In today’s briefing:
- YAGEO and Shibaura Still Fighting, Minebea Likely to Bid Up, The Question Is Another YAGEO Overbid
- Hongkong Land (HKL SP) Recycles Nine Floors Of One Exchange Square
- HLB Merger Arb Setup: How Cancellation Risk Could Lead to Extra Profits
- SK Telecom’s Block Deal Sale of 10.8 Million Shares of Kakao Corp
- Devyani International’s Acquisition of Sky Gate Hospitality: A Strategic Move for Accelerated Growth
- Building the Arsenal: Indra’s Possible Merger with EM&E
YAGEO and Shibaura Still Fighting, Minebea Likely to Bid Up, The Question Is Another YAGEO Overbid
- Yageo Corporation (2327 TT) bid ¥4,300 for Shibaura Electronics (6957 JP). Minebea Mitsumi (6479 JP) overbid at ¥4,500. YAGEO overbid Minebea at ¥5,400 on 17 April (expected to start 7-May)
- Apparently, YAGEO was a bit upset by the public comments by Shibaura regarding custom/mass-market/online different ways of doing business. YAGEO responded with receipts. Shibaura will respond later.
- On the 22nd, Minebea noted they would delay their intended 23rd start date. Now they have more irrevocables. In the end, I expect YAGEO’s, not Minebea’s, top price defines this.
Hongkong Land (HKL SP) Recycles Nine Floors Of One Exchange Square
- In a rare move, Jardine Matheson (JM SP)-controlled Hongkong Land (HKL SP) has sold nine floors (147,025 square feet) of One Exchange Square to HKEX (388 HK) for HK$6.3bn (US$810mn).
- HKL plans to use the proceeds to provide enhancements to the property sold, the reduction of net debt; and for a share buyback. Shares are up 9% as I type.
- HKL is focussed on divesting US$4bn to US$6bn of its balance sheet assets in the next three years. HKL’s CEO Michael Smith: “Recycling capital is our top priority right now“.
HLB Merger Arb Setup: How Cancellation Risk Could Lead to Extra Profits
- We go long on HLB LS, short on HLB Inc, and close the short once HLB LS converts. If the deal falls through, there’s potential for extra profits.
- The view that the merger’s worse for HLB LS is gaining support, making it likely the spread could go negative, though there’s risk, the chances are pretty high.
- The 4% spread is the floor for arb profit, and cancellation risk could add extra gains. This angle deserves serious consideration right now.
SK Telecom’s Block Deal Sale of 10.8 Million Shares of Kakao Corp
- Prior to market open on 25 April, SK Telecom announced that it plans to sell 10.8 million shares of Kakao, representing 2.4% of outstanding shares in a block deal sale.
- The sale of Kakao Corp shares and using the proceeds to further acquire shares in SK Broadband and invest in AI businesses is a solid move by SK Telecom.
- We believe that this trading down gap of Kakao Corp is likely to be covered soon in the next several days/weeks so it represents a short term buying opportunity.
Devyani International’s Acquisition of Sky Gate Hospitality: A Strategic Move for Accelerated Growth
- Devyani International acquired an Indian QSR brand, Sky Gate, marking its entry into Biryani.
- The acquisition deal is valued at INR 4.19 billion, translating to a relatively low 1.9x FY25 EV/Sales. This attractive valuation provides DIL with an entry into a high-TAM segment.
- No single brand has surpassed INR 3 bn in revenue due to regional taste differences, difficulty in standardising quality, and difficulty in achieving profitability due to high operational costs
Building the Arsenal: Indra’s Possible Merger with EM&E
- Indra’s potential merger with Escribano aims to strengthen its industrial base for future European defense programs, but governance concerns and shareholder dilution risks are creating significant market uncertainty.
- The transaction’s structure is critical: a pure share swap would preserve Indra’s balance sheet health, while a heavy cash component could raise leverage dangerously, approaching 3.4x net debt/EBITDA.
- Event-Driven investors should de-risk ahead of the April 30 board meeting, monitor deal terms closely, and prepare to pivot based on the merger’s financing structure, governance safeguards, and strategic fit.
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