In today’s briefing:
- Emart’s Tender Offer for Shinsegae Construction: Arb Trading Angles
- FujiSoft (9749) – Somewhat Inexplicable Renewed Opinion of Fairness on KKR Tender
- Shin Kong (2888 TT) Deal – Activism, Proxy Advice, Proxy Fight, Voting Risk, and Discounts
- Merger Arb Mondays (30 Sep) – Canvest, Henlius, CPMC, Xingda, Fuji Soft, Capitol, Dyna-Mac
- Tokyo Metro (9023 JP) IPO: TPX Inclusion in November; Global Indices: One in October, One in Feb
- FnGuide Semiconductor Top10 Index Rebalance Preview: Wonik IPS to Replace ISC
- China Healthcare Weekly (Sep29)- Henlius Privatization Update, NHSA Fee Control, Hansoh Is Exception
- EQD / NSE Vol Update / Vols Bogged Down by Holiday Shortened Week in Spite of Upcoming Event Risks
- Tender Offer and Taking Private of Shinsegae E&C by E Mart
- Nippon Steel/US Steel: Appealing Expected Value
Emart’s Tender Offer for Shinsegae Construction: Arb Trading Angles
- E Mart Inc is launching a tender offer for 27.33% of Shinsegae Eng & Construction, offering ₩18,300 per share, a 14% premium, from September 30 to October 29.
- This tender’s got zero cancellation or proration risk since they’re all in to buy every share tendered. That makes it a prime event for close spread tracking and trading opportunities.
- Emart needs 95% of Shinsegae Construction’s shares to delist, requiring 22% of the remaining 27%. If they can’t get it, a stock swap with Emart shares is likely.
FujiSoft (9749) – Somewhat Inexplicable Renewed Opinion of Fairness on KKR Tender
- On the 19th of September, KKR amended the terms and Scheme/Structure of its Tender Offer for Fuji Soft Inc (9749 JP). I thought the new terms coercive.
- On the 26th, FujiSoft decided there had been no change detrimental to general shareholders. On the 27th, KKR amended the Tender Offer Registration Statement to reflect FSI’s revised Opinion.
- That means Bain needs to change FSI’s mind or come out with a big number before the end of the First Tender, leaving lots of stock for Round Two.
Shin Kong (2888 TT) Deal – Activism, Proxy Advice, Proxy Fight, Voting Risk, and Discounts
- Taishin Financial Holding (2887 TT) has raised its bid for Shin Kong Financial Holding (2888 TT) and CTBC Financial Holding (2891 TT) has dropped its bid after FSC rejection.
- Shin Kong’s Board approved the revised (25% higher) Taishin bid. Shares in Shin Kong fell sharply on the FSC rejection of the CTBC bid.
- Taishin’s bid clearly has governance/related party issues and a significant portion of the “non-Taishin” reps on the Shin Kong Board had issues. October 9th passage is not a done deal.
Merger Arb Mondays (30 Sep) – Canvest, Henlius, CPMC, Xingda, Fuji Soft, Capitol, Dyna-Mac
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Canvest Environmental Protection Group (1381 HK), Greatview Aseptic Packaging (468 HK), Shanghai Henlius Biotech (2696 HK), Shinko Electric Industries (6967 JP), China Traditional Chinese Medicine (570 HK).
- Lowest spreads: Dyna Mac Holdings (DMHL SP), Seven & I Holdings (3382 JP), Trancom Co Ltd (9058 JP), Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP).
Tokyo Metro (9023 JP) IPO: TPX Inclusion in November; Global Indices: One in October, One in Feb
- Tokyo Metro (9023 JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 23 October.
- At the reported indicative IPO price of JPY 1100/share, Tokyo Metro (9023 JP) will be valued at JPY 639.1bn (US$4.49bn).
- The stock should be added to one global index on 29 October, to the TOPIX INDEX on 28 November, while another global index inclusion will need to wait till February.
FnGuide Semiconductor Top10 Index Rebalance Preview: Wonik IPS to Replace ISC
- Today is the last trading day in the review period for the October rebalance of the FnGuide Semiconductor Top10 Index.
- Wonik Ips (240810 KS) is a high probability add and ISC Co Ltd (095340 KS) is a high probability delete. This will reverse the changes from the April rebalance.
- Passive trackers will need to buy over 3.5x ADV in Wonik Ips (240810 KS) and sell nearly 2x ADV in ISC Co Ltd (095340 KS).
China Healthcare Weekly (Sep29)- Henlius Privatization Update, NHSA Fee Control, Hansoh Is Exception
- The medical insurance statistics reflected that medical insurance funds are facing increasing pressure. If income/expenditure maintain average growth rates in recent years, there would be a deficit state in 2024.
- Due to increasing pressure on medical insurance fund, the entire process of innovative drug evaluation/NRDL negotiation this year will be more strictly enforced, but Hansoh (3692 HK) is an exception.
- For Henlius’ privatization, completing Pre-Conditions in 24Q4 looks tight. Considering Chinese New Year holiday, the privatization may not be completed until at least mid-to-late February 2025.The deal will get up.
EQD / NSE Vol Update / Vols Bogged Down by Holiday Shortened Week in Spite of Upcoming Event Risks
- Nifty50 IVs have finally cracked below 11.0% levels – in spite of upcoming event-risks. Moves lower have been exacerbated by the holiday shortened week.
- Vol-Regime Model has switched to “Low & Down” vol-state in Nifty50. Tactical implications: Short Vega exposure less favourable going forward.
- Risk premia selloff has driven Vol Term-Structure deeper into Contango. Smile & Skew characteristics have compressed in congruence with lower IVs.
Tender Offer and Taking Private of Shinsegae E&C by E Mart
- E Mart Inc (139480 KS) is conducting a tender offer of 27.33% of Shinsegae Eng & Construction (034300 KS) (2,126,611 shares) and trying to take the company private afterwards.
- The tender offer price is 18,300 won, which is 14% higher than the closing price on Friday (27 September).
- Tender offer is likely to result in higher price of Shinsegae E&C in the near term but it could be difficult for E Mart to take it private this year.
Nippon Steel/US Steel: Appealing Expected Value
- On September 26, Nippon Steel’s president affirmed the company’s commitment to completing the United States Steel (X US) acquisition by year-end, despite the CFIUS review being extended until December.
- U.S. Steel, with an expected value of $45.19/share offers 27% upside potential. This discount, driven by acquisition/fundamental value, supports a buy recommendation thus, I would be long U.S. Steel.
- If the deal were to succeed, the likelihood of it closing before the end of 2024 is low, primarily due to the complexities surrounding the American presidential elections.
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