In today’s briefing:
- Information Received Through KRX Officials Regarding Changes in the KOSPI 200 Methodology
- Haitong Int’l Securities (665 HK): Possible Offer From Parent
- System Information Co (3677 JP) “MBO” By Bain an Exit Trade for Founder+CEO+Employees
- SK Square: M&A of 11st – Alibaba Out and Qoo10 In?
- Doosan Robotics (454910 KS): Listing & Index Inclusion Timeline
- Details About KOSPI & KOSDAQ Lock-Up Release Stocks for October
- End of Mandatory Lock-Up Periods for 45 Companies in Korea in October 2023
- Updated TOPIX Selldown and Index Flows This Week – Initial TOPIX Selldown of Toshiba NEXT Month
- NIFTY Family Index Rebalance: Flows at the Close Today + F&O Expiry
- System Information (3677 JP): Bain Backed MBO’s JPY930 Tender Offer
Information Received Through KRX Officials Regarding Changes in the KOSPI 200 Methodology
- The official announcement from KRX regarding the KOSPI 200 rebalancing rule change is expected to be released shortly after the end of October.
- The rule change will take effect beginning with this year’s December rebalancing. An official from KRX has communicated that we can confidently regard this as confirmed.
- It is essential to be aware that during this December review, there exists a significant potential for generating substantial price fluctuations within a narrow timeframe.
Haitong Int’l Securities (665 HK): Possible Offer From Parent
- Haitong International Securities Group (665 HK) (HITSEC) is suspended pursuant to Hong Kong’s Code on Takeovers and Mergers.
- The rumour doing the rounds is that Haitong Securities Co Ltd (A) (600837 CH) (HSC) may take private its 73.4%-held Hong Kong-listed investment banking unit.
- HITSEC’s share performance since 1Q18 has been tragic. Financials have been dire since 2H20. But expect a punchy premium if HTS does seek to take HITSEC private.
System Information Co (3677 JP) “MBO” By Bain an Exit Trade for Founder+CEO+Employees
- The stock is down more than 50% from its high 3yrs ago. The founder is 79. The CEO is 75. Employees and former directors own another 10%.
- This is an exit vs an MBO. And the Target Side negotiating the exit were rolled by Bain. This is NOT an expensive purchase. Bain’s equity check is 2.3x EBIT.
- But it probably gets done anyway unless someone gets noisy. For that, they’d have to buy a 10-15% stake I expect.
SK Square: M&A of 11st – Alibaba Out and Qoo10 In?
- On 27 September, Maeil Business Daily reported that SK Square signed an MOU with Qoo10 to pursue a joint management of 11st.
- It appears that Alibaba may have been reviewing this deal but it is no longer interested in pursuing 11st.
- A deal between Qoo10 and 11st could occur, but this is not certain, which means some of the cash proceeds to FI would need to be burdened by SK Square.
Doosan Robotics (454910 KS): Listing & Index Inclusion Timeline
- Doosan Robotics (454910 KS) is principally engaged in the manufacture and sale of industrial robots.
- Doosan Robotics has raised KRW 421bn (US$311m) in its IPO, valuing the company at KRW 1,685bn (US$1.245bn). Float at listing will vary from 6%-21% depending on index provider.
- Inclusion in the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) and other global indices will take place between Feb (possibly May) and June next year.
Details About KOSPI & KOSDAQ Lock-Up Release Stocks for October
- In KOSPI, all eyes are on Ottogi Corporation, a constituent of the KOSPI 200 index. 8.38% of SO’s shares are about to be unleashed.
- In KOSDAQ, the focus is on CanariaBio and Coocon Corp, both of which are constituents of the KOSDAQ 150. They are set to release shares on October 28th.
- For Fadu, a two-month IPO lock-up is being released, accounting for 2.5% of SO.
End of Mandatory Lock-Up Periods for 45 Companies in Korea in October 2023
- We discuss the end of the mandatory lock-up periods for 45 stocks in Korea in October 2023, among which 2 are in KOSPI and 43 are in KOSDAQ.
- These 45 stocks on average could be subject to further selling pressures in October and could underperform relative to the market.
- Among these 45 stocks, top five market cap stocks include Fadu, Ottogi Corporation, CanariaBio, Top Material, and PhilEnergy.
Updated TOPIX Selldown and Index Flows This Week – Initial TOPIX Selldown of Toshiba NEXT Month
- Last week on 20 Sep I published Toshiba Tender Offer Ends Today – Upcoming Index Selldown Schedule and Sunday, The Biggish Sep 2023 “Wednesday-Thursday Trade” With Added Monday/Friday Flavour.
- They were based on an expectation the TSE would announce the initial selldown for Sep-end as they normally would. Unbeknownst to me, on 22 Sep they announced end-Oct.
- The initial TOPIX selldown is 30 Oct, not 28 Sep. This affects expected reverse funding today.
NIFTY Family Index Rebalance: Flows at the Close Today + F&O Expiry
- The rebalance of the NIFTY, Nifty Next 50, NSE Nifty Bank, CPSE ETF (CPSEBE IN) and a bunch of other indices will be implemented at the close of trading today.
- Depending on the index, there are constituent changes, changes to the number of shares and free float, plus capping changes. Put together, there is a lot of flow and impact.
- The round-trip trade will be in excess of US$1bn. Add in the futures & options expiry and volumes will be extremely high in the last 30 minutes of trading.
System Information (3677 JP): Bain Backed MBO’s JPY930 Tender Offer
- System Information (3677 JP) has recommended Bain’s tender offer of JPY930 per share, a 21.9% premium to the undisturbed price (27 September).
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 50.69% ownership ratio.
- Irrevocables to accept the offer represent a 19.69% ownership ratio. The minimum acceptance condition (lower limit) requires a 37.0% minority acceptance rate. The tender offer is reasonable.
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