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.
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.
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.
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%.
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.
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.
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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.
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.
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%.
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.
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.
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.
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.
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.
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
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.
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%.
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.
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.
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.
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.
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.
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
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).
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.
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
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
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.
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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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.
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%.
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.
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.
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.
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.
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.
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
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.
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%.
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.
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.
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.
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.
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.
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
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).
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.
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
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
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.
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.
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.
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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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.
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.
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.
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.
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.
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
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.
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%.
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.
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.
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.
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.
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.
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
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).
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.
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
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
We remain constructive overall and continue to believe that global equities (MSCI ACWI) are going through a bottoming process. Opportunities exist but Sector leadership is mixed. In our February International Strategy document, we explore various themes which lead to our overall constructive outlook, as well as a technical appraisal of each Sector and the investable opportunities therein.
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.
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.
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.
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.
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.
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
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.
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%.
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.
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.
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.
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.
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.
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
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).
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.
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
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
We remain constructive overall and continue to believe that global equities (MSCI ACWI) are going through a bottoming process. Opportunities exist but Sector leadership is mixed. In our February International Strategy document, we explore various themes which lead to our overall constructive outlook, as well as a technical appraisal of each Sector and the investable opportunities therein.
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.
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.
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.
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.
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
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.
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%.
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.
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.
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.
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.
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.
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
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).
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.
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
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
We remain constructive overall and continue to believe that global equities (MSCI ACWI) are going through a bottoming process. Opportunities exist but Sector leadership is mixed. In our February International Strategy document, we explore various themes which lead to our overall constructive outlook, as well as a technical appraisal of each Sector and the investable opportunities therein.
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.
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.
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.
We remain constructive overall and continue to believe that global equities (MSCI ACWI) are going through a bottoming process. Opportunities exist but Sector leadership is mixed. In our February International Strategy document, we explore various themes which lead to our overall constructive outlook, as well as a technical appraisal of each Sector and the investable opportunities therein.
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.
We remain constructive overall and continue to believe that global equities (MSCI ACWI) are going through a bottoming process. Opportunities exist but Sector leadership is mixed. In our February International Strategy document, we explore various themes which lead to our overall constructive outlook, as well as a technical appraisal of each Sector and the investable opportunities therein.
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.
In today’s report we highlight the following actionable solar energy names: First Solar (FSLR), SolarEdge Technologies (SEDG), GCL-Poly Energy (3800-HK), Meyer Burger Technology AG (MBTN-CH), Enphase Energy (ENPH), JinkoSolar Sponsored ADR (JKS), TerraForm Power (TERP), Beijing Enterprises Clean Energy Group (1250-HK), GCL New Energy (451-HK), and Viatron Technologies (141000-KR).
Get Straight to the Source on Smartkarma
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The key issue raised at the time was that the transaction would give GPSC a monopoly on power purchase agreements in Map Ta Phut, Thailand’s largest industrial park.
Despite what appeared to be a non-issue from an anti-trust point of view (as discussed in Anti-Trust Should Be A Non-Issue In The GPSC/Glow Deal), on 11 October 2018 the Energy Regulatory Commission (“ERC”) notified the public of its decision not to give its approval for the transaction. Glow’s shares declined ~6% on the news.
An appeal to reconsider ERC’s decision was dismissed on 14 December.
After an announcement alluding to multiple interests for Engie’s stake, on the 27 December Glow announced that ERC has resolved to approve the merger with GPSC, provided Glow sells its Glow SPP1 plant before or at the same time as the merger. A number of conditions were also attached to some of the remaining power plants.
No price has been disclosed for the 69.11% stake in Glow, ex the SPP1 plant.
The current upside is (at best) 6.8% to an indicative offer price Bt95.86, assuming Glow can sell SPP1 at the same multiple under GPSC’s initial offer and GPSC continues to assign the same multiple to Glow even after the sale of SPP1. That would appear a stretch. However, SPP1 is estimated to account for just ~5% of Glow’s energy output and revenue. And media are reporting Engie itself may acquire the plant, which should smooth and expedite the completion of the transaction.
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