In today’s briefing:
- LG Energy – Quick Thoughts on US$2bn EB Offering by Parent
- LG Chem: To Issue Exchangeable Bonds Worth US$2 Billion
- LG Chem Official ₩2.6T EB Issuance (1.6% of LG Energy SO): Details & Trading Considerations
- Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion
- Solactive Global Uranium & Nuclear Components Index Rebalance Preview: Potential Changes
- Chindata: Bain’s Move Spurs China Merchants Into Action
- Shougang Fushan Resources (639 HK): Partial Offer at HK$2.40
- POSCO DX Could Switch Its Listing from KOSDAQ to KOSPI by End of 2023
LG Energy – Quick Thoughts on US$2bn EB Offering by Parent
- LG Chem Ltd (051910 KS) aims to raise around US$2bn via offering 2028 and 2030 puttable USD exchangeable bonds for LG Energy Solution (373220 KS) shares.
- LG Chem (LGC) had been rumoured to sell down some of its stake in LG Energy Solutions (LGES), hence, this deal will remove the overhang on LGES.
- In this note, we have a quick look at the deal and provide our thoughts on the structure.
LG Chem: To Issue Exchangeable Bonds Worth US$2 Billion
- On 11 July, LG Chem announced that it would issue foreign currency exchangeable bonds worth US$2 billion to raise funs to expansion into its rechargeable battery materials.
- Investors in LG Energy Solution will likely have a more positive view of this EB issue rather than a block sale of common shares, because of lack of price discount.
- We believe LG Chem is not done in selling its shares of LGES as we think LG Chem is likely to sell additional 5-10% stake in LGES in 3-5 years.
LG Chem Official ₩2.6T EB Issuance (1.6% of LG Energy SO): Details & Trading Considerations
- The exchange prices are ₩687,500 and ₩715,000 at a premium of 25-30% to the closing price of LG Energy Solution today.
- The commencement date for both the 5-year and 7-year bonds’ exchange is August 28th.
- We should design a strategic setup that targets a band play within the current price range and the low ₩700,000 range.
Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion
- Plus Alpha Consulting (4071 JP) listed on TSE Growth at end-June 2021 at ¥2300/share, which was 90x the trailing fiscal year’s earnings. but only about 65x then-current year earnings.
- The stock popped 20+% on Day 1 to close ¥2803. Last Friday, two years and 13% higher at ¥3185/share, the company announced a Secondary Offering and move to TSE Prime.
- It’s a big offering. It’s a smaller TOPIX inclusion event. Next spring we’ll see more upweights.
Solactive Global Uranium & Nuclear Components Index Rebalance Preview: Potential Changes
- Based on prices and turnover from 10 July, there could be one deletion from the index in July. Plus there will be capping and float changes.
- There are four stocks that meet the inclusion criteria but all are non-pure play companies and the index is already at the limit of 15 non-pure play companies.
- There will be a large impact on a lot of stocks but the flows are not very large due to the limited assets tracking the index.
Chindata: Bain’s Move Spurs China Merchants Into Action
- My read of Bain’s Offer last month, was a tactic to flesh out a competing Offer. It seemed unlikely Bain would get the regulatory approval to take Chindata (CD US) private.
- Now state-backed China Merchants Capital Holdings International Ltd. has made a non-binding offer of $9.20/ADS, compared to $8/ADS from Bain.
- This Offer is indicative. But an SOE taking over data centres makes a lot of sense.
Shougang Fushan Resources (639 HK): Partial Offer at HK$2.40
- Shougang Fushan Resources (639 HK) has launched a partial offer to acquire a maximum of 125.0m shares (2.47% of outstanding) at HK$2.40 per share, a 17.6% premium to the undisturbed price.
- The partial offer is conditional on approval by more than 50% of disinterested shares and the shareholder approval of the whitewash waiver. There is no minimum acceptance condition.
- The 2020 partial offer, which was at a 9.3% premium to the undisturbed price and -17% below the current offer, was overwhelmingly approved. Therefore, the current offer should be approved.
POSCO DX Could Switch Its Listing from KOSDAQ to KOSPI by End of 2023
- On 10 July, it was reported in the Hankyung Business Daily that Posco DX (022100 KS) could switch its listing from KOSDAQ to KOSPI by the end of 2023.
- One of the key reasons for the change in the listing venue from KOSDAQ to KOSPI is that POSCO Group believes this could lead to improved valuations for the company.
- We believe the valuations of Posco DX have become too high. Therefore, we have a Negative View of Posco DX at current prices.
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