In today’s briefing:
- Privatization of HMM: Enormous Shares Dilution Risk
- Alpha Auto Group/Lookers: From Done Deal to Uncertain Situation
Privatization of HMM: Enormous Shares Dilution Risk
- The Korean government has initiated the M&A privatization of HMM, the largest container shipping company in Korea.
- We are Negative on the shares of HMM Co., Ltd. (011200 KS) in the next 6-12 months. We expect additional 20% to 30%+ downside risk on HMM in this period.
- Although HMM has a strong balance sheet, more investors are likely to emphasize on the negatives including excessive share dilution risk and worsening environment for the global shipping industry.
Alpha Auto Group/Lookers: From Done Deal to Uncertain Situation
- Lookers disclosed that Cinch (largest shareholder with 19.52% stake) plans to vote against the scheme. The shares have dropped to halfway between the pre-offer price and Alpha Auto’s offer.
- The shares are pricing a 45% probability of deal completion. This sector has a track record of failed deals, so it is understandable that investors are spooked.
- Top Lookers shareholders are keen on selling and an offer from Lithia could well happen. At around 103p I’d be long, as I consider the risk reward is balanced.
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