In today’s briefing:
- NEC Networks (1973 JP) Next To Last Showdown – NEC Lowers Minimum, Bumps Tiny, Ignores Synergies
- Henlius (2696 HK): Interesting Shareholder Movements with the Vote on 22 January
- Pentmaster (1665 HK): Malaysian Parent’s Offer For Pseudo Dual-Listing
- Japan: Potential Passive Selling in February
- Merger Arb Mondays (23 Dec) – Seven & I, Fuji Soft, NEC Networks, Pentamaster, Goldlion, Henlius
- Ping An Healthcare and Technology (1833 HK) – Cash Dividend Or Scrip Dividend?
- Korea’s Dem Leader: PBR Under 0.3x Should Be Hostile M&A Targets – Names That Could Feel the Heat
- KOSPI Size Indices: Overlap Between Global Passive Selling & Downward Migrations
- Analyzing the Regulatory Loophole in Kaspi’s Acquisition of D-Market’s Controlling Stake and Potential Outcomes
- Strategic Transactions and Legal Developments: HEPS, ACC:OL, ABCP, BELFB, NWOR:L, EMBRAC, AVAP:L
NEC Networks (1973 JP) Next To Last Showdown – NEC Lowers Minimum, Bumps Tiny, Ignores Synergies
- On Friday, NEC Corp (6701 JP) raised the price for its Tender Offer on Nec Networks & System Integr (1973 JP) from ¥3,250 to ¥3,300.
- It also lowered the minimum to 10.153mm shares (6.82%). It had proposed to do so earlier but NESIC demanded a bump, and NEC didn’t want to.
- Now it’s bumped. That’s the “final price.” But it still does not include “a fair allocation of a portion of the value that cannot be realised without an acquisition.”
Henlius (2696 HK): Interesting Shareholder Movements with the Vote on 22 January
- Shanghai Henlius Biotech (2696 HK)’s IFA opines that Shanghai Fosun Pharmaceutical (Group) (2196 HK)’s HK$24.60 offer is fair and reasonable. The vote is on 22 January.
- The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). There are recent movements in H Share substantial shareholders.
- Key shareholders should be supportive of the cash/scrip offer. At the last close and for a 15 February payment, the gross/annualised spread is 2.9%/16.9%.
Pentmaster (1665 HK): Malaysian Parent’s Offer For Pseudo Dual-Listing
- In Pentamaster Corp: In The (EV) Driver’s Seat in February last year, I discussed Pentamaster Corp (PENT MK)‘s supply of semiconductors testers to the electric vehicle business.
- A quirk of PENT was that its pseudo dual-listed twin – Pentamaster International (1665 HK) – trades at a significant discount.
- In a not altogether surprising move, PENT is now seeking to take PI private by way of a Scheme at HK$1.00/share, including a HK$0.07/share dividend.
Japan: Potential Passive Selling in February
- Currently, 9 stocks could be deleted from global passive portfolios in February. The deletion will lead to liquidity events where trackers will need to sell multiple days of ADV.
- There has been a buildup on shorts on few stocks with minimal positioning in the other stocks. That could change once the calendar ticks over to 2025.
- Kokusai Electric (6525 JP) is a potential inclusion to the Nikkei 225 (NKY INDEX) in March and this deletion could provide liquidity to enter a position ahead of that announcement.
Merger Arb Mondays (23 Dec) – Seven & I, Fuji Soft, NEC Networks, Pentamaster, Goldlion, Henlius
- 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: Arcadium Lithium (LTM AU), Seven & I Holdings (3382 JP), Get Nice Financial Group Ltd (1469 HK), ESR Group (1821 HK), Goldlion Holdings (533 HK).
- Lowest spreads: Lifestyle China (2136 HK), Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks & System Integr (1973 JP).
Ping An Healthcare and Technology (1833 HK) – Cash Dividend Or Scrip Dividend?
- Hopson Development (754 HK) is cash-strapped and it will most likely choose cash dividend, which would increase the likelihood that Glorious Peace’s shareholding ratio will increase to more than 50%.
- If PAGD’s share price is higher than HK$6.12, there is arbitrage opportunity. Since Ping An may hope other shareholders to choose cash dividends, future stock price may fall below HK$6.12
- A risk point is Ping An can actually wait for other shareholders to make their choices before making the final decisions based on the stock price situation at that time.
Korea’s Dem Leader: PBR Under 0.3x Should Be Hostile M&A Targets – Names That Could Feel the Heat
- During the public hearing, Lee Jae-myung asked Simpac’s CFO about their 0.3x PBR, then remarked, “That’s prime territory for a hostile M&A.”
- With PBRs under 0.3x, these companies may roll out shareholder returns to manage political pressure—definitely worth tracking from a value-up trading perspective.
- Hanwha is interesting due to its room for shareholder returns and potential merger with Hanwha Energy. With the new Commercial Act, a public tender offer is likely. Worth watching closely.
KOSPI Size Indices: Overlap Between Global Passive Selling & Downward Migrations
- The review period for the March rebalance of the KOSPI Size Indices commenced on 1 December and will end on 28 February.
- A quarter of the way through the review period, we forecast 37 migrating stocks. Among new listings, 1 could be added to LargeCap, 3 to MidCap and 2 to SmallCap.
- Four downward migrations were deleted from a global index in November. Now, three more downward migrations could be deleted from the same global index in February.
Analyzing the Regulatory Loophole in Kaspi’s Acquisition of D-Market’s Controlling Stake and Potential Outcomes
- D-Market’s controlling stake is being sold to Kaspi, acquiring Class A shares at $7.57 and Class B at $4.75.
- Turkish law mandates a takeover offer for minority shares, but HEPS’s ADR structure exempts it from this requirement.
- Activism efforts aim to increase HEPS’s shareholders to 500, potentially forcing Kaspi to include minority shareholders.
Strategic Transactions and Legal Developments: HEPS, ACC:OL, ABCP, BELFB, NWOR:L, EMBRAC, AVAP:L
- D-Market Electronic Services & Trading’s (HEPS) controlling stake is being sold to Kaspi, exploiting a regulatory loophole to avoid a mandatory takeover offer.
- Aker Carbon Capture (ACC:OL) sold its business, leaving a cash shell trading at a 20% discount to net cash.
- Ambase (ABCP) is litigating over an Equity Put Right, with summary judgment motions scheduled, potentially impacting share price.
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