In today’s briefing:
- (Mostly) Asia-Pac M&A: APM Human Services, TCM, Alps Logistics, Fancl, Jeisys Medical, PropertyGuru
- ESR Group (1821 HK): A Rumoured Offer Price Surfaces
- Henlius (2696 HK): Share Alternative Facilitates the Vote
- Japan Tobacco/Vector Group: Possible Bump-Up?
- NIFTY Bank Index Rebalance: Canara Bank IN; Bandhan Bank OUT
- China Healthcare Weekly (Aug.25)- China TCM 24H1 Profit Warning, Financing Activities, Giant Biogene
- Weekly Deals Digest (25 Aug) – Seven & I, Iriso, Fancl, Alps Logistics, China TCM, Henlius, GA Pack
- Trading Situation for Hyundai Motor’s 5% Stake in Korea Zinc, Set to Be Unlocked in October
- NIFTY50 Index Rebalance: Trent, BEL to Replace Divi’s Lab, LTIMindtree
- Last Week in Event SPACE: Seven & I Holdings, Webjet, Hanwha Group, Swire Pac/Props, EOFlow
(Mostly) Asia-Pac M&A: APM Human Services, TCM, Alps Logistics, Fancl, Jeisys Medical, PropertyGuru
- I tally 45 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal
- Two new deals were discussed this week: Alimentation Couche-Tard (ATD CN)‘s non-binding proposal for Seven & I Holdings (3382 JP).; and EQT’s Offer for PropertyGuru (PGRU US).
- Key updates took place on APM Human Services (APM AU), TCM (570 HK), GaPack (468 HK), Alps Logistics (9055 JP), Fancl Corp (4921 JP), and Jeisys Medical (287410 KS).
ESR Group (1821 HK): A Rumoured Offer Price Surfaces
- A media outlet that Reports on Deals reported that the consortium will offer HK$14.50 per share, a 22.1% and 61.8% premium to the last close (HK$11.88) and undisturbed price (HK$8.96).
- While not a knockout offer, the consortium’s impending binding proposal suggests confidence that the offer price and structure would gain the support of the substantial shareholders.
- The downside to a deal break is low as ESR’s valuation is undemanding. Its forward EV/EBITDA multiple is at a 30% discount to the median peers’ multiple.
Henlius (2696 HK): Share Alternative Facilitates the Vote
- Shanghai Fosun Pharmaceutical (Group) (2196 HK) announced the Shanghai Henlius Biotech (2696 HK) share alternative offer, subject to proration due to a cap of 8% of outstanding shares.
- The share alternative offer was necessary to facilitate the vote as the HK$24.60 offer is half the HK$49.60 IPO price.
- The co-founders, HenLink and LVC, will likely tender some or all their shares for scrip. At the last close and for the December-end payment, the gross/annualised spread is 7.4%/17.9%.
Japan Tobacco/Vector Group: Possible Bump-Up?
- JT plans to acquire 100% of Vector Group at $15.00/share, a 29.9% premium. The offer requires over 50% acceptance, with Board support and completion expected by late 2024, pending approvals.
- The shares go ex-dividend on August 30, with payment on September 12. Adjusted for the dividend, shares trade at a -0.4% gross spread. My fair value estimated is $15.92/share.
- Consensus sets a target price of $16/share. JT may consider raising its offer to this level (6.67%), especially if they see Vector as a strong long-term investment.
NIFTY Bank Index Rebalance: Canara Bank IN; Bandhan Bank OUT
- In line with our forecast, Canara Bank (CBK IN) will replace Bandhan Bank Ltd (BANDHAN IN) in the NSE Nifty Bank Index (NSEBANK INDEX) at the close on 27 September.
- Bandhan Bank Ltd (BANDHAN IN) will be deleted from a global index at the close on 31 August, so real float will increase a lot over the next month.
- Passive trackers will need to buy over 2 days of ADV in Canara Bank (CBK IN) and sell 1 day of ADV in Bandhan Bank Ltd (BANDHAN IN).
China Healthcare Weekly (Aug.25)- China TCM 24H1 Profit Warning, Financing Activities, Giant Biogene
- China Traditional Chinese Medicine (570 HK)‘s profit warning suggests weaker-than-expected 2024H1 results, but the interim report is needed for clarity. This is unlikely to negatively affect the company’s privatization plans.
- In 24H1, healthcare investment and financing activities have slowed, and it will take time for investors’ confidence in the sector to recover.
- Giant Biogene (2367 HK)‘s 24H1 results exceeded expectations, leading management to raise its 2024 guidance. However, the profit margin declined, and we remain cautious about long-term growth prospects.
Weekly Deals Digest (25 Aug) – Seven & I, Iriso, Fancl, Alps Logistics, China TCM, Henlius, GA Pack
- 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: WeRide (WRD US) delayed its Nasdaw IPO, 99 Speed Mart Retail Holdings (99SPD MK) launched a US$530 million IPO.
- Event-Driven developments: Seven & I Holdings (3382 JP), Iriso Electronics (6908 JP), Fancl Corp (4921 JP), China Traditional Chinese Medicine (570 HK), Shanghai Henlius Biotech (2696 HK), GA Pack.
Trading Situation for Hyundai Motor’s 5% Stake in Korea Zinc, Set to Be Unlocked in October
- The market is watching closely for when Hyundai Motor might sell its 5% stake in Korea Zinc, with the lockup ending on October 7th.
- Hyundai might mediate to end the lawsuit and lift the injunction, potentially agreeing to sell the stake to a third party or on the market.
- The uncertainty around Hyundai’s Korea Zinc stake sale makes trading challenging, but its actions in Q4 could significantly affect Korea Zinc’s stock price and create trading opportunities.
NIFTY50 Index Rebalance: Trent, BEL to Replace Divi’s Lab, LTIMindtree
- Trent (TRENT IN) and Bharat Electronics (BHE IN) will replace LTIMindtree (LTIM IN) and Divi’s Laboratories (DIVI IN) in the NIFTY Index (NIFTY INDEX) at the close on 27 September.
- Passive trackers will need to trade at least 5 days of ADV and over 11 days of delivery volume in the stocks.
- All the index changes are also changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) and there will be opposing flows (though much smaller in size) for the stocks.
Last Week in Event SPACE: Seven & I Holdings, Webjet, Hanwha Group, Swire Pac/Props, EOFlow
- Alimentation Couche-Tard has returned to the well with a NBIO for 7&I (3382 JP). This’ll be anathema to politicians who view 7&i as a local champion AND a lifeline entity.
- Global travel outfit Webjet Ltd (WEB AU) has announced the separation of its two key divisions. The sum of the part is greater than the whole? I’ll take that bet.
- The Kim family turn their focus to Hanwha Galleria (452260 KS) in the latest Partial Offer within the Hanwha Group complex.
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