In today’s briefing:
- 111’s Opportunistic US$3.66 Bid from the Co-Founders
- Backtesting Implications: Korea Sector ETFs Rebalancing on the 8th
- Merger Arb Mondays (12 Sep) – DTAC/True, Link Admin, Ramsay, Genex, Tyro, EVOC, Giordano, 111
- Repsol: Sale of 25% of E&P Division
111’s Opportunistic US$3.66 Bid from the Co-Founders
- 111 Inc (YI US), the largest virtual pharmacy network in China, disclosed a privatisation proposal from a co-founder-led consortium at US$3.66 per ADS, a 20.0% premium to the undisturbed price.
- For privatisation to succeed, shareholders representing two-thirds of shares present and voting need to approve the deal. The co-founders represent 92.04% of the total voting power.
- The offer price is unattractive but this is a done deal. At the last close, the gross and annualised spread for a January 2023 completion is 11.6% and 33.4%, respectively.
Backtesting Implications: Korea Sector ETFs Rebalancing on the 8th
- Compared to the tightly crowded KOSPI 200, the sector ETFs’ rebalancing flow trading appears relatively less crowded, which led to a significantly higher flow/price correlation on the rebalancing day.
- The KRX now delivers the rebalancing results of the KRX Sector & K-New Deal Indexes only to paying customers. This can increase the profit effect of acquiring prior information.
- So, safe play, which builds up a position from the time this information is acquired, rather than an aggressive preemptive position build-up, can still obtain a sufficient level of juice.
Merger Arb Mondays (12 Sep) – DTAC/True, Link Admin, Ramsay, Genex, Tyro, EVOC, Giordano, 111
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
- Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Genex Power Ltd (GNX AU), Infomedia Ltd (IFM AU), 111 Inc (YI US).
- Lowest spreads – Tyro Payments (TYR AU), Nitro Software Ltd (NTO AU), Nearmap Ltd (NEA AU), Dongzheng Automotive Finance (2718 HK), MyDeal.com.au Ltd (MYD AU), MACA Ltd (MLD AU).
Repsol: Sale of 25% of E&P Division
- The $19bn EV operation (vs. Repsol’s market cap of €19bn) allows Repsol to maintain the majority in a strategic area, crystallizes value (market assigns a higher valuation to the E&P division separately).
- The implied valuation by the market is on average $3 billion lower. As usual with a minority stake sale, the market rarely values it at 100%.
- I estimate a moderate positive impact (the deal is similar to what was announced in July), value unlocking could theoretically reach €2.5-€3 per share, but I’d take a neutral stance.
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