In today’s briefing:
- Toshiba (6502) – Funding Secured!
- China ADRs Delisting – Christmas Came a Day Earlier than We Expected – No Delisting Risk for Now
- Yashili/Mengniu: Are We There Yet?
- China ADRs: PCAOB Resets the Clock on Delistings; Implications
- Toshiba (6502 JP): Securing Financing Helps Sentiment but Hurdles Remain
- Discussing Why Meritz Swap Spread Not Being Narrowed & When to Enter
- MinRes’ “Unconditional” Offer For Norwest
- Liquid Universe of European Ordinary and Preferred Shares: December ‘22 Report
Toshiba (6502) – Funding Secured!
- A Nikkei article today suggests FUNDING SECURED for JIP’s deal for Toshiba Corp (6502 JP). Noises 2wks ago suggested this timing for a deal, but there are no terms yet.
- The syndicate, led by SMBC and Mizuho, “has agreed to ¥1.2trln in loans.” The two leads take two-thirds but details suggest not all is as smooth as the headline suggests.
- The remaining questions are whether the major holders will take the bait at that price, and/or whether JIC would come in over the top. I expect yes to the first.
China ADRs Delisting – Christmas Came a Day Earlier than We Expected – No Delisting Risk for Now
- Today PCAOB announced that they had secured complete access to inspect and investigate Chinese Firms for the first time in history.
- This was on back of the Aug 2022 agreement between PCAOB, CSRC and MOF, which was followed up with a Hong Kong visit by PCAOB officials over Sep-Nov 2022.
- We wrote about this on 14th Dec 2022 and expected the results to be out on Friday (16th Dec), they have come out a day earlier than we expected.
Yashili/Mengniu: Are We There Yet?
- Back on the 6 May, Yashili International Holdings (1230 HK) announced a pre-conditional Offer, by way of a Scheme, from China Mengniu Dairy Co (2319 HK).
- Pre-Conditions concern three sales and purchase agreements, all of which Yashili shareholders voted through on the 16 August.
- From a regulatory standpoint, various conditions attached to Dumex China remain outstanding. But the wording in the most recent monthly update suggests the process is getting to the pointy end.
China ADRs: PCAOB Resets the Clock on Delistings; Implications
- After getting ‘unprecedented access’ to inspect and investigate audit firms in the PRC, the PCAOB is vacating their 2021 determinations; there will be no ADR delistings in the near future.
- PCAOB inspectors have identified numerous potential deficiencies that are consistent with what the PCAOB has encountered in other first-time inspections around the world.
- The iShares MSCI China ETF (MCHI US), KraneShares CSI China Internet ETF (KWEB US) and NASDAQ Golden Dragon China Index (HXC INDEX) are trading lower in the U.S.
Toshiba (6502 JP): Securing Financing Helps Sentiment but Hurdles Remain
- The Nikkei reports that Japan Industrial Partners (JIP), the preferred bidder, has secured bank financing of around JPY1.2 trillion (US$8.8 billion), conditional on Toshiba Corp (6502 JP) selling some businesses.
- JIP will table an offer valuing Toshiba at JPY2.2 trillion (US$16 billion). The special committee is assessing the proposal and a final decision will be made at a board meeting.
- JIP’s next challenge is getting the committee to recommend the offer. While a potential offer of JPY5,100 is not terrible, it is well below the original bid expectation of JPY6,000.
Discussing Why Meritz Swap Spread Not Being Narrowed & When to Enter
- The swap arb spread has been consistently within the 3% to 5% band since November 23, when arb trading should have actually started.
- Meritz Financial’s buyback seems to be making it difficult to build positions on expectations that the price gap relative to Fire and Securities will converge quickly with the swap ratio.
- As the actual risk of repaying financial borrows is small, we should start building up positions two weeks before the end of January, aiming to exit in early or mid-February.
MinRes’ “Unconditional” Offer For Norwest
- Iron ore and lithium play Mineral Resources (MIN AU) is offering one new share for every 1,367 Norwest Energy (NWE AU), an onshore O&G play, in an off-market takeover.
- The implied value of A$0.06/share under the Offer represents a 27% premium to NWE’s one-month VWAP.
- MinRes currently owns 19.9% in Norwest. There is no minimum acceptance condition. This is done and will trade tight.
Liquid Universe of European Ordinary and Preferred Shares: December ‘22 Report
- Since mid-November, spreads have shown a mixed performance across our liquid universe with a slight bias towards widening (10 have widened, 9 tightened).
- Trade recommendations long ords / short prefs: Fuchs Petrolub, Henkel, Ericsson, Handelsbanken, SSAB Svenska Stal.
- Trade recommendations long prefs / short ords: Sixt, VW, MFE-Media for Europe, Grifols, Atlas Copco.
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