In today’s briefing:
- KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!)
- Finally, Korea Launches English Search Service for All Disclosures Starting July 31st
- NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented
- JSR Corporation (4185 JP): Tender Offer Risk/Reward
- Merger Arb Mondays (31 Jul) – Eoflow, JSR, Toshiba, Pacific Current, Costa, Estia, Newcrest, Dali
- Weekly Deals Digest (30 Jul) – L’Occitane, Dali, Eoflow, Toshiba, Pacific Current, Estia
- OCI Swap Arbitrage: A Bit More Complex Structure, Still Juicy Spread in Play
- STAR50 Index Rebalance Preview: Potential Changes Playing Catchup
- Dali Foods (3799 HK): 23 August Scheme Meeting. IFA Says Fair
- EQD | S&P/ASX200 WEEKLY Make-It-Or-Break-It
KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!)
- Today, with Q1 earnings, which I found less than great, KDDI Corp (9433 JP) announced a Tender Offer Buyback to repurchase up to 64,102,500 shares for up to ¥250.03175bn.
- The Tender Offer – at ¥3900/share vs Last at ¥4,271/share (designed for cross-holding unwinds) – goes from 31-July through 28-August. It fills the 83.3% of the buyback programme announced 11-May.
- Toyota Motor (7203 JP) has announced it would sell ¥250bn of shares into this Tender Offer. This is less interesting than it looks. The whole thing is.
Finally, Korea Launches English Search Service for All Disclosures Starting July 31st
- Starting Monday, July 31st, the FSS-operated disclosure website, DART (Data Analysis, Retrieval, and Transfer System), will provide an English search service for all disclosures.
- This measure will open up possibilities for diverse position strategies that require timeliness and comparability for Korean local stocks, leading to a significant turning point.
- This calls for a more comprehensive approach in identifying the overall market flow. We should be attentive to potential alterations in the structure of foreign flows.
NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented
- Using the current index methodology throws up 5 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be BIG.
- Using the proposed index methodology throws up 11 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be HUGE.
- The market consultation being put on hold could indicate pushback from index users or the possibility of F&O contracts being introduced on some of the non-F&O index constituents.
JSR Corporation (4185 JP): Tender Offer Risk/Reward
- JSR Corp (4185 JP)‘s pre-conditional tender offer from JIC is JPY4,350 per share. Since the deal announcement on 26 June, the gross spread has averaged 6.4%.
- The wide gross spread reflects the risk in satisfying the pre-conditions related to country approvals, particularly in China. JIC, unusually can waive all or part of the conditions precedent.
- The wild card is geopolitical developments. There are three China approval scenarios. The likely scenario is the deal approval under a normal procedure with a delay to the tender start.
Merger Arb Mondays (31 Jul) – Eoflow, JSR, Toshiba, Pacific Current, Costa, Estia, Newcrest, Dali
- 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 – 111 Inc (YI US), Chindata Group (CD US), Estia Health (EHE AU), ENM Holdings (128 HK), JSR Corp (4185 JP), Costa Group Holdings (CGC AU).
- Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Toyo Construction (1890 JP), Penguin International (PBS SP), Kenedix Retail REIT (3453 JP), ARTERIA Networks Corp (4423 JP).
Weekly Deals Digest (30 Jul) – L’Occitane, Dali, Eoflow, Toshiba, Pacific Current, Estia
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments – Rakuten Securities (RAKUSEC JP), EbixCash (EBIXC IN), Lalatech Holdings Co Ltd (LALA HK) and Lianlian DigiTech (2104619D CH) IPOs.
- Event-Driven developments – Eoflow (294090 KS), Dali Foods Group (3799 HK), L’Occitane (973 HK), Toshiba Corp (6502 JP), Pacific Current (PAC AU), Estia Health (EHE AU).
OCI Swap Arbitrage: A Bit More Complex Structure, Still Juicy Spread in Play
- This is a classic swap arbitrage of shorting the acquirer and using the tendered shares to repay it. However, executing now would be meaningless as the swap ratio isn’t finalized.
- Nevertheless, we should consider securing a long position in OCI Holdings in advance. The target (45%) is quite substantial, indicating that the practical allocation rate won’t plummet dangerously below 1.
- Additionally, the likelihood of OCI Holdings’ swap price plummeting to completely nullify the 5.6% spread immediately after its determination appears to be low based on the current context.
STAR50 Index Rebalance Preview: Potential Changes Playing Catchup
- The review period for the September rebalance ends today. The changes could be announced on 25 August with the implementation taking place after the close on 8 September.
- The upcoming launch of the STAR100 Index could result in the index committee continuing to use a 6-month minimum listing history resulting in two changes to the index.
- One way turnover is estimated at 2.3% resulting in a one-way trade of CNY 2,658m. The impact on the deletions will be much larger than that on the inclusions.
Dali Foods (3799 HK): 23 August Scheme Meeting. IFA Says Fair
- Back on the 27 June, Dali Foods Group (3799 HK), announced a privatisation Offer by way of a Scheme from its founder/chairman/CEO Xu Shihui.
- The cancellation price, which has been declared final, was HK$3.75/share, a decent 37.87% premium to undisturbed.
- The Scheme Doc is now out. The Scheme Meeting is the 23 August. Xu and concert parties control 88.89%, therefore a blocking stake is 1.11% of shares out.
EQD | S&P/ASX200 WEEKLY Make-It-Or-Break-It
- The S&P/ASX 200 INDEX has been stuck in the 7000-7400 range for 16 weeks until last week when it briefly pierced the upper range (but closed the week at 7403).
- This WEEKLY trend pattern can lead to a multi-week rally when it rises for => + 3 weeks in a row (it’s a pattern that can include momentum trades).
- The index is at a make-it-or-break-it junction: either it starts to trend higher towards the previous peak (7567, January 2023), or it will pullback into the 7000-7400 range.
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