value, as yet, attached to the scrip component.

A firm number for Glow Energy Pcl (GLOW TB) has yet to be announced, which could result in a US$4bn+ deal.

The average premium to last close for the new deals was 27.5%.

New Deals

Industry

Deal size (US$mn)

Premium

Deal Type

Australia
Ruralco Holdings (RHL AU)Agriculture33644.0%Scheme
HK
Hanergy Thin Film Power (566 HK)Semiconductor Equipment––Scheme
Xingfa Aluminium (98 HK)Aluminum2022.9%Off-Mkt
Japan
Veriserve Corp (3724 JP)IT Consulting14343.6%Off-Mkt
Jiec Co Ltd (4291 JP)Software17039.3%Off-Mkt
Nd Software (3794 JP)Software27028.7%Off-Mkt
U Shin Ltd (6985 JP)Auto Parts and Equipment28828.3%Off-Mkt
Thailand
Golden Land Prop Dvlp (GOLD TB)Diversified Real Estate6322.4%Off-Mkt
Glow Energy Pcl (GLOW TB)IPP and Energy Traders4,000–Tender Offer (?)
UK
Dairy Crest (DCG LN)Dairy Products1,27212.0%Scheme
Ophir Energy (OPHR LN)Oil & Gas E&P51166.0%Scheme
RPC Group PLC (RPC LN)Financials4,10616.0%Scheme
China
Sichuan Swellfun Co Ltd A (600779 CH)Alcoholic Beverages33019.3%Off-Mkt
Source: Company announcements

Brief Summary of News in February of Arb Situations On Our Radar

Australia

Comments (with links)

Eclipx (ECX AU)
At the Eclipx Group 2019 AGM, the Chairman mentioned that it was the board unanimously endorses this proposal and that a revised timetable will be announced when the contents of the Scheme Book are agreed upon with MMS.
Graincorp Ltd A (GNC AU)
At the GrainCorp 2019 AGM, the Chairman announced that the engagement between the two parties remains active, and the proposal is still indicative and non-binding.
Greencross Ltd (GXL AU)
On 6th February 2019, Greencross held a scheme meeting at which the shareholders approved the scheme of arrangement (99.67% of Greencross shareholders present and voting at the Scheme Meeting voted in favour). A dividend of AUD 0.19 was announced on 7th February (ex-date: 12-Feb-2019), to be paid on 20th February 2019, conditional on court approval of the scheme. The scheme received court approval on 11th February 2019, along with which the company suspended the trading of its shares on ASX from the close of trading on 11th February 2019. The Scheme was implemented on 27th February 2019.
Healthscope Ltd (HSO AU)
On 1st February 2019 it was announced that Healthscope entered into an Implementation Deed with Brookfield, where Brookfield is to acquire all of the shares of Healthscope through a scheme at A$2.5/share and an off-market takeover offer A$4.2/share. A dividend of A$ 0.035 (ex-date:04-Mar-2019) announced on 14th February 2019, is included in the offer price.
MYOB Group Ltd (MYO AU)
The “go-shop” period in relation to the KKR Scheme, which allowed MYOB and its advisers to solicit a superior competing proposal, ended on 22nd February 2019, without any superior proposals emerging. As a result, the Directors of MYOB have reaffirmed their recommendation of the scheme. The Scheme Booklet is expected to be released in mid – late March 2019, with the Scheme meeting expected to be held in late April 2019.
Navitas Ltd (NVT AU)
On 18th February 2019, when the exclusivity period granted to BGH Consortium was to expire, Navitas announced that the exclusivity period is extended to 1st March 2019. This extension was granted in order to carry out a limited set of remaining due diligence, as per the announcement. The Directors of Navitas continue to unanimously recommend the Scheme.
Propertylink Group (PLG AU)
On 20th February 2019, the company announced the offer becoming unconditional, along with which it was announced that ESR has an interest of 74.78% of Propertylink and that Centuria Capital Group in respect of their 19.51% ownership. The offer has been extended to the 8th March.
Ruralco Holdings (RHL AU)
Ruralco has announced it has entered into a Scheme Implementation Deed in which Nutrien Ltd (NTR CN) has agreed to take Ruralco private at $4.40/share – a 44% premium to last close and the one-month VWAP.
Sigma Healthcare (SIG AU)
In a market update released by Sigma Healthcare, on 11th February 2019, it was announced that high level due diligence is still underway with regard to the potential merger proposal.

Hong Kong

Comments (with links)

Hanergy Thin Film Power (566 HK)
Hanergy announced on 26th February 2019, the intention of HMEH to privatise the company by way of a Scheme, at one SPV share for every Hanergy share. No price was given for the SPV.
Harbin Electric Co Ltd H (1133 HK)
The deadline to despatch the Composite Document was further extended to 29th March 2019, from its previous extension – 22nd February 2019.
Hopewell Holdings (54 HK)
The scheme document for the privatisation of Hopewell Holdings was dispatched on 24th February 2019.
New Sports Group (299 HK)

The deadline to despatch the Composite Document has been extended to either 30th April 2019 or 7 days after the date of fulfilment of the conditions, whichever is earlier. This extension is required in order to prepare the Goldjoy Circular to convene the EGM and because completion is subject to the conditions of the Sale and Purchase Agreement being fulfilled.

Xingfa Aluminium (98 HK)

On 13th February 2019, major shareholder of Xingfa Aluminium – Guangxin Aluminium, acquired 5,000 shares in Xingfa, which triggered the launch of a Madatory General Offer, as Guangxin’s stake in Xingfa exceeded 30%. The offer price is HK$5.60 cash/share.

India

Comments (with links)

Bharat Financial Inclusion (BHAFIN IN)
The transaction is expected to close today
Glaxosmithkline Consumer Healthcare (SKB IN)

No Feb update

Gruh Finance (GRHF IN)
No Feb update

Indonesia

Comments

Bank Danamon Indonesia (BDMN IJ)
Based on the original schedule, BDMN has today gone ex-rights on being able to vote in the Shareholder Meeting on March 26 and also ex-rights on the ability to select the cash payment for your shares.

Japan

Comments (with links)

Clarion Co Ltd (6796 JP)
The offer closed today
Descente Ltd (8114 JP)

On the 7th Feb, Descente announced that it was opposed to the deal. They can’t do much because the deal is launched. Shortly after, the employees union, a group of ex-employees, and a former president all came out against Itochu’s Tender Offer. On the 26th, the company announced that it would bring forward its announcement of its Medium Term Plan by a couple of months.

Jiec Co Ltd (4291 JP)

No update since launch on 31 January

Kabu.Com Securities (8703 JP)
On 12th February 2019, KDDI Corp announced that they intend to conduct a Tender offer for a minimum 45,758,400 shares of Kabu.Com Securities at ¥559/share. If they are able to acquire the minimum, it would lead to a Two Step Squeezeout, because when KDDI’s holding is combined with that of MUFJ Securities’, their total holding reaches 66.67%.
Kosaido Co Ltd (7868 JP)
On 4th February 2019 after the close, Reno KK filed a Large Shareholder Report declaring a 5.83% position as of 28th January 2019, following which, on the 5th of February they announced that they had purchased an additional 2.49% on the 29th of January, increasing their holding to 8.31%. On the days that followed, along with their joint holder Aoyama Fudosan, the Reno group increased their stake to 9.55% by 1st February 2019 (which was announced on 8th February 2019). On 18th February, an article was published on toyokeizai.net which suggested that Mr. Nakatsuji (longstanding external shareholder) and Sakurai Mie (leader shareholder and descendent of the founder of Kosaido), were against the takeover. It was announced on 26th February 2019, that the tender offer close date had extended to 12th March 2019, from 1st March 2019.
Nexon Co Ltd (3659 JP)
Reportedly Amazon.com Inc (AMZN US) and Comcast will enter the race and have submitted initial bids to acquire Nexon. EA was also mooted as a participant in first round bidding.
Nd Software (3794 JP)
On the 8 Feb, ND Software announced a Management Buy Out (MBO) sponsored by both the existing president, who owns 20%, and J-Will Partners to take the company private at ¥1700/share, which is a 28.7% premium to last trade and comes out to be roughly 7.2x trailing 12-month EV/EBITDA.
Pioneer Corp (6773 JP)
Pioneer has received all anti-trust approvals
Shinmaywa Industries (7224 JP)
The results of the Tender Offer was released on 20th February 2019. There were 32.43 million shares tendered, while the Tender Offer was only to buy 26.6666 million shares, which led to an 82.23% pro-ration. Following the closing of the Tender Offer, the Murakami grouping will own 4% of shares out and 5.7% of voting rights remaining.
U Shin Ltd (6985 JP)
On 14th February 2019, Minebea Mitsumi announced the launch of their Tender Offer to acquire U Shin Ltd at ¥985/share. The offer opened on 15th February 2019, and will close on 10th April 2019. The intention to make an offer to acquire U Shin Ltd was first announced back in November 2018.
Veriserve Corp (3724 JP)
After market close on 31st January 2019, Sumitomo Corp (8053 JP) consolidated subsidiary SCSK Corp (9719 JP) announced a Tender Offer to buy out minorities in Veriserve Corp (3724 JP). At the time of announcement, SCSK held 2,900,000 shares or 55.59% of voting rights. The Tender Offer is at ¥6,700/share

New Zealand

Comments

Trade Me (TME NZ)

No Feb update

Singapore

Comments (with links)

Ascendas-Singbridge
No Feb update
Courts Asia Ltd (COURTS SP)
The formal offer document was despatched on 1st February 2019, with the first closing date scheduled for 1st March 2019. On the same day a couple of hours later, due to irrevocable involved, the 50% shareholder acceptance condition was met, and the offer was declared unconditional. This allowed the company to extend the closing date of the offer to 15th March 2019 (final closing date).
M1 Ltd (M1 SP)
On 15th February 2019, an announcement was published declaring the offer unconditional, this led to the extension of the closing date to 4th March 2019.
Pci Ltd (PCI SP)
Singapore Exchange Securities Trading Limited approved PCI Limited’s application to delist the company from the official list of the SGX-ST, when the scheme becomes effective and binding in accordance with its terms

South Korea

Comments

Hyundai Oilbank
No update

Taiwan

Comments

Yungtay Engineering (1507 TT)
On the 14th of February the company announced that in the board meeting held on 29th January 2019, two independent directors objected to the terms of the Tender Offer which had been agreed. There is reportedly an investigation into shareholder rights being conducted. It is to note that in the 14th Feb release, it became clear that Otis Elevator had bid TWD 63/share for Yungtay but the directors had not approved the bid.

Thailand

Comments (with links)

Delta Electronics Thai (DELTA TB)
On 13th February 2019, Delta announced that the conditions precedent of the Conditional Voluntary Tender Offer was fully satisfied, following which on 18th February 2019 the Intention to Make a Tender Offer (Form 247-3) was announced along with the FY18 Dividend of Bt 2.30/share (which will be added). The Offer document was released on 22nd February 2019, announcing the Tender offer period – from 26-Feb-2019 to 01-Apr-2019.
Glow Energy Pcl (GLOW TB)
In the “Management Discussions” attached to FY18 earnings of Global Power Synergy Company Ltd, they mentioned that they are collaborating with GLOW in order to decide on tender offer price for GLOW’s shares, after taking into consideration the disposal of one of GLOW’s plants.
Golden Land Prop Dvlp (GOLD TB)
On 25th February 2019, Golden Land Prop Dvlp announced that they had received information that Frasers Property intends to make a Voluntary Tender Offer to acquire all of Golden Land Prop Dvlp’s shares at Bt 8.5/share.
Thanachart Capital (TCAP TB)
Thanachart Capital Public Company Limited (TCAP), as a major shareholder of Thanachart Bank Company Limited, announced on 26th February 2019, that they entered the Non-binding Memorandums of Understanding, in relation to the merger between Thanachart and TMB.

Europe/UK

Comments (with links)

Amer Sports Oyj (AMEAS FH)
On 21st February 2019, the offer period expiry date was extended to 7th March 2019 (previously 28th February 2019). As per the announcement on 22nd February 2019, the Anta Sports shareholders approved the deal to buy Amer Sports, with 99.19% of votes cast being for the deal. A couple of days later, on 25th February 2019, Mexico’s regulator approved the takeover, and this was the last of the approvals.
Ceva Logistics AG (CEVA SW)
No Feb update
Dairy Crest (DCG LN)
On 22nd February 2019, an announcement was released with the news that Saputo Inc had offered £6.20 cash/per share, to acquire all of the shares of Dairy Crest by way of a Scheme of Arrangement.
Diageo Plc (DGE LN)
On 26th February 2019, Diageo made an announcement stating that they had been approached by Sichuan Swellfun, with a possible partial tender offer to increase their stake in Diageo to 70% (from 60%) at RMB 45/share.
Earthport plc (EPO LN)
Visa announced an increase in their offer to £0.37/share (from £0.30/share), on 7th February 2019. The following day Mastercard issued a stated that they were considering their options. On 11th February 2019, Visa posted their Offer Document, following which Mastercard announced that they no longer have any letters of intent acceptiig their offer. An announcement on 21st February 2019, mentioned that both the Court Meeting and General Meeting have been adjourned by the Chairman and the new date will be announced in due course. On 27th February 2019, the offer was extended to remain open till 8th March 2019.
Ophir Energy (OPHR LN)
It was announced on 30th January 2019 that Medco Energi Internasional T had reached an agreement to acquire Ophir Energy at an offer price of £0.55/share, by way of a Scheme of Arrangement.Petrus Advisors (3.5% shareholder) dialed up the pressure on its opposition for this offer, with a letter addressed to Ophir’s Chairman, on 19th February 2019.
Oslo Børs VPS Holding ASA
On 4th February Nasdaq AB published the Public Offer document, according to which the acceptance period is from 4th February 2019 to 4th
March 2019.
Panalpina Welttransport Holdin (PWTN SW)
On 4th February 2019, Panalpina disclosed that their largest shareholder, the Ernst Göhner Foundation, does not support DSV’s indicative offer, which was made in January 2019. Following an announcement by Panalpina on 15th February 2019, regarding Panalpina pursuing a private combination with Agility Group, DSV informed the market that on 6th February 2019, they put forward an all-cash offer of CHF 180/share.
RPC Group PLC (RPC LN)
On the morning of January 23rd, 2019, after five PUSU extensions, RPC announced the recommended final cash offer by Apollo for 782p per share, or £3.323 billion.

 

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Mar 25
0

Brief Utlilities: Last Week in GER Research: Navitas, Mindtree, PG&E, Delta Electronics, GDS, Myob, Sigma and Ruhnn and more

By | Utilities Sector

In this briefing:

  1. Last Week in GER Research: Navitas, Mindtree, PG&E, Delta Electronics, GDS, Myob, Sigma and Ruhnn
  2. SPCG: Laying Foundations for Next Stage of Growth
  3. PG&E: Turnaround; A Mission Impossible Task
  4. GLOW’s Done Deal As SPA (Almost) Completes
  5. TTW: Cut 2019-2023 Earnings on the Rise of Depreciation Expenses

1. Last Week in GER Research: Navitas, Mindtree, PG&E, Delta Electronics, GDS, Myob, Sigma and Ruhnn

Below is a recap of the key Event-driven, IPO and placement research produced by the Global Equity Research team. This week we highlight Arun’s analysis on the takeover deals for Navitas Ltd (NVT AU) and Mindtree Ltd (MTCL IN) and the valuation range for Delta Electronics Thai (DELTA TB) . In addition, Arun recommends taking the Gds Holdings (Adr) (GDS US) placement while recommending the deal for MYOB Group Ltd (MYO AU) and contends investors may need to be patient for the rejected Sigma Healthcare (SIG AU) deal. Venkat looks into the bankruptcy arbitrage situation for P G & E Corp (PCG US) and contends PG&E has no equity value due to pending litigation risks. Finally, Arun initiates on the IPO of Chinese e-commerce company Ruhnn Holding Ltd (RUHN US)

Best of luck for the new week – Arun, Venkat and Rickin

2. SPCG: Laying Foundations for Next Stage of Growth

Sp3

We initiate coverage of SPCG with a BUY rating and a 2019E target price of Bt22.80, derived from a discounted cash flow valuation (WACC 7.0% and terminal growth of 1.0%). This is equivalent to 8.4x PE’19E.

The story:

  • Promising industry outlook
  • Striding toward overseas opportunities
  • Expiring adder should have been priced in already
  • Expected stable earnings in 2019-21E

Risks:   Single source supplier

                Forex fluctuation

                Uncertainty about sunlight

3. PG&E: Turnaround; A Mission Impossible Task

Fig%204

We write this note to provide P G & E Corp (PCG US) current state of affairs. First and foremost, we believe that the equity value is zero as the company restructures under chapter 11 bankruptcy code. Most companies that enter chapter 11 bankruptcy either face operational or financial headwinds. PG&E problems are compounded by complications of litigation and regulatory risk along with operational and financial risks.

4. GLOW’s Done Deal As SPA (Almost) Completes

Price%20mar

The revised SPA between Engie SA (ENGI FP) and Global Power Synergy Company Ltd (GPSC TB) is expected to the close this week, triggering a mandatory Tender offer for Glow Energy Pcl (GLOW TB).

The revision was a remedial requirement (announced on the 27 Dec) after the Office of the Energy Regulatory Commission (ERC) resolved to approve, in principle, the proposed merger of GSPC and GLOW, provided GLOW sells Glow SPP1 before or at the same time as the merger. The ERC had previously rejected the merger on the 11 October.

The divestment of SPP1 to B Grimm Power (BGRIM TB) for Bt3.3bn (~2.5% of GLOW’s market cap at the time) was announced on the 22 February and was completed yesterday. 

Subsequent to the SPP1 sale, the purchase price under the SPA was adjusted to Bt91.9906/share, a ~3% decline from the initial Bt94.892/share price under the original SPA.

My discussions with GLOW indicate the SPA is expected to complete this week – i.e. Engie crosses its 69.11% holding in GLOW to GPSC – and that the 247-3 and 247-4 forms will be submitted by GPSC in “around” 1-2 weeks after the close of the main transaction. The ERC signed off on the SPA last Friday.

Assuming late-May payment, this is currently trading at a gross/annualised spread of 1.6%/8.8%.

5. TTW: Cut 2019-2023 Earnings on the Rise of Depreciation Expenses

Picture2

We maintain our positive view toward its long-term outlook on the backs of potential growth from its location and secured contract with government agency. Maintain a BUY rating with a new target price of Bt16.8 (SOTP).

The story:

  • We cut our 2019-2021 earnings forecast by 12-13% to factor in rising depreciation expenses caused by its shortening depreciated years of PTW’s assets.
  • Our new target price of Bt16.8 is derived from Some-of-the-parts (SOTP) which comprises (1) Bt13.8 from core business (tap water supply under both TTW and PTW) based on DCF(6.7%WACC, 0%TG) and (2) Bt3.0 from CKP based on IFA report.

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Mar 22
0

Brief Utlilities: M&A: A Round-Up of Deals in February 2019 and more

By | Utilities Sector

In this briefing:

  1. M&A: A Round-Up of Deals in February 2019
  2. Will Rakuten Get A Near-Term Lyft?

1. M&A: A Round-Up of Deals in February 2019

For the month of February, thirteen new deals were discussed on Smartkarma with an overall deal size of US$12.3bn.

This overall number includes the “offer” for Hanergy Thin Film Power (566 HK) which has no value, as yet, attached to the scrip component.

A firm number for Glow Energy Pcl (GLOW TB) has yet to be announced, which could result in a US$4bn+ deal.

The average premium to last close for the new deals was 27.5%.

New Deals

Industry

Deal size (US$mn)

Premium

Deal Type

Australia
Ruralco Holdings (RHL AU)Agriculture33644.0%Scheme
HK
Hanergy Thin Film Power (566 HK)Semiconductor Equipment––Scheme
Xingfa Aluminium (98 HK)Aluminum2022.9%Off-Mkt
Japan
Veriserve Corp (3724 JP)IT Consulting14343.6%Off-Mkt
Jiec Co Ltd (4291 JP)Software17039.3%Off-Mkt
Nd Software (3794 JP)Software27028.7%Off-Mkt
U Shin Ltd (6985 JP)Auto Parts and Equipment28828.3%Off-Mkt
Thailand
Golden Land Prop Dvlp (GOLD TB)Diversified Real Estate6322.4%Off-Mkt
Glow Energy Pcl (GLOW TB)IPP and Energy Traders4,000–Tender Offer (?)
UK
Dairy Crest (DCG LN)Dairy Products1,27212.0%Scheme
Ophir Energy (OPHR LN)Oil & Gas E&P51166.0%Scheme
RPC Group PLC (RPC LN)Financials4,10616.0%Scheme
China
Sichuan Swellfun Co Ltd A (600779 CH)Alcoholic Beverages33019.3%Off-Mkt
Source: Company announcements

Brief Summary of News in February of Arb Situations On Our Radar

Australia

Comments (with links)

Eclipx (ECX AU)
At the Eclipx Group 2019 AGM, the Chairman mentioned that it was the board unanimously endorses this proposal and that a revised timetable will be announced when the contents of the Scheme Book are agreed upon with MMS.
Graincorp Ltd A (GNC AU)
At the GrainCorp 2019 AGM, the Chairman announced that the engagement between the two parties remains active, and the proposal is still indicative and non-binding.
Greencross Ltd (GXL AU)
On 6th February 2019, Greencross held a scheme meeting at which the shareholders approved the scheme of arrangement (99.67% of Greencross shareholders present and voting at the Scheme Meeting voted in favour). A dividend of AUD 0.19 was announced on 7th February (ex-date: 12-Feb-2019), to be paid on 20th February 2019, conditional on court approval of the scheme. The scheme received court approval on 11th February 2019, along with which the company suspended the trading of its shares on ASX from the close of trading on 11th February 2019. The Scheme was implemented on 27th February 2019.
Healthscope Ltd (HSO AU)
On 1st February 2019 it was announced that Healthscope entered into an Implementation Deed with Brookfield, where Brookfield is to acquire all of the shares of Healthscope through a scheme at A$2.5/share and an off-market takeover offer A$4.2/share. A dividend of A$ 0.035 (ex-date:04-Mar-2019) announced on 14th February 2019, is included in the offer price.
MYOB Group Ltd (MYO AU)
The “go-shop” period in relation to the KKR Scheme, which allowed MYOB and its advisers to solicit a superior competing proposal, ended on 22nd February 2019, without any superior proposals emerging. As a result, the Directors of MYOB have reaffirmed their recommendation of the scheme. The Scheme Booklet is expected to be released in mid – late March 2019, with the Scheme meeting expected to be held in late April 2019.
Navitas Ltd (NVT AU)
On 18th February 2019, when the exclusivity period granted to BGH Consortium was to expire, Navitas announced that the exclusivity period is extended to 1st March 2019. This extension was granted in order to carry out a limited set of remaining due diligence, as per the announcement. The Directors of Navitas continue to unanimously recommend the Scheme.
Propertylink Group (PLG AU)
On 20th February 2019, the company announced the offer becoming unconditional, along with which it was announced that ESR has an interest of 74.78% of Propertylink and that Centuria Capital Group in respect of their 19.51% ownership. The offer has been extended to the 8th March.
Ruralco Holdings (RHL AU)
Ruralco has announced it has entered into a Scheme Implementation Deed in which Nutrien Ltd (NTR CN) has agreed to take Ruralco private at $4.40/share – a 44% premium to last close and the one-month VWAP.
Sigma Healthcare (SIG AU)
In a market update released by Sigma Healthcare, on 11th February 2019, it was announced that high level due diligence is still underway with regard to the potential merger proposal.

Hong Kong

Comments (with links)

Hanergy Thin Film Power (566 HK)
Hanergy announced on 26th February 2019, the intention of HMEH to privatise the company by way of a Scheme, at one SPV share for every Hanergy share. No price was given for the SPV.
Harbin Electric Co Ltd H (1133 HK)
The deadline to despatch the Composite Document was further extended to 29th March 2019, from its previous extension – 22nd February 2019.
Hopewell Holdings (54 HK)
The scheme document for the privatisation of Hopewell Holdings was dispatched on 24th February 2019.
New Sports Group (299 HK)

The deadline to despatch the Composite Document has been extended to either 30th April 2019 or 7 days after the date of fulfilment of the conditions, whichever is earlier. This extension is required in order to prepare the Goldjoy Circular to convene the EGM and because completion is subject to the conditions of the Sale and Purchase Agreement being fulfilled.

Xingfa Aluminium (98 HK)

On 13th February 2019, major shareholder of Xingfa Aluminium – Guangxin Aluminium, acquired 5,000 shares in Xingfa, which triggered the launch of a Madatory General Offer, as Guangxin’s stake in Xingfa exceeded 30%. The offer price is HK$5.60 cash/share.

India

Comments (with links)

Bharat Financial Inclusion (BHAFIN IN)
The transaction is expected to close today
Glaxosmithkline Consumer Healthcare (SKB IN)

No Feb update

Gruh Finance (GRHF IN)
No Feb update

Indonesia

Comments

Bank Danamon Indonesia (BDMN IJ)
Based on the original schedule, BDMN has today gone ex-rights on being able to vote in the Shareholder Meeting on March 26 and also ex-rights on the ability to select the cash payment for your shares.

Japan

Comments (with links)

Clarion Co Ltd (6796 JP)
The offer closed today
Descente Ltd (8114 JP)

On the 7th Feb, Descente announced that it was opposed to the deal. They can’t do much because the deal is launched. Shortly after, the employees union, a group of ex-employees, and a former president all came out against Itochu’s Tender Offer. On the 26th, the company announced that it would bring forward its announcement of its Medium Term Plan by a couple of months.

Jiec Co Ltd (4291 JP)

No update since launch on 31 January

Kabu.Com Securities (8703 JP)
On 12th February 2019, KDDI Corp announced that they intend to conduct a Tender offer for a minimum 45,758,400 shares of Kabu.Com Securities at ¥559/share. If they are able to acquire the minimum, it would lead to a Two Step Squeezeout, because when KDDI’s holding is combined with that of MUFJ Securities’, their total holding reaches 66.67%.
Kosaido Co Ltd (7868 JP)
On 4th February 2019 after the close, Reno KK filed a Large Shareholder Report declaring a 5.83% position as of 28th January 2019, following which, on the 5th of February they announced that they had purchased an additional 2.49% on the 29th of January, increasing their holding to 8.31%. On the days that followed, along with their joint holder Aoyama Fudosan, the Reno group increased their stake to 9.55% by 1st February 2019 (which was announced on 8th February 2019). On 18th February, an article was published on toyokeizai.net which suggested that Mr. Nakatsuji (longstanding external shareholder) and Sakurai Mie (leader shareholder and descendent of the founder of Kosaido), were against the takeover. It was announced on 26th February 2019, that the tender offer close date had extended to 12th March 2019, from 1st March 2019.
Nexon Co Ltd (3659 JP)
Reportedly Amazon.com Inc (AMZN US) and Comcast will enter the race and have submitted initial bids to acquire Nexon. EA was also mooted as a participant in first round bidding.
Nd Software (3794 JP)
On the 8 Feb, ND Software announced a Management Buy Out (MBO) sponsored by both the existing president, who owns 20%, and J-Will Partners to take the company private at ¥1700/share, which is a 28.7% premium to last trade and comes out to be roughly 7.2x trailing 12-month EV/EBITDA.
Pioneer Corp (6773 JP)
Pioneer has received all anti-trust approvals
Shinmaywa Industries (7224 JP)
The results of the Tender Offer was released on 20th February 2019. There were 32.43 million shares tendered, while the Tender Offer was only to buy 26.6666 million shares, which led to an 82.23% pro-ration. Following the closing of the Tender Offer, the Murakami grouping will own 4% of shares out and 5.7% of voting rights remaining.
U Shin Ltd (6985 JP)
On 14th February 2019, Minebea Mitsumi announced the launch of their Tender Offer to acquire U Shin Ltd at ¥985/share. The offer opened on 15th February 2019, and will close on 10th April 2019. The intention to make an offer to acquire U Shin Ltd was first announced back in November 2018.
Veriserve Corp (3724 JP)
After market close on 31st January 2019, Sumitomo Corp (8053 JP) consolidated subsidiary SCSK Corp (9719 JP) announced a Tender Offer to buy out minorities in Veriserve Corp (3724 JP). At the time of announcement, SCSK held 2,900,000 shares or 55.59% of voting rights. The Tender Offer is at ¥6,700/share

New Zealand

Comments

Trade Me (TME NZ)

No Feb update

Singapore

Comments (with links)

Ascendas-Singbridge
No Feb update
Courts Asia Ltd (COURTS SP)
The formal offer document was despatched on 1st February 2019, with the first closing date scheduled for 1st March 2019. On the same day a couple of hours later, due to irrevocable involved, the 50% shareholder acceptance condition was met, and the offer was declared unconditional. This allowed the company to extend the closing date of the offer to 15th March 2019 (final closing date).
M1 Ltd (M1 SP)
On 15th February 2019, an announcement was published declaring the offer unconditional, this led to the extension of the closing date to 4th March 2019.
Pci Ltd (PCI SP)
Singapore Exchange Securities Trading Limited approved PCI Limited’s application to delist the company from the official list of the SGX-ST, when the scheme becomes effective and binding in accordance with its terms

South Korea

Comments

Hyundai Oilbank
No update

Taiwan

Comments

Yungtay Engineering (1507 TT)
On the 14th of February the company announced that in the board meeting held on 29th January 2019, two independent directors objected to the terms of the Tender Offer which had been agreed. There is reportedly an investigation into shareholder rights being conducted. It is to note that in the 14th Feb release, it became clear that Otis Elevator had bid TWD 63/share for Yungtay but the directors had not approved the bid.

Thailand

Comments (with links)

Delta Electronics Thai (DELTA TB)
On 13th February 2019, Delta announced that the conditions precedent of the Conditional Voluntary Tender Offer was fully satisfied, following which on 18th February 2019 the Intention to Make a Tender Offer (Form 247-3) was announced along with the FY18 Dividend of Bt 2.30/share (which will be added). The Offer document was released on 22nd February 2019, announcing the Tender offer period – from 26-Feb-2019 to 01-Apr-2019.
Glow Energy Pcl (GLOW TB)
In the “Management Discussions” attached to FY18 earnings of Global Power Synergy Company Ltd, they mentioned that they are collaborating with GLOW in order to decide on tender offer price for GLOW’s shares, after taking into consideration the disposal of one of GLOW’s plants.
Golden Land Prop Dvlp (GOLD TB)
On 25th February 2019, Golden Land Prop Dvlp announced that they had received information that Frasers Property intends to make a Voluntary Tender Offer to acquire all of Golden Land Prop Dvlp’s shares at Bt 8.5/share.
Thanachart Capital (TCAP TB)
Thanachart Capital Public Company Limited (TCAP), as a major shareholder of Thanachart Bank Company Limited, announced on 26th February 2019, that they entered the Non-binding Memorandums of Understanding, in relation to the merger between Thanachart and TMB.

Europe/UK

Comments (with links)

Amer Sports Oyj (AMEAS FH)
On 21st February 2019, the offer period expiry date was extended to 7th March 2019 (previously 28th February 2019). As per the announcement on 22nd February 2019, the Anta Sports shareholders approved the deal to buy Amer Sports, with 99.19% of votes cast being for the deal. A couple of days later, on 25th February 2019, Mexico’s regulator approved the takeover, and this was the last of the approvals.
Ceva Logistics AG (CEVA SW)
No Feb update
Dairy Crest (DCG LN)
On 22nd February 2019, an announcement was released with the news that Saputo Inc had offered £6.20 cash/per share, to acquire all of the shares of Dairy Crest by way of a Scheme of Arrangement.
Diageo Plc (DGE LN)
On 26th February 2019, Diageo made an announcement stating that they had been approached by Sichuan Swellfun, with a possible partial tender offer to increase their stake in Diageo to 70% (from 60%) at RMB 45/share.
Earthport plc (EPO LN)
Visa announced an increase in their offer to £0.37/share (from £0.30/share), on 7th February 2019. The following day Mastercard issued a stated that they were considering their options. On 11th February 2019, Visa posted their Offer Document, following which Mastercard announced that they no longer have any letters of intent acceptiig their offer. An announcement on 21st February 2019, mentioned that both the Court Meeting and General Meeting have been adjourned by the Chairman and the new date will be announced in due course. On 27th February 2019, the offer was extended to remain open till 8th March 2019.
Ophir Energy (OPHR LN)
It was announced on 30th January 2019 that Medco Energi Internasional T had reached an agreement to acquire Ophir Energy at an offer price of £0.55/share, by way of a Scheme of Arrangement.Petrus Advisors (3.5% shareholder) dialed up the pressure on its opposition for this offer, with a letter addressed to Ophir’s Chairman, on 19th February 2019.
Oslo Børs VPS Holding ASA
On 4th February Nasdaq AB published the Public Offer document, according to which the acceptance period is from 4th February 2019 to 4th
March 2019.
Panalpina Welttransport Holdin (PWTN SW)
On 4th February 2019, Panalpina disclosed that their largest shareholder, the Ernst Göhner Foundation, does not support DSV’s indicative offer, which was made in January 2019. Following an announcement by Panalpina on 15th February 2019, regarding Panalpina pursuing a private combination with Agility Group, DSV informed the market that on 6th February 2019, they put forward an all-cash offer of CHF 180/share.
RPC Group PLC (RPC LN)
On the morning of January 23rd, 2019, after five PUSU extensions, RPC announced the recommended final cash offer by Apollo for 782p per share, or £3.323 billion.

 

2. Will Rakuten Get A Near-Term Lyft?

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Rakuten Inc (4755 JP) is much in the news for many reasons – one of which being a plunge into the deeper waters of being the fourth Type I Mobile Network Operator in Japan, having officially applied for the license in February 2018 and seeing it approved in April.  – the license for which it applied a year ago, with approval received in April 2018. The goal has been to use its initial foray into the MVNO business where it has more than 1.5 million users, and increase its footprint to attract some of its 100+mm Rakuten IDs, 7mm Rakuten Bank accountholders, 3mm Rakuten Securities accountholders, so that it can increase the LTV (LifeTimeValue) of its existing customer base. 

The goal is to introduce service this year (also a requirement of the terms of its license), growing steadily to have 15mm subs in 10 years. The estimated hardware spend is said to be ¥600-700bn on base stations and equipment, initially concentrating on areas in and around mass transit stations in urban areas such as Tokyo and Osaka, and then expand outward. The company has signed deals with numerous partners in electricity distribution such as Tokyo Electric Power Co (9501 JP), Chubu Electric Power Co (9502 JP), and Kansai Electric Power Co (9503 JP) to install transmission equipment on these companies’ power poles and other infrastructure.

The shares have suffered mightily since the plan came to light in mid-December 2015, underperforming the TOPIX Info & Communications Sector Index by more than 20% in the fourteen months through yesterday. The sharp drop on the left hand side of the chart was a two-day sell-a-thon by investors convinced the company was about to waste billions of dollars. The Info & Communications Sector Index also dropped sharply on that day on fears that a fourth entrant with a declared goal of dropping monthly charges by 40% would increase churn at the existing Big Three (NTT Docomo Inc (9437 JP), Softbank Corp (9434 JP), and KDDI Corp (9433 JP)) and possibly cause a price war. The shares dropped from about ¥1140 to ¥1020/share, and then slid another 30-odd percent in the next six months to ¥700/share.

The shares have rebounded, fell back in autumn general market weakness, rebounded a tie-up on payments with KDDI announced Nov1 and decent Q3 numbes announced less than 2 weeks later, got crushed in the sharp global selloff in November and December, then had a v-shaped rebound at the start of 2019. 

At the end of January Rakuten Mobile Network received blanket licenses to transmit on 1.7Ghz in the major regions  covering Tokyo, Kyoto, Osaka, Nagoya and Yokohama from the local Bureaus of Communication, and expects to receive others soon. Last week, Rakuten reported full-year earnings through end-December with revenues up 16.6%yoy to just over ¥1.1 trillion, OP (IFRS) at ¥170.4bn, and Net Income at ¥142bn and on the same day announced Nokia had been granted the contract to deploy a turnkey solution as had been previously tested and speculated. 

There are numerous telecom and retailing experts publishing on Smartkarma who have more expertise on Rakuten’s telecom plans and their plans to compete harder against Amazon Japan and Yahoo Japan and others in the e-tailing space. 

Selected Insights on Smartkarma on Rakuten Inc (4755 JP) In the Last 12+ Months

DateSectorInsight ProviderInsight Title
21 Dec 2017TelecomNew Street ResearchRakuten’s Entry to Telco Market Unlikely to Be Disruptive. Telco Visits Suggest Positive Outlook.
17 Jan 2018Telecom New Street Research Rakuten’s Balance Sheet and Incremental Costs Limit Funding Flexibility as It Plans Mobile Entry
11 Sep 2018TelecomNathan RamlerSoftBank (9984 JP) Mobile Sub-Brands Provide a Case Study for Rakuten (4755 JP) Mobile
21 Sep 2018TelecomNathan RamlerRakuten (4755 JP) Mobile: Can It Succeed? A Study, Plus Insights from SoftBank’s (9984 JP) EMobile
18 Oct 2018RetailingMichael CaustonRakuten Launches Own Delivery Service
16 Nov 2018Retailing Michael Causton Online Food Boom: Rakuten Walmart Alliance Goes Live
16 Feb 2019Retailing Michael Causton Rakuten to Covertly Cut Merchant Commission Rates?
20 Feb 2019TelecomKirk BoodryValue-Enhancing 5G Spectrum Allocations on the Way for KDDI, DoCoMo, Softbank and Rakuten

I am not going to pretend to their level of knowledge on telecom or retailing (I found Kirk Boodry’s piece on the upcoming 5G allocations in March to be particularly informative) but I will note that Rakuten has a) the ability to borrow against the hardware and licenses, b) can roll out hardware quarter-by-quarter, and c) the KDDI/Rakuten deal is important. In it, KDDI will give Rakuten access to its nationwide roaming network, and Rakuten will provide KDDI with expertise on mobile payments – especially relevant as KDDI is now building out au Financial as briefly discussed here. 

But There is More NewsFlow To Come, And THAT is Interesting

In March 2015, Rakuten CEO Hiroshi Mikitani announced that Rakuten had invested US$300mm in a then just-become-unicorn ride-sharing company called Lyft Inc (0812823D US), which at the end of the Series E round in May 2015 would leave it with ~11.9% of the company at a ~US$2.4-2.5bn post-money valuation. Recent articles suggest that Rakuten remains the top investor (though a WSJ article 2 weeks ago noted there would be golden shares. Hiroshi Mikitani remains a board member of Lyft.

That becomes important as by all accounts I can find (much more detail below), Rakuten continued investing in the four subsequent funding rounds through last summer, leaving the company as the largest single shareholder in Lyft as it prepares for its IPO later this spring. Lyft confidentially filed its IPO paperwork (a “draft S-1”) with the SEC in early December 2018, leaping ahead of Uber in the race to IPO first so the much larger Uber valuation doesn’t block Lyft’s chances for raising funds.

Reuters carried an article Thursday night Asia time saying Lyft planned to start its roadshow the week of March 18th, with an expected valuation of US$20-25 billion, and the first-mover advantage would allow Lyft to set the metrics it wants to use upon which to be judged and priced (if it waited, it would have to be compared to Uber). That could mean more emphasis on the company’s strong suite of self-driving partnerships (drive.ai, Ford, GM, Jaguar, Nutonomy, Waymo, others). A March 18th roadshow would require a full S-1 filing two weeks prior to that.

A successful IPO story based on picking up market share (reportedly doubled to 28% by end-2018 vs end-2016) might make Rakuten’s other investments look good too (Rakuten led Series B, C, D, and E funding for Spanish-language ride-hailing app cabify from 2014-2018 (and reportedly pushed cabify to merge with Lyft last year) and has invested in multiple rounds in SE Asian version GoJek.

The runup to this IPO and the clarity a filing could provide on ownership could provide a near-term fillip to Rakuten’s share price. 

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