In today’s briefing:
- Origin: Brookfield’s “Inferior” Alternative Proposal
- KOSDAQ150 Index Rebalance: 17 Changes a Side; Many Surprises
- EOFlow (Further) Tests Investor Patience
- KOSPI200 Index Rebalance: Mostly Expected Though Some Discretion Used
- CareNet (2150) – Watch the TOPIX Birdy (Smallcap)
- Origin Energy (ORG AU): Brookfield/EIG’s Latest Effort Falls Flat
- Understanding & Assessing Yearend Dividend Arbitrage Structure Using Futures in Korea
- Hollysys (HOLI US): Progress as a Binding Proposal Targeted for Mid-December
- OreCorp (ORR AU): Silvercorp Returns with a Higher Offer
- LX International: Positive Impact from Not Participating in Main Bidding for HMM
Origin: Brookfield’s “Inferior” Alternative Proposal
- Origin Energy (ORG AU)‘s Scheme vote today was always going to be a tenuous affair with AusSuper’s ~17.5% blocking stake, and Perpetual also firmly in the “against” camp.
- The Scheme meeting has now been adjourned. Origin said that based on the proxy votes, it was unlikely the Scheme would have achieved the required 75% approval by shareholders.
- In addition, the Brookfield-led consortium has pitched a alternative non-binding and indicative proposal which Origin views as inferior to the existing Scheme, and has significant reservations as to its complexity.
KOSDAQ150 Index Rebalance: 17 Changes a Side; Many Surprises
- There are 17 inclusions and 17 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 14 December.
- While most of the inclusions were expected, there are many differences on the deletes. Trading the strategy becomes tougher with the short sell ban in place.
- The adds have started to outperform the deletes over the last month and there could be more movement over the next 3 weeks to implementation.
EOFlow (Further) Tests Investor Patience
- Back on the 25 May, when Medtronic Plc (MDT US) enter into a SPA with EOFlow (294090 KS)‘s CEO, with a follow-on Tender Offer, the whole construct looked pretty clean.
- Then in August Insulet Corp (PODD US) launched its lawsuit, which in hindsight, should have been expected. Then earlier this month, news surfaced concerning a stock-backed loan to the CEO.
- Now the CEO is selling, presumably to repay his collateralized loan. Shares are down 38% since the resumption of trading, and are now at a whopping 122% spread to terms.
KOSPI200 Index Rebalance: Mostly Expected Though Some Discretion Used
- There will be 7 additions and 7 deletions for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY) at the December rebalance that will be implemented on 14 December.
- The rebalance is on expected lines, though the index committee decided not to add Youngpoong Paper (006740 KS) to the index. Not really a big surprise given the price move.
- HDC Hyundai Development Co-Engineering & Construction (294870 KS) is a surprise delete and there is not much short interest that could cover against the passive selling.
CareNet (2150) – Watch the TOPIX Birdy (Smallcap)
- Carenet Inc (2150 JP) is a “medical contents” provider. It acts as a distributor of information to doctors and medical practitioners over the internet, and also consults with pharmaceutical companies.
- On Wednesday, they announced that they were going to move from TSE Growth to TSE Prime as of 29 November.
- At ¥31bn market capand this may turn people off, but it may be a treat for some. There is a reason why there are some big holders.
Origin Energy (ORG AU): Brookfield/EIG’s Latest Effort Falls Flat
- Origin Energy (ORG AU) has postponed its scheme meeting to 4 December after it received a non-binding indicative proposal from Brookfield/EIG to amend the current scheme.
- The Board admitted the current scheme was likely to be voted down if the meeting was held today. The alternative transaction structure will struggle to gain shareholder support.
- If Brookfield/EIG walks, the share price will fall, at least in the short term. We think a reasonable deal break price is A$7.40, an 11% downside to the last close.
Understanding & Assessing Yearend Dividend Arbitrage Structure Using Futures in Korea
- As the ex-dividend date in Korea has been before the dividend is determined, SSFs trade at a discount based on the anticipated dividend rather than adjusting dividend settlement proceeds explicitly.
- The current dividend arbitrage yield for the financial companies can be seen as reflecting the postponement of the ex-dividend date to the next year.
- We should pay attention to those with a significant dividend arbitrage yield but that did not amend their articles of incorporation earlier this year.
Hollysys (HOLI US): Progress as a Binding Proposal Targeted for Mid-December
- The Hollysys Automation Technologies (HOLI US) Board has finally succumbed to shareholder pressure by targeting a special meeting of shareholders in the week commencing 22 January 2024.
- The special meeting is a side event as the Board targets a binding proposal by mid-December, with some bidders proceeding to the confirmatory due diligence stage.
- The BVI takeover structure and Hollysys’ undemanding valuation facilitate a competitive bidding process. A 10% uplift to the current highest offer (Recco’s US$26.50 offer) is possible.
OreCorp (ORR AU): Silvercorp Returns with a Higher Offer
- Orecorp Ltd (ORR AU) has disclosed a revised offer from Silvercorp Metals (SVM US) at A$0.19 cash per share and 0.0967 SVM shares per ORR share.
- The revised offer was necessitated due to the decline in SVM shares. Since 7 August, the revised offer is, on average, 7.8% higher than the previous offer.
- Directors and irrevocables represent around 20% of voting rights. The revised offer should help the scheme get up. At the last close, the gross spread was 8.6%.
LX International: Positive Impact from Not Participating in Main Bidding for HMM
- LX International announced today that it will not participate in the main bidding to acquire HMM Co.
- This is likely to have a positive impact on LX International’s share price as many investors are relieved that company will not raise excessive amounts of capital to acquire HMM.
- In addition, by not acquiring HMM, LX International has enough financial resources to continue to pay high dividends.
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