In today’s briefing:
- Tsuruha (3391), Welcia (3141), and Aeon (8267) Do a Deal, Short-Changing Tsuruha Minorities
- What if China ADRs Are Delisted from US Exchanges?
- “Tiny Win for Guess The Ratio” Aeon (8267) Pays a SMALL Premium for Aeon Mall (8905)
- Suzuki Motor (7269 JP) Placement: Likely to Price Today; 7-8% Underperformance Vs Peers/TOPIX
- Aeon Mall (8905 JP): Aeon (8267 JP)’s Share Exchange Ratio Is Set
- HK Connect SOUTHBOUND Flows (To 11 Apr 2025); Record Net Buying
- A/H Premium Tracker (To 11 Apr 2025): Sharp AH Premia Widening
- Merger Arb Mondays (14 Apr) – ESR, Fengxiang, Vesync, Goldlion, Shibaura, Tsuruha/Welcia, Aeon Mall
- Fengxiang (9977 HK): PAG’s Pre-Con Offer
- Strategic Acquisitions, Merger Developments, and Takeover Bids: Key Updates
Tsuruha (3391), Welcia (3141), and Aeon (8267) Do a Deal, Short-Changing Tsuruha Minorities
- On Friday, Tsuruha Holdings (3391 JP), Welcia Holdings (3141 JP), and Aeon Co Ltd (8267 JP) announced the Tsuruha/Welcia merger and Partial Tender to get Aeon to 50+% of NEWCO.
- The scrip ratio short-changes Tsuruha shareholders. The subsequent partial offer to raise Aeon’s stake above 50% is low too. 9.7% shareholder Orbis is already out with a complaint.
- But… all is not lost. There are some interesting angles here to complain.
What if China ADRs Are Delisted from US Exchanges?
- We see 281 Chinese companies listed on U.S Stock Exchanges with a total market cap of US$869bn. 32 of these companies are listed on the HKEX (388 HK).
- If the rumours of Chinese stocks being delisted from U.S. Exchanges gathers steam, we could see a wave of secondary listings in Hong Kong.
- PDD Holdings, Full Truck Alliance, Vipshop Holdings, TAL Education and ZEEKR are the largest China ADRs with no HK listing and could come under pressure.
“Tiny Win for Guess The Ratio” Aeon (8267) Pays a SMALL Premium for Aeon Mall (8905)
- In an announcement after the close Friday 11 April, Aeon Co Ltd (8267 JP) and AEON Mall (8905 JP) announced their merger ratio, and timing.
- The ratio is 0.65 to 1.0, meaning Aeon Mall shareholders don’t get a lot of credit for their real estate. The timing is short-dated. The AGM is end-May. Merger July1.
- This may be a tad light, but it is a done deal. Active shareholder base is almost all retail and crossholders+dom passive gets Aeon to 70%.
Suzuki Motor (7269 JP) Placement: Likely to Price Today; 7-8% Underperformance Vs Peers/TOPIX
- Tokio Marine & Nichido Fire Insurance and Sompo Japan Insurance are looking to raise US$1.2bn by offloading their entire stakes in Suzuki Motor by way of a secondary offering.
- Suzuki Motor (7269 JP) stock is flat since the announcement of the placement but has underperformed its peers and the TSE Tokyo Price Index TOPIX (TPX INDEX).
- With the placement being less than 5% of the number of shares outstanding, there is unlikely to be any immediate passive inflow which could pressure the stock.
Aeon Mall (8905 JP): Aeon (8267 JP)’s Share Exchange Ratio Is Set
- AEON Mall (8905 JP) announced a share exchange offer by Aeon Co Ltd (8267 JP) at 0.65 Aeon shares per Aeon Mall share, a 30.9% premium to the undisturbed price.
- The share exchange ratio is reasonable compared to historical price ratios and IFA valuation ranges. The implied offer multiple is attractive compared to peer multiples.
- Aeon’s 58.16% shareholding ensures that Aeon Mall’s vote on 22 May is low-risk. The share exchange’s effective date is 1 July.
HK Connect SOUTHBOUND Flows (To 11 Apr 2025); Record Net Buying
- Q1 saw record quarterly inflows by SOUTHBOUND investors at HK$435bn, beating the previous record of Q1 2021 by more than HK$100bn. The first two weeks in April were HK$145bn.
- The first two weeks in April were HK$145bn as what appeared to be national team, or equally patriotic buyers, showed up droves to buy financials, energy, telecoms, and big techs.
- Included is a summary of important China Stocks-relevant news as I saw it this week, but frankly, the only thing that matters is the back and forth by the Donald.
A/H Premium Tracker (To 11 Apr 2025): Sharp AH Premia Widening
- AH Premia bounce higher. Spread curve torsion is mild given how much AH is widening again. Two weeks in a row we see a big net move.
- For a month I thought warning signs were flashing and spreads could widen. They are still widening despite really big net SOUTHBOUND buying.
- I expected the right thing to do was hunker down and be flat H/A risk. Hs underperformed As by 3.7% over two weeks so it’s tough to be flat enough.
Merger Arb Mondays (14 Apr) – ESR, Fengxiang, Vesync, Goldlion, Shibaura, Tsuruha/Welcia, Aeon Mall
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: ENN Energy (2688 HK), Insignia Financial (IFL AU), Oneconnect Financial Technology (6638 HK), Shandong Fengxiang (9977 HK), Seven & I Holdings (3382 JP), Smart Share Global (EM US).
- Lowest spreads: Shibaura Electronics (6957 JP), Sinarmas Land (SML SP), Millennium & Copthorne Hotels Nz (MCK NZ), Makino Milling Machine Co (6135 JP), Spartan Resources (SPR AU).
Fengxiang (9977 HK): PAG’s Pre-Con Offer
- When Shandong Fengxiang (9977 HK) was suspended last month due to the Takeovers Code, I expected PAG to launch an Offer by way of a Merger by Absorption at ~HK$2.00.
- And that is exactly what unfolded. The price, which is a 33.33% premium to last close is final. 42.35% of independent H-shareholders are supportive. A scrip alternative is afforded.
- PAG was permitted to take control of Fengxiang, via the domestic shares, late 2022. There will be no regulatory roadblock as PAG now seeks to privatise Fengxiang.
Strategic Acquisitions, Merger Developments, and Takeover Bids: Key Updates
- Lensar (LNSR) is being acquired by Alcon for $14/share plus a CVR up to $2.75/share, with closing expected in H2 2024.
- OCI N.V. announced a $1bn extraordinary cash distribution, with shareholders choosing payment currency, ex-dividend date April 15.
- Kronos Bio (KRON) terminated a lease for $1.5m, with potential net cash outcome between ~$1 and $1.30/share.
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