In today’s briefing:
- FTSE All-World/All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry
- Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done
- Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase
- Warrego (WGO AU) Bidding War Between Strike (STX AU) And Beach (BPT AU)
- Selling Sogo Seibu Doesn’t Mean Seven & I Will Sell Ito-Yokado
- North Holdings 3/Caverion: Agreed Takeout
FTSE All-World/All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry
- We see 4 potential adds, 1 close add and 1 potential delete for the FTSE All-World/All-Cap indices at the upcoming QIR that will be implemented at close on 16 December.
- The largest impact will be the passive selling on Golden Agri Resources (GGR SP) due to a nationality change from Singapore to Ineligible.
- There is a big lock-up expiry on Delhivery where US$2.89bn of shares will be free for trading on 21 November – that is significantly larger than the potential passive buying.
Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done
- On Friday, Sumitomo Corp (8053 JP) announced a bid for equity affiliate (they own 27+% but Nippon Steel 15%, top 2 is 40+%) Sumitomo Precision Products (6355 JP).
- It’s a one-year high and 4-year high price, and 8x average 10yr EV/EBITDA but 4.6x 2024e EBITDA from the Mid Term Plan. And way below a 10-year high.
- This gets done if Retail agrees to the tender. If 50% put in, that should do it. So I expect this gets done.
Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads Pendal Group (PDL AU), Alliance Aviation Services (AQZ AU), Genex Power Ltd (GNX AU), 21Vianet Group (VNET US), 111 Inc (YI US), Golden Energy & Resources (GER SP).
- Lowest spreads – Tyro Payments (TYR AU),Perpetual Ltd (PPT AU), OZ Minerals Ltd (OZL AU), Nitro Software Ltd (NTO AU), China Vast Industrial Urban Development (6166 HK), Moya Holdings.
Warrego (WGO AU) Bidding War Between Strike (STX AU) And Beach (BPT AU)
- Beach Energy (BPT AU)’s all-cash proposal is A$0.20 per share and Strike Energy (STX AU)’s all-scrip proposal is 0.775x STX shares per Petrel Energy (WGO AU) share.
- BPT’s all-cash offer provides value certainty. On the other hand, STX’s all-scrip offer lets shareholders get exposure to 100% interest in the West Erregulla project.
- Both offers are reasonable but far from knockout bids, which suggests room for a further bidding round. At the last close, BPT’s offer is 3.2% higher than STX’s offer.
Selling Sogo Seibu Doesn’t Mean Seven & I Will Sell Ito-Yokado
- Seven & I has at last agreed to sell the ailing Sogo Seibu chain – although not for enough to offset years of investment with little to show for it.
- Some hope that this means the start of a house cleaning exercise to rid the group of its multiple under-performing retail assets, leaving a gleaming exemplar of rational efficiency.
- This is unlikely, especially for the original Ito-Yokado general merchandise chain and a problem given the lack of growth potential in the group’s domestic business.
North Holdings 3/Caverion: Agreed Takeout
- The main shareholders of Caverion (27.08% in aggregate) are joining Bain Capital in a voluntary recommended public €7/share cash tender offer that seems adequate in the short term.
- Nevertheless the offer price fails to account for the potential of Caverion, in my view. My fair value estimate (comps-based) is €9.01/share, thus an offer sweetening could be likely.
- I consider it unlikely that the offer will fail, and although the current spread is not so attractive on a rate of return basis, I would be long the shares.
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