In today’s briefing:
- KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!) Redux (Another Buyback in H2 Possible)
- HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June
- Great Eastern Holdings (GE SP): OCBC’s Offer Needs a Bump to Achieve Privatisation Ambitions
- Local Reports in Korea Regarding A Holdings Stake Sale Between Naver & Softbank
- Merger Arb Mondays (13 May) – GA Pack, HEC Pharma, L’Occitane, Alps Logistics, Great Eastern
- EQD / NSE Volatility Update / 06-May-24 to 10-May-24
KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!) Redux (Another Buyback in H2 Possible)
- In May 2023, KDDI Corp (9433 JP) announced a ¥300bn buyback program, did nothing for two months, then announced a Tender Offer Buyback to buy shares from Toyota.
- Toyota had increased its stake years before, then KDDI bought back shares from others, so Toyota was backing its ownership down. I discussed the relationships, history, etc, here.
- This year, KDDI announced Friday with earnings that is buying back another large stake from Toyota.
HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June
- We do not forecast any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June but there could be capping changes for 7 stocks.
- Capping changes will result in a one-way turnover of 7.6% leading to a round-trip trade of US$2.4bn. 17 stocks will have over 0.5x ADV to trade from passive trackers.
- Li Auto (2015 HK) will have the largest inflow while there will be big outflows from Meituan (3690 HK), Xiaomi Corp (1810 HK), JD.com (9618 HK) and Tencent (700 HK).
Great Eastern Holdings (GE SP): OCBC’s Offer Needs a Bump to Achieve Privatisation Ambitions
- OCBC (OCBC SP) has announced a voluntary unconditional general offer for Great Eastern Holdings (GE SP) at S$25.60 per share, a 36.90% premium to the undisturbed price.
- OCBC aims to privatise Great Eastern by delisting resolutions or exercising compulsory acquisition rights. The offer has not been declared final.
- While the offer is reasonable, it is not a knockout bid which would comfortably allow OCBC to privatise through either option. A bump is highly likely.
Local Reports in Korea Regarding A Holdings Stake Sale Between Naver & Softbank
- Naver doesn’t view the sale of its A Holdings stake unfavorably; insiders suggest it’s been planning this move since last year.
- Market speculation suggests Naver was disappointed by Softbank’s rejection of CLOVA X in LINE, prompting plans to sell A Holdings stake for AI development. A sale agreement is expected soon.
- The method through which Softbank secures funds for this acquisition is worth the attention from a short-term trading perspective.
Merger Arb Mondays (13 May) – GA Pack, HEC Pharma, L’Occitane, Alps Logistics, Great Eastern
- 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: Yichang HEC Changjiang Pharma (1558 HK), Alps Logistics (9055 JP), Hollysys Automation Technologies (HOLI US), Ansarada Group Ltd (AND AU), Southern Cross Media (SXL AU).
- Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Pact Group Holdings (PGH AU), Alumina Ltd (AWC AU).
EQD / NSE Volatility Update / 06-May-24 to 10-May-24
- Election-Related volatility being reflected in options. India VIX has surged 70% over the past two weeks. Quarterly IVs have seen the largest rise as they capture election result date.
- BankNifty IVs are finally responding as the market plays catch up to the bank regulator’s new-found aggressiveness
- Elevated Vol-of-vol observed the past few weeks. Vol-regime Switching Model continues to point to “High & Down” state. Odds of switching to a “High & Up” state are increasing.
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