In today’s briefing:
- BHP & OZL Enter Scheme Implementation Deed – Timing, Risk, & Index Effects
- Swire Now Buying Back B Shares Only
- Nojima (7419) Launches Buyout of Conexio (9422)
- JAFCO (8595 JP): Murakami Gets His Way with a JPY2,500 Tender Offer
- Futu (FUTU US / 3588 HK): Dual Primary Listing, Stock Connect & Potential HSCI/HSTECH Inclusion
- Conexio Corporation (9422 JP) JPY1,911 Tender Offer from Nojima
- OZ Minerals (OZL AU)’s SID with BHP at A$28.25
- Revised CGT/SST in Korea: Intense Selling Flow on T-1 Ex-Date Will Be Intact Until 2024
- MergerTalk:Why Black Knight May Be As Safe As Houses Even If Regulators Stop Its Merger With ICE
- EQD | HSI Index:-Chinese Equities Have Held up into Year End and We Revisit the December Call Ratio
BHP & OZL Enter Scheme Implementation Deed – Timing, Risk, & Index Effects
- This morning, BHP Group Ltd (BHP AU) and OZ Minerals Ltd (OZL AU) announced they had entered into a Scheme Implementation Deed at A$28.25/share (5wks after I said 3-6 weeks).
- All terms are confirmed and there may be a fully-franked dividend up to A$1.75/share which would reduce terms to A$26.50. The OZL Directors unanimously recommend.
- Anti-Trust approvals are needed in Brazil & Vietnam, other standard conditions, and the OZL Scheme Meeting should be late March early April. I expect this is done.
Swire Now Buying Back B Shares Only
- In August this year, Swire Pacific started a buyback programme for up to HK$4.0 billion worth of their shares (Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK)).
- The shares went up. And B briefly outperformed A, but since then, the B/A ratio has fallen and my impression was Swire may have been misinterpreting the buyback rules.
- Swire had been buying both every day. But they’ve been Buying Bs but no As for the last ten days in a row. This begs a few questions.
Nojima (7419) Launches Buyout of Conexio (9422)
- Nojima Corp (7419 JP) is buying out Conexio Corp (9422 JP) majority owner Itochu Corp (8001 JP) along with minorities. At a 59% premium, it looks good.
- However, in terms of normalised EV/EBITDA or EV/FCF multiple, this is not expensive.
- And while the major seller/target and friendlies are oh so close, the register is more interesting than the yuho top 10 shareholder list suggests.
JAFCO (8595 JP): Murakami Gets His Way with a JPY2,500 Tender Offer
- Jafco Co Ltd (8595 JP) and Murakami have reached an agreement on a revised tender offer for 16.8 million shares (23.60% of outstanding shares) at JPY2,500 per share.
- The revised tender offer’s primary purpose remains to facilitate Murakami to tender his 19.53% shareholding at the expense of other shareholders and the misallocation of JPY42 billion (tender cost).
- The justification for the transaction is weak as most of the benefits could have been achieved without it. This calls into question the Board’s ability to enhance value.
Futu (FUTU US / 3588 HK): Dual Primary Listing, Stock Connect & Potential HSCI/HSTECH Inclusion
- Futu Holdings Ltd (FUTU US) will Dual Primary list on the HKEX (388 HK) by Way of Introduction and the stock is expected to start trading on 30 December.
- Following the changes to the handling of Dual-Primary-listed companies, Futu Holdings Ltd (FUTU US) should be added to the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
- Futu Holdings Ltd (FUTU US) should also be added to the HSCI at the March rebalance and should be added to Southbound Stock Connect late July/ early August.
Conexio Corporation (9422 JP) JPY1,911 Tender Offer from Nojima
- Conexio Corp (9422 JP) has recommended Nojima Corp (7419 JP)’s tender offer of JPY1,911 per share, an 59.1% premium to the undisturbed price (22 December).
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the offer has been set to meet the 66.67% ownership ratio.
- The tender offer was set in motion due to Itochu Corp (8001 JP)’s desire to exit. Itochu tendering its 60.34% stake and an attractive offer, suggests a done deal.
OZ Minerals (OZL AU)’s SID with BHP at A$28.25
- OZ Minerals Ltd (OZL AU) has entered into a SID with BHP Group Ltd (BHP AU) at A$28.25 per share, a 49.3% premium to the undisturbed price (5 August).
- The offer price is attractive. The key conditions are shareholder and regulatory (Brazil and Vietnam) approvals. The scheme meeting is in late March/early April 2023.
- The key risk is the rise in copper prices. At last close and for the end-April payment, the gross and annualised spread to the offer is 1.6% and 4.8%, respectively.
Revised CGT/SST in Korea: Intense Selling Flow on T-1 Ex-Date Will Be Intact Until 2024
- The all-inclusive CGT will be implemented in 2025. The current partial capital gains tax will be maintained until 2024. And the STT will drop from 0.23% to 0.15% in 2024.
- The critical cause of an arb opportunity on ex-date price correction+dividend yield has been the yearend selling flow on T-1 ex-date for the purpose of tax avoidance by majority shareholders.
- So, from this year to 2024, we should keep an eye on this arbitrage opportunity, which will continue to arise.
MergerTalk:Why Black Knight May Be As Safe As Houses Even If Regulators Stop Its Merger With ICE
- We think that a ~40% spread overstates the risk of this deal not moving to completion.
- The horizontal integration aspects of this transaction can be remedied, but this is a largely vertical merger transaction which regulators may struggle to prove will lead to monopolistic behavior.
- Even if the ICE merger is ultimately blocked, BKI has other supporting factors that could drive upside – an attractive valuation and a potential revival of interest from other parties
EQD | HSI Index:-Chinese Equities Have Held up into Year End and We Revisit the December Call Ratio
- Chinese equities have continued to outperform versus other global markets
- The HSI Index 200dma has proved to be a barrier to the upside
- We evaluate the call ratio we suggested in November and recommend action
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