In today’s briefing:
- Toshiba (6502) Tender – Certainly Cheaper. Maybe Delayed, But Toshiba Fatigue Is Strong
- SK Telecom – Major Share Buyback & Cancellation
- Nomura Real Estate To Buy Nomura RE Master Fund Units
- KRX Autos Sept Rebalancing: Less Known, Still Juicy Trading Event with 4 Constituent Changes
- EOFLOW/Medtronic Tender: Assessing the Wide Spread
- A Long Short Arb Event on SKT & LG U+ Targeting SKT’s Index Inclusion in November with Buyback
- GQG Mulls Offer As Pacific Current Balks At Regal’s NBIO
- Quiddity Leaderboard CSI 300/500 Dec 22: Massive Baskets, US$2.5bn One-Way
- Bain Capital/SoftwareOne: Bargaining for a Better Offer
- Alpha Auto Group/Lookers: Sharp Turn
Toshiba (6502) Tender – Certainly Cheaper. Maybe Delayed, But Toshiba Fatigue Is Strong
- It has been four months since JIP officially announced their intention to launch a Tender Offer for Toshiba Corp (6502 JP) by end-July. 7 weeks since Toshiba’s Board supported it.
- There’s been no material public griping. Peers are sharply higher. There have been news stories suggesting a Western Digital/Kioxia deal is close. That’s now extended. The Toshiba deal possibly too.
- But huge outperformance by peers, and possible clarity from Kioxia deal terms are unlikely to move the Toshiba Board to demand more.
SK Telecom – Major Share Buyback & Cancellation
- On 27 July, SK Telecom announced a sizeable share buyback worth 300 billion won (including shares cancellation of 200 billion won) and quarterly dividend of 181 billion won.
- SK Telecom will pay a quarterly DPS of 830 won, which represents 1.8% of its current price of 45,900 won.
- SK Telecom is trying to boost its share price which has been negatively impacted by the regulators’ pressure to cut telecom tariff rates and also increase competition.
Nomura Real Estate To Buy Nomura RE Master Fund Units
- Today, Nomura Real Estate Master Fund, (3462 JP) – the largest REIT in the ‘Diversified REIT’ JREIT space – announced sponsor Nomura Real Estate (3231 JP) would up its stake.
- They would lift their stake from 4.47% by 2.54% to 7.01%. There is a reason for this, just like there was last time with Japan Excellent (8987 JP).
- Understanding the reason is how you understand the trade to do.
KRX Autos Sept Rebalancing: Less Known, Still Juicy Trading Event with 4 Constituent Changes
- At the current stage, with the three-month review period almost complete, there will likely be two additions and two deletions:
- Additions: KG Mobility (003620 KS) & Nexen Tire Corp (002350 KS) Deletions: Sebang Global Battery (004490 KS) & Kumho HT Inc (214330 KS)
- In the past few years, KRX Autos has shown a significant price impact for constituent changes on the rebalancing trading day. This pattern will likely repeat in the upcoming rebalancing.
EOFLOW/Medtronic Tender: Assessing the Wide Spread
- Medtronic Plc (MDT US) aims to acquire Eoflow (294090 KS) through share purchase agreements (SPA), a share subscription agreement (SSA) and a public tender offer at KRW30,000.
- Since the deal announcement on 26 May, the spread has widened, reflecting deal risk around patent litigation risk, regulatory approvals and the minimum acceptance condition.
- Our assessment of these risks suggests a low probability of a deal break. At the last close, the gross spread is an attractive 8.5%.
A Long Short Arb Event on SKT & LG U+ Targeting SKT’s Index Inclusion in November with Buyback
- The chances of SKT’s inclusion in the August MSCI Review seem slim. SKT narrowly missed meeting the 15% threshold on both Day 1 and Day 2 during this review.
- SK Telecom’s buyback completion can be accelerated to align with the MSCI November Review period, just like the previous case of KT Corp back in April.
- The estimated size of passive funds flowing into SKT is approximately ₩160 billion, which is expected to be around 5.5 times the average daily trading volume (ADTV).
GQG Mulls Offer As Pacific Current Balks At Regal’s NBIO
- Yesterday (26 July), asset manager Pacific Current (PAC AU) announced a cash/scrip NBIO from Regal Partners (RPL AU).
- Under Regal’s proposal, Pacific Current shareholders would receive an implied $10.77/share. Pacific Current considers the current share price doesn’t reflect the underlying value of its portfolio and business.
- Now GQG Partners (GQG AU) has announced it intends to submit its own NBIO. No price was mentioned.
Quiddity Leaderboard CSI 300/500 Dec 22: Massive Baskets, US$2.5bn One-Way
- CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
- In this insight, we take a look at the potential ADDs/DELs for the CSI 300 and CSI 500 rebalance in December 2023.
- I currently expect 13 ADDs/DELs for CSI 300 and 50 ADDs/DELs for CSI 500.
Bain Capital/SoftwareOne: Bargaining for a Better Offer
- The board of SoftwareONE Holding (SWON SW) rejected on 24 July a revised CHF 19.50-20.50 offer from Bain Capital and said it began a strategic review to seek the best value.
- CHF 19.5 represents a 40% premium, Gross spread to the low point of the range is 4.2%. 0x EV/NTM EBITDA and 19.5 Fwd P/E.
- This could trigger upwards revisions and would justify the Board asking for a higher offer. I’d hold on to the shares as Bain Capital could increase the offer a bit.
Alpha Auto Group/Lookers: Sharp Turn
- The deal looked dead in the water during a week until, on 27 July, Global Auto Holdings raised its offer for Lookers PLC (LOOK LN) by 8%, to 130p/share (46.6% premium).
- The increased offer will now be carried out via takeover, and represents an implied EV of £968 million, 6.1x EV/Fwd NTM EBITDA and 9x Fwd P/E (on latest Consensus figures).
- Considering the number of failed deals in the sector, I believe the offer looks very decent and the deal should now close. Spread is 5.2%/23.7% (gross /annualised). Long.
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