In today’s briefing:
- Allkem+Livent=Arcadium : Expected Index Flows
- Arb Trading with Stock Rights in Korea: A Basic Guide Featuring LG Display Offering
- Toyo Construction (1890) – Everyone Hits Pause
- Japan Bumpitrage Potential: T&K Toka, IJTT, Taisho, Shidax, Benesse, Tokyo Rakutenchi
- Nippon Steel/United States Steel Corp: Knock-Out Offer
- Whispir (WSP AU): Soprano & Pendula Jostle for Control
- STAR50 Index Rebalance Preview: Four High Impact Changes in March
- Quiddity Leaderboard ASX Mar 24: Allkem, Newmont, Costa, and Many More
Allkem+Livent=Arcadium : Expected Index Flows
- Yesterday during the day, Allkem Ltd (AKE AU) shareholders approved the Scheme and Livent (LTHM US) shareholders approved the merger. The deal is done. Allkem last trades 21 Dec.
- NEWCO starts trading 4 January in the US but the Arcadium Lithium CDIs start trading 22 Dec in Australia. S&P/ASX announced they will replace Allkem in the ASX200.
- But I have been asked for a breakdown of flows and timing again, so I have put it into a handy table which I hope makes it less confusing.
Arb Trading with Stock Rights in Korea: A Basic Guide Featuring LG Display Offering
- Unlike typical Korean stock rights arbitrage, LG Display’s significant equity offering and active stock futures trading anticipate a spread opening, akin to the recent Hanwha Ocean scenario.
- In contrast to Hanwha Ocean, the absence of major sellers, like KDB, sets this event apart. LG Electronics, the major shareholder with a 37.9% stake, intends to participate.
- Despite differences from Hanwha Ocean, LG Display’s high retail shareholder presence implies a substantial likelihood of stock rights overhang, even without players like KDB.
Toyo Construction (1890) – Everyone Hits Pause
- In September, YFO (Yamauchi Family Office) upped its Tender Offer proposal to ¥1,255/share. YFO presented. The Toyo Special Committee met, interviewed, examined, deliberated, then last week rejected YFO’s proposal.
- The rejection was a three-parter. First, they rejected YFO for not bringing management/ownership experience. Second, they said the proposal didn’t add enough value. Third, the price was too low.
- There were no metrics against which to measure anything. And now Toyo has apparently decided to withdraw its Tender Offer Proposal.
Japan Bumpitrage Potential: T&K Toka, IJTT, Taisho, Shidax, Benesse, Tokyo Rakutenchi
- Japan’s merger arb is facing an unusual situation: six merger arb situations (>US$100 million market cap) where the shares have consistently traded through terms.
- We evaluate the bumpitrage potential of these six Japanese merger arb situations on qualitative and quantitative metrics.
- Based on our analysis, the ranking as measured by the highest bumpitrage potential in descending order are T&K Toka, IJTT, Taisho, Shidax, Benesse and Tokyo Rakutenchi.
Nippon Steel/United States Steel Corp: Knock-Out Offer
- Nippon Steel Corporation (5401 JP) and United States Steel (X US) have agreed an all-cash $55.00/share offer, 142% premium to where X traded before Cliff’s approach, a very generous 7x EV/24e EBITDA.
- A determined buyer seeks market share in the lucrative US market, with no meaningful synergies expected and willingness to keep all US Steel jobs and (greener) growth projects.
- Although unions and some lawmakers are voicing concerns, CFIUS shouldn’t pose a big hurdle. Spread is 12.04%/17.93% (gross/annualised, assuming late settlement by end of Q3 2024). Long.
Whispir (WSP AU): Soprano & Pendula Jostle for Control
- On the 6 November, cloud communication outfit Whispir (WSP AU) announced a A$0.46/share unconditional Offer, in cash, from mobile messaging software play Soprano Design.
- The Offer price was a 92% premium to Whispir’s recent private placement, and a 60% premium to the undisturbed price. Whispir rejected the Offer.
- Pendula subsequently emerged with a A$0.57/share NBIO. Soprano “countered” with A$0.52/share. Pendula upped its indicative Offer to A$0.60/share. An independent expert’s fair value is between A$0.486/share-A$0.565/share.
STAR50 Index Rebalance Preview: Four High Impact Changes in March
- The review period for the March rebalance ends 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
- We expect the index committee to continue using a 6-month minimum listing history resulting in four changes to the index.
- One way turnover is estimated at 3.3% resulting in a one-way trade of CNY 4,717m. The impact on the deletions will be much larger than that on the inclusions.
Quiddity Leaderboard ASX Mar 24: Allkem, Newmont, Costa, and Many More
- In this insight, we take a look at the potential index changes for ASX 300, 200, 100, 50, and 20 in the run-up to the March 2024 index review.
- I expect one change for ASX 20, one change for ASX 100, and four changes for ASX 200 during the March 2024 index rebal event.
- Separately, there could also be one intra-review change for ASX 200 in February 2024.
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