In today’s briefing:
- FTSE All-World/All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry
- Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done
- Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase
- North Holdings 3/Caverion: Agreed Takeout
FTSE All-World/All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry
- We see 4 potential adds, 1 close add and 1 potential delete for the FTSE All-World/All-Cap indices at the upcoming QIR that will be implemented at close on 16 December.
- The largest impact will be the passive selling on Golden Agri Resources (GGR SP) due to a nationality change from Singapore to Ineligible.
- There is a big lock-up expiry on Delhivery where US$2.89bn of shares will be free for trading on 21 November – that is significantly larger than the potential passive buying.
Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done
- On Friday, Sumitomo Corp (8053 JP) announced a bid for equity affiliate (they own 27+% but Nippon Steel 15%, top 2 is 40+%) Sumitomo Precision Products (6355 JP).
- It’s a one-year high and 4-year high price, and 8x average 10yr EV/EBITDA but 4.6x 2024e EBITDA from the Mid Term Plan. And way below a 10-year high.
- This gets done if Retail agrees to the tender. If 50% put in, that should do it. So I expect this gets done.
Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads Pendal Group (PDL AU), Alliance Aviation Services (AQZ AU), Genex Power Ltd (GNX AU), 21Vianet Group (VNET US), 111 Inc (YI US), Golden Energy & Resources (GER SP).
- Lowest spreads – Tyro Payments (TYR AU),Perpetual Ltd (PPT AU), OZ Minerals Ltd (OZL AU), Nitro Software Ltd (NTO AU), China Vast Industrial Urban Development (6166 HK), Moya Holdings.
North Holdings 3/Caverion: Agreed Takeout
- The main shareholders of Caverion (27.08% in aggregate) are joining Bain Capital in a voluntary recommended public €7/share cash tender offer that seems adequate in the short term.
- Nevertheless the offer price fails to account for the potential of Caverion, in my view. My fair value estimate (comps-based) is €9.01/share, thus an offer sweetening could be likely.
- I consider it unlikely that the offer will fail, and although the current spread is not so attractive on a rate of return basis, I would be long the shares.
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