Brief Consumer: Severgroup Puts in a Cheeky Bid for Lenta – TPG and EBRD Bail and more

In this briefing:

1. Severgroup Puts in a Cheeky Bid for Lenta – TPG and EBRD Bail
2. Map Aktif Follow-On Offering – Lace up for a Potential Long Run
3. Pan Pacific/Don Quijote: Bringing Joy into Shopping
4. Last Week in GER Research: Lyft, Rakuten, Lynas, Yunji IPO, Xinyi IPO and Ruhnn IPO
5. Notes from the Silk Road: Xtep Int’l Holdings (1368 HK): Time to Run (Away) For Now

1. Severgroup Puts in a Cheeky Bid for Lenta – TPG and EBRD Bail

In the middle of last week, Russia’s largest chain of hypermarkets Lenta Ltd (LNTA LI)  announced that it was aware that there were ongoing discussions between Luna (TPG’s holding entity, which owns 34.13% of Lenta’s capital) and Alexey Mordashov’s Severgroup, for Luna to sell its stake in Lenta to the Russian conglomerate. A day later, Lenta announced the company was aware of discussions between Severgroup and the EBRD (7.40% holder). 

Reuters reported last night that Severgroup had reached an agreement to buy a 41.9% stake, excluding treasury shares, in Lenta from those two sellers, for a total of US$721mm, or US$18 per share or US$3.60 per GDR. That implies a price of US$1.75bn for the whole company. 

Later last night, Lenta announced on its website (full press release here) a cash offer for all the shares had been proposed. The Offer has a pre-condition dealing with the above-mentioned transactions being approved by those who need to approve.

The Offer Price is an 8.11% premium to the last trade on 26 March – the undisturbed price, and a premium of 9.76% to the 6mo average price of US$3.28 for the GDRs. 

There may be something interesting to do here.

2. Map Aktif Follow-On Offering – Lace up for a Potential Long Run

CVC is looking to raise about US$353m through the sale of about 648m Map Aktif Adiperkasa PT (MAPA IJ) shares in the follow-on offering.

Map Aktif (MAPA) is a sports, leisure, and kids retailer in Indonesia. It is a subsidiary of Mitra Adiperkasa (MAPI IJ).  The selldown might not be totally unexpected as CVC planned to exit its investment by 2020. However, post this selldown it will still have 192m share left.

3. Pan Pacific/Don Quijote: Bringing Joy into Shopping

• Japanese Retail is in a secular decline: There are areas in retail that are worse affected than the rest
• Falling foot traffic: The biggest problem for Japanese retail
• Don Quijote’s recent history and growth potential
• Attracting shoppers from multiple store formats helps Don Quijote to expand its target market
• Don Quijote is least affected from slowdown in Chinese tourist spending
• FamilyMart UNY store conversions to contribute to revenue and EBIT growth over the next five years
• New store openings to cap at 25 per year because of UNY store conversions
• Valuation: Market unjustly penalized Don Quijote for the UNY acquisition
• Change in retail landscape to help make Don Quijote the “DON” in Japanese retail

4. Last Week in GER Research: Lyft, Rakuten, Lynas, Yunji IPO, Xinyi IPO and Ruhnn IPO

Below is a recap of the key analysis produced by the Global Equity Research team. This week, we update on Lyft Inc (LYFT US) now that it is below its IPO price and remind of the potentially muted impact for strategic holder Rakuten Inc (4755 JP). On the M&A front, Arun digs into the conditional deal for Lynas Corp Ltd (LYC AU) from Wesfarmers Ltd (WES AU). With regards to IPO research, we initiate on e-commerce player Yunji Inc. (YJ US) and solar company Xinyi Energy Holdings Ltd (1671746D HK) while we update on the IPO valuation of Ruhnn Holding Ltd (RUHN US). 

In addition, we have provided an updated calendar of upcoming catalysts for EVENT driven names below. 

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

5. Notes from the Silk Road: Xtep Int’l Holdings (1368 HK): Time to Run (Away) For Now

Xtep International (1368 HK) has announced a placing and top-up subscription of new shares event, creating a capital base which is 9% larger. 

XTEP states that they have considered various ways of raising funds and consider that it would be in their best interests to raise equity funding through the placing and the subscription. 

With the share price down 16% since the placement, we examine what this means for the company’s fundamentals and shareholders. We believe the results will prove to be mixed for management and shareholders alike. We highlight how we expect the stock ranking to react, given we the placement was only a few days back and this is yet to reflect. This special situation analysis may surprise you with the conclusions.