In today’s briefing:
- Henlius (2696 HK): Deal Break as HKEx Merger Arb Rulebooks Are Rewritten
- GAPack (468 HK): Now What As XJF’s Offer Gets Up
- Henlius (2696)’s Fail Sets (Another) Bad Precedent
- Tencent/Netease: One Game Approval for Tencent in Jan and the Perplexity
- Shanghai Henlius Biotech (2696 HK) – About the Deal Break and the Valuation Outlook
Henlius (2696 HK): Deal Break as HKEx Merger Arb Rulebooks Are Rewritten
- Shanghai Henlius Biotech (2696 HK) shareholders have voted against Shanghai Fosun Pharmaceutical (Group) (2196 HK)’s HK$24.60 offer. The minority participation rate was high, and the NO vote comfortably cleared the threshold.
- The China Traditional Chinese Medicine (570 HK) and Henlius deal breaks have rewritten the HKEx merger arb rulebook. The Henlius deal break offers several lessons.
- The 27.5% share price decline since 9 January points to a well-flagged deal break. Nevertheless, precedent deal-breaks suggest that the shares remain vulnerable and could touch HK$15.
GAPack (468 HK): Now What As XJF’s Offer Gets Up
- Shandong Xinjufeng Technology Packaging (301296 CH)‘s (XJF) Offer for Greatview Aseptic Packaging (468 HK) (GAPack) turning unconditional was well telegraphed ahead of yesterday’s first close in light of CCASS movements.
- My bet is China Mengniu Dairy Co (2319 HK), after surprisingly selling below 5%, also tendered.
- With 73.51% now in the bag and the Offer extended to the 4th February, what happens now? What are Jeff Bi and/or Gong Hong’s options?
Henlius (2696)’s Fail Sets (Another) Bad Precedent
- The question was asked in Henlius (2696 HK): So, When Was The Last Time A PE/VC Outfit Blocked A Deal? Well, now we have one as LVC inexplicably blocked.
- It didn’t appear to make economic rationale for LVC to crash the party – knowing they would do so, and not bother to reduce their position accordingly.
- In tandem with the TCM (570 HK) debacle, it sets another bad precedent for future/existing Hong Kong events. Expect spreads for HK arbs to widen. And Henlius to crater.
Tencent/Netease: One Game Approval for Tencent in Jan and the Perplexity
- China announced game approval for the January batch. The number of games approved remained at a higher level than 2023.
- The pace of China game approval appears to have accelerated to the same level as pre-tightening.
- Tencent and CMGE received one approval for January, respectively. We also highlight perplexity of Tencent’s approved game.
Shanghai Henlius Biotech (2696 HK) – About the Deal Break and the Valuation Outlook
- Lin Lijun voted against the privatization, which is in line with our analysis.Lin and some other long-term investors expressed their “dissatisfaction” by opposing the privatization due to disappointing Cancellation Price.
- Due to deal break, Henlius’ share price could be under pressure in short term.Investors may need to wait until the implementation of biosimilar VBP in 2025 to see situation clearly.
- Despite biosimilar VBP, we remain optimistic about the outlook of Henlius, because its future development positioning will not be limited to just biosimilars, but will focus on internationalization.
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