In today’s briefing:
- Rio Tinto (RIO AU/LN): Shareholders To Vote On Merits Of Unification
- Proto Corp (4298 JP) – Activists Getting More Activish, Watch for Position Changes?
- Rio Tinto (RIO AU/RIO LN): Unification Index Flows
- Changyou (CYOU US): Short-Form Merger Dissent Now (Definitely) Permitted
- Is Homeplus Debacle a Key Negative Tipping Point for MBK?
- ESR Group (1821 HK): Steady Progress
- Silk Logistics (SLH AU): ACCC’s Statement Of Issues
- NaiGai Trans (9384 JP) – Small LCL Shipping Founder Gets an Exit
- Kakao Corp: Insiders Are Buying and Cancellation of Treasury Shares
- WEX Launches $750M Tender Offer with Odd-Lot Provision Amidst Share Price Decline and Strategic Stake Increase
Rio Tinto (RIO AU/LN): Shareholders To Vote On Merits Of Unification
- Palliser Capital, which reportedly holds ~$300mn in Rio Tinto Ltd (RIO AU/LN) shares across its dual-head structure, has campaigned for near-on a year to unify the primary listing in Australia.
- Palliser’s reasonings (and others) to unify make sense, such as access to stock-based mergers and eliminating franking wastage. A recent independent assessment from Grant Thornton is also supportive of unification.
- Shareholders will vote on the resolution on 3rd April for UK-listed shares and 1st May for Australian-listed shares. The UK line holds the key to the vote outcome.
Proto Corp (4298 JP) – Activists Getting More Activish, Watch for Position Changes?
- The MBO for Proto Corp (4298 JP) where the founder/chair is buying out from minorities is being done at the wrong price. His reasons are good, but not for minorities.
- One large foreign shareholder – the second largest shareholder of the firm – has offered substantial pushback in the form of a letter asking for discussions. That went nowhere.
- So now they have come out harder. The solution here is a really big bump or a broken deal if investors keep the share price above the TOB price.
Rio Tinto (RIO AU/RIO LN): Unification Index Flows
- At the upcoming AGM, Rio Tinto Ltd and Rio Tinto PLC shareholders will vote on the company commencing a review on the benefits vs costs of Unification.
- Palliser Capital has been pushing for Unification while the Rio Tinto Board has recommended that shareholders vote against Resolution 21/24 citing tax costs among other reasons.
- If the Unification completes, S&P/ASX trackers will need to buy Rio Tinto Ltd (RIO AU) while UKX Index (UKX INDEX) trackers will sell Rio Tinto PLC (RIO LN). Net positive.
Changyou (CYOU US): Short-Form Merger Dissent Now (Definitely) Permitted
- In a long-form merger for Cayman incorporated companies, dissenters can petition the Grand Court for determination of fair value. For short form merges, that avenue of dissent was not available.
- But on the 28 January 2021, the Grand Court of the Cayman Islands concluded that shareholders of companies that undertake a ‘short-form’ merger were entitled to dissent.
- Changyou.com (CYOU US) appealed this decision in the Court of Appeal, and was dismissed. Then appealed to the Privy Council. In a judgement handed down yesterday, this was also dismissed.
Is Homeplus Debacle a Key Negative Tipping Point for MBK?
- In this insight, we discuss how the Homeplus debacle is causing a major negative sentiment on MBK Partners from both the Korean government and the media.
- This negative sentiment has grown so much that it could have a legitimate negative impact in the upcoming proxy vote for the control of Korea Zinc.
- The Korean government has targeted MBK for tax probe. Plus, a coalition of securities firms is expected to file a lawsuit against Homeplus and MBK.
ESR Group (1821 HK): Steady Progress
- ESR Group (1821 HK)’s preconditional scheme offer from the consortium is either cash (HK$13.00), scrip or a combination of cash/scrip. The offer is final.
- On 7 March, the consortium disclosed two additional irrevocable (3.47% of outstanding shares) and satisfied two regulatory preconditions (UK FCA and Singapore MAS).
- Since announcing the offer, peers have materially derated, lowering the vote risk. At the last close and for an end August payment, the gross/annualised spread is 4.5%/10.1%
Silk Logistics (SLH AU): ACCC’s Statement Of Issues
- Back on the 11th November 2024, Silk Logistics (SLH AU) entered into an Offer by way of a Scheme with Dubai-based DP World, Australia’s biggest ports operator.
- DP World offered A$2.14/share (less any dividends), a 45.6% premium to last close. The Offer has the backing of Silk’s board, and co-founders (holding ~46% of the shares out).
- This looked all stitched up. Potentially a delay for ACCC/FIRB, but it felt like one that should get approved. But the ACCC has now detailed a comprehensive list of concerns.
NaiGai Trans (9384 JP) – Small LCL Shipping Founder Gets an Exit
- Naigai Trans Line (9384 JP) is a small logistics provider. They specialise in LCL (“Less-Than-Container-Load” shipments around Asia.
- On 7 March 2025, the company agreed to a buyout via Tender Offer by IAPF2 – a buyout vehicle of IA Partners – a 3yr old PE firm in Japan.
- This is 5.9x EBITDA. There’s minimal transparency. No guidance. The PE firm is putting down an equity check of 2x EBITDA and 4x earnings. But it’ll probably get done.
Kakao Corp: Insiders Are Buying and Cancellation of Treasury Shares
- Kakao Corp (035720 KS) has two near-term positive catalysts. First is treasury shares cancellation. Second is insiders buying of its shares.
- These moves suggest the management’s confidence in the company’s outlook ahead of the AGM on 26 March.
- In our view, one of the major reasons why the insiders are buying could be due to Kakao’s collaboration with OpenAI.
WEX Launches $750M Tender Offer with Odd-Lot Provision Amidst Share Price Decline and Strategic Stake Increase
- WEX launched a $750m tender offer to repurchase ~12% of shares at $148-$170/share, prioritizing odd lots.
- Impactive Capital increased its stake in WEX from 5.6% to 6.7%, purchasing at $154.75/share average.
- WEX is highly leveraged with net debt at 5x EBITDA, despite slowing growth and weak guidance.
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