In this briefing:
- China Three Gorges’ Rebuttable Presumption
- Severgroup Puts in a Cheeky Bid for Lenta – TPG and EBRD Bail
- Yinson Tenders a Lifeboat for Ezion
- DSV Improves Bid and Göhner Foundation and Panalpina Agree
- M&A: A Round-Up of Deals in March 2019
1. China Three Gorges’ Rebuttable Presumption
In my initial insight on China Power New Energy Development Co (735 HK, “CPNED”)‘s privatisation by China Power New Energy Limited (the Offeror) by way of a Scheme, I concluded China Three Gorges, CPNED’s largest shareholder with 27.10%, will likely be required to abstain at the Court Meeting as it is presumed to be a connected party to the Offeror as per the Takeovers Code.
But the announcement states that CTG has given an irrevocable undertaking to vote for the Scheme and to elect the share alternative.
It seems illogical to mention in the irrevocable CTG will vote for the Scheme when in actuality it cannot vote. So, which one is it?
The short answer is: CTG cannot currently vote.
But understanding this requires diving into the minutiae of Hong Kong’s Takeovers Code. So I do.
2. Severgroup Puts in a Cheeky Bid for Lenta – TPG and EBRD Bail
In the middle of last week, Russia’s largest chain of hypermarkets Lenta Ltd (LNTA LI) announced that it was aware that there were ongoing discussions between Luna (TPG’s holding entity, which owns 34.13% of Lenta’s capital) and Alexey Mordashov’s Severgroup, for Luna to sell its stake in Lenta to the Russian conglomerate. A day later, Lenta announced the company was aware of discussions between Severgroup and the EBRD (7.40% holder).
Reuters reported last night that Severgroup had reached an agreement to buy a 41.9% stake, excluding treasury shares, in Lenta from those two sellers, for a total of US$721mm, or US$18 per share or US$3.60 per GDR. That implies a price of US$1.75bn for the whole company.
Later last night, Lenta announced on its website (full press release here) a cash offer for all the shares had been proposed. The Offer has a pre-condition dealing with the above-mentioned transactions being approved by those who need to approve.
The Offer Price is an 8.11% premium to the last trade on 26 March – the undisturbed price, and a premium of 9.76% to the 6mo average price of US$3.28 for the GDRs.
There may be something interesting to do here.
3. Yinson Tenders a Lifeboat for Ezion
Long-suffering lifeboat market play Ezion Holdings (EZI SP) has received a bail-out from Malaysia’s Yinson Holdings (YNS MK).
Yinson’s proposal is two-fold:
- A conditional debt conversion agreement to capitalise all of the “relevant debt” of US$916mn via the allotment and issue of up to approximately 22,573,570,909 new ordinary shares of Ezion at an issue price of S$0.055/share (27.9% premium to last close).
- A conditional option agreement for the proposed grant by Ezion of 3,360,495,867 non-listed and transferable share options to Yinson at the exercise price of S$0.0605 per option Share.
This shareholder structure will take the following shape, with Yinson holding 85.9% of shares out after the conversion and 87.5% after both the conversion and the exercise of the share options.
Current | After | After Conversion | ||||
| Current shares out | 3,728 | 100% | 3,728 | 14% | 3,728 | 13% |
| Debt conversion | 0% | 22,574 | 86% | 22,574 | 76% | |
| Option shares | 0% | 0% | 3,360 | 11% | ||
| Total shares (mn) | 3,728 | 26,302 | 29,662 | |||
However … as per the more detailed Bursa announcement:
It is the intention of YEPL (wholly-owned sub of Yinson) to acquire up to US$916mn of the Relevant Debts for a consideration to be agreed with the Designated Lenders. Tentatively, YHB (Yinson) expected its cash outlay shall be in the region of USD200mn and some EHL (Ezion) Shares that will give YEPL a shareholding of not less than 70% in EHL at the point of the completion of the Proposed Debt conversion and Subscription. In any event, assuming all convertible securities of EHL are converted, YHB expects its eventual shareholding in EHL shall be a controlling stake of at least 51%.
Ezion is also in negotiation with the major secured lenders to restructure its existing debts which would result in the conversion of certain debts to redeemable convertible preferences shares to be issued by Ezion.
As this is effectively a hybrid takeover, there exist a number of conditions required to complete this proposal. Of importance is the waiver from the Securities Industry Council of Singapore for Yinson not to make a mandatory general offer for Ezion under Rule 14.1 of the Takeover Code, as the share subscription takes Yinson’s stake >30%.
Conditions of the Debt Conversion/Proposed Subscription and Share Options | |
| For the Debt Conversion & Subscription | |
| Conditions | Satisfactory due diligence by Yinson. |
| Waiver from SIC not to make a MGO. | |
| Independent shareholders of Ezion approving the whitewash waiver. Simple majority vote. | |
| The approval by Ezion shareholders for the allotment and issue of the subscription shares. Simple majority vote. | |
| Other | The long stop date is 6 months from the conditional debt conversion agreement (31 March 2019). |
| For the Share Options | |
| Conditions | The approval by Ezion shareholders for the option shares. Simple majority vote. |
| Other | The long stop date is 6 months from the conditional option agreement (31 March 2019). |
| The exercise period is five years from the issuance of the options. | |
| Gross proceeds will be S$203mn assuming full exercise. To be applied to business expansion or new business opportunities | |
| Inter-conditionality | The grant of options is conditional upon and shall take place simultaneously with the debt conversion and subscription |
On Ezion
Ezion develops, owns, and charters offshore assets to support offshore energy markets, via three key segments:
- Lifeboats/liftboats – these are self-propelled rigs involved in the production and maintenance of the O&G and windfarm industry. This segment accounted for 57.9% of revenue in FY18.
- Jack-up rigs – engaged in non-self propelled rigs involved in the production and maintenance of the O&G and windfarm industry. The segment accounted for 34.1% of revenue in FY18.
- And offshore support logistic services, accounting for 7.5% of revenue in FYT18.
Ezion is primarily Asian focused with revenue split between Singapore, India, and the rest of Asia as to 8%, 5.3% and 54%. The Middle East and Africa account for 15.6% and 15.2% respectively.
Fundamentals
US$mn | FY16 | FY17 | FY18 |
| Revenues | |||
| Liftboats | 127 | 96 | 69 |
| Jack-Up Rigs | 158 | 76 | 41 |
| Offshore Support Logistic Services | 33 | 20 | 9 |
| Others | 1 | 1 | 1 |
| Total Revenue | 318 | 193 | 119 |
| EBITDA | |||
| Liftboats | 77 | 68 | 21 |
| Jack-Up Rigs | 112 | 60 | 16 |
| Offshore Support Logistic Services | 22 | 16 | (1) |
| Others | 1 | 1 | 1 |
| Total EBITDA | 212 | 144 | 37 |
| NPBT | |||
| Liftboats | 62 | (16) | (54) |
| Jack-Up Rigs | (54) | (745) | (297) |
| Offshore Support Logistic Services | (13) | (156) | (53) |
| Others | 1 | 1 | 7 |
| Unallocated Expenses | (24) | (82) | 94 |
| Total NPBT | (29) | (999) | (303) |
| Assets | |||
| Liftboats | 811 | 772 | 807 |
| Jack-Up Rigs | 1,382 | 556 | 226 |
| Offshore Support Logistic Services | 415 | 315 | 119 |
| Others | 79 | 81 | 32 |
| Unallocated Assets | 165 | 70 | 108 |
| Total assets | 2,851 | 1,794 | 1,291 |
| Total equity | 1,315 | 305 | (255) |
| Net debt | 1,282 | 1,358 | 1,358 |
- Revenue declined by US$125mn in FY17 due to a reduction in charter rates and delays in re-deployment of the Ezion’s liftboats due to working capital constraints. The loss before tax was exacerbated by impairment losses totalling US$897mn.
- Revenue declined by US$74mn in FY17 due to a drop in the utilisation rates of liftboats and jack-up rigs. FY18 also saw an increase in impairments loses of US$84.5mn, while loses in associate and jointly controlled entities increased to US$39mn in FY18 from US$16mn in FY17.
Effect on NTA from the conversion/options
Assuming the subscription and options were completed on 31 December 2018, the effects of the Ezion’s NTL/NTA per share would be as follows:
Before subscription | After subscription | |
(NTL)/NTA (US$mn) | (254.7) | 811.2 |
(NTL)/NTA per share (US$) | (0.0687) | 0.0274 |
Peer Comparisons
Trading Comps | Mkt Cap (SGDm) | PER | PBV | EV/EBITDA |
Yinson Holdings Berhad | 1,647 | 21.7x | 1.5x | 9.1x |
ASL Marine Holdings Ltd. | 33 | NM | 0.1x | 15.3x |
Dyna-Mac Holdings Limited | 105 | 69.6x | 1.0x | 10.5x |
Mermaid Maritime Public Company | 113 | NM | 0.3x | -10.3x |
Nam Cheong Limited | 57 | 0.1x | NM | 11.1x |
China Oilfield Services Limited | 7,230 | 1067.0x | 1.0x | 11.2x |
Aban Offshore Limited | 67 | NM | 17.7x | 27.2x |
Max | 7,230 | 1067.0x | 17.7x | 27.2x |
Median | 105 | 45.7x | 1.0x | 11.1x |
Min | 33 | 0.1x | 0.1x | -10.3x |
Mean | 1,322 | 289.6x | 3.6x | 10.6x |
Ezion Holdings Limited | Market Cap (SGDm) | PER | PBV | EV/EBITDA |
Current Price SGD 0.04 | 160 | NM | NM | -5.8x |
Substantial Shareholders of Ezion
Shares (mn) | % | |
Chan Fooi Peng | 184.7 | 5.0 |
Chew Thiam Peng (CEO) | 190.3 | 5.1 |
4. DSV Improves Bid and Göhner Foundation and Panalpina Agree
Late Sunday night Bloomberg reported that DSV A/S (DSV DC) had sweetened its offer for Panalpina Welttransport Holding (PWTN SW) from the previous CHF 180/share and that the new bid had won the support of the Foundation.
This morning quite early we have an agreed deal and what had seemed a tough deal now seems easy.
According to a press release a short while ago.
DSV and Panalpina have reached an agreement on the terms and conditions of a combination by way of a Public Exchange Offer to all Panalpina shareholders. The board of directors of Panalpina recommends that Panalpina shareholders accept the Public Exchange Offer. The Public Exchange Offer already has the support of shareholders representing 69.9% of the registered shares of Panalpina, who have irrevocably agreed to tender their shares into the Public Exchange Offer. This includes Panalpina’s largest shareholder, Ernst Göhner Foundation and Cevian and Artisan*.
The deal is 2.375 shares of DSV for every share of Panalpina, which as of Friday’s close had a value of CHF 195.80/share which is a 43% premium to the CHF 137/share where Panalpina was trading the day before DSV’s first bid.
Exact terms of the Exchange Offer have not been disclosed but there will be an 80% acceptance condition (including the 69.9% who have already irrevocably agreed to accept the Offer), and other conditions will include “receipt of all necessary regulatory approvals, approval of a capital increase at an extraordinary general meeting in DSV, approval of a listing prospectus and admittance of the new DSV shares for trading at NASDAQ Copenhagen and effectiveness of a US Registration Statement.” (DSV press release)
In light of the Exchange Offer, the Ernst Göhner Foundation asked the board of Panalpina to postpone the April 5th EGM which was set to decide on the one-share one-vote.
5. M&A: A Round-Up of Deals in March 2019
For the month of March, ten new deals were discussed on Smartkarma with an overall deal size of US$22.3bn.
Clicking on the company name in the table below will take you to the entity page where you can see insight(s) written by Smartkarma contributors.
New Deals | Industry | Deal Size (US$m) | Deal Type | Premium |
Australia | ||||
Real Estate Development | 197 | Scheme | 12.0% | |
Research & Consulting | 100 | Scheme | 22.7% | |
Diversified Metals & Mining | 1,063 | Scheme | 44.7% | |
Hong Kong | ||||
Construction & Engineering | 1,300 | MGO | 14.5% | |
Clean Energy | 596 | Scheme | 41.9% | |
India | ||||
IT Consulting and Other Services | 754 | Open Offer | 4.0% | |
Vietnam | ||||
Pharmaceuticals | 146 | Off-Mkt | 3.5% | |
Europe | ||||
Interactive Media and Services | 5,249 | Off-Mkt | 10.9% | |
US | ||||
Semiconductor Equipment | 5,900 | Off-Mkt | 15.9% | |
Construction Machinery | 7,040 | Merger | 13.0% |
Blackstone and Hellman & Friedman made a proposal for Scout24 AG (G24 GR) in mid-January – which was rejected by the board – and subsequently returned with an improved offer which was then supported. The deal was first written on after the Tender Offer was officially launched in March.
The average premium to last close for the new deals announced in March was 18%, while the average for the first quarter of 2019 is 33%.
Brief Summary of News in March of Arb Situations On Smartkarma’s Radar
(again, click on the company names to take to you to the insights and/or discussion posts)
Australia | Comments (with links) |
No March Updates | |
On 19th March 2019, Healthscope announced that they had received FIRB approval for the scheme. The Offer docs have been pushed out to the 24 April so as to incorporate the Scheme and Takeover Documents into a single integrated booklet | |
On 4th March 2019, Manikay Partners LLC and its affiliates filed a notice that they had increased their holding in MYOB to 9.99%, and submitted a letter that asserted that the board should reconsider their recommendation of the KKR offer. However, on 6th March MYOB’s Board, mentioned in their announcement, that they continue to recommend the offer. MYOB’s shareholders will be able to vote for the proposal at the Scheme meeting which will be held on 17th April 2019, as set out in the announcement on 14th March 2019. A Scheme Update on 20th March, stated that the all cash consideration of A$3.40/share, was KKR’s best and final offer. | |
On 21st March 2019, Navitas entered a Board Recommended Scheme Implementation Deed with BGH. | |
On 8th March 2019, a letter was released to Ruralco’s shareholders that confirmed the details of the offer, and that the Board of Ruralco unanimously recommends the Scheme. | |
On 13th March 2019, the Board of Sigma announced that following their review of the proposal submitted by API, they conclude that it is not in the best interest of the shareholders. |
China | Comments |
On 18th March 2019, an announcement was released stating that Sichuan Swellfun has engaged Citic Securities as their advisor for Diageo’s offer. |
Hong Kong | Comments (with links) |
The Composite Document for the deal was dispatched on 20th March 2019. | |
It was announced on 5th March 2019, that permission has been granted to extend the time for the despatch of the Composite Document to 2nd April 2019, in order for the offeror to consider the 2018 annual results of Xingfa. | |
No March Updates | |
The resolution to approve the Sheme was approved by the Shareholders at the Court Meeting held on 21st March 2019. | |
No March Updates |
India | Comments (with links) |
No March Updates | |
No March Updates |
Japan | Comments (with links) |
Faurecia announced on 1st March 2019, that they were able to successfully complete their Tender Offer for Clarion. 95.28% of Clarion shareholders had tendered their shares. | |
On 8th March 2019, Descente released an opinion on the Tender offer, which said they continue to oppose the offer. The results of the tender offer was released on 15th March 2019 – Itochu planned on buying 7.21million shares out of the 75.37mm shares which bear voting rights (as of the commencement of the Tender), and 15,115,148 shares were tendered, which led to a pro-ration rate of 47.7%. The president will be replaced with the president of Itochu Textile. | |
On 19th March 2019, SCSK Corp announced that they had managed to acquire 1.947mm shares of Jiec Co Ltd in the tender offer taking them to 97.90%. | |
No March Updates | |
On 8th March 2019, an announcement was released, which stated that the offer was bumped up to ¥ 700/share, from ¥ 610/share, and the offer close date was extended to 25th March 2019, with the commencement of settlement being 29th March 2019. On 18th March, Yoshiaki Murakami-associated companies announced they had raised their stake above 10%, at a price higher than the ¥ 700/share final tender offer price. On 20th March, Minami Aoyama Fudosan – another Murakami-associated company – announced a Tender Offer for a minimum of 50.00% of Kosaido (and up to 100% of the shares out) at ¥750/share (and announced they had bought more bringing their stake to 13.47% in total). On 25th March 2019, Bain extended their tender offer from 25th March to April 8th. | |
ND Software published an announcement on 8th March 2019, that the base date for shareholders eligible to vote at the EGM, will be the 31st March 2019. | |
A Reuters article on 3rd March 2019, mentioned that Tencent, Kakao Corp, Bain Capital, MBK Partners, and an unidentified private equity firm are the five bidders that have been shortlisted by Nexon, as reported by the Korea Economic Daily newspaper. Netmarble Corp was not offered a position among the bidders, but is said to have formed a consortium MBK Partners. | |
On 8th March 2019, Pioneer announced that they had completed the payment for issuance of new shares through a third party allotment. | |
No March Updates | |
SCSK Corp announced on 19th March 2019, that they gained 94.76% of the shares of Veriserve Corp in the tender, which will mean an immediate push to squeeze out minorities. |
New Zealand | Comments (with links) |
On 7th March 2019, Trade Me announced that the high court had approved the special meeting for shareholders to vote on the Apax proposal. The Independent Advisers’ assessed a fair value between NZ$5.93 and NZ$6.39 per share, below Apax’s offer of NZ$6.45 per share. On 11th March the company announced that the special meeting for the shareholders to vote will be held on 3rd April 2019. The scheme booklet was released on the Trade Me website on 13th March 2019, which was ciculated among shareholders on 19th March. |
Singapore | Comments (with links) |
Ascendas-Singbridge Pte Ltd | No March Updates |
The offer closed on 15th March 2019, with 95.83% of the issued share capital of Courts Asia. The remaining shares will be acquired through a compulsory acquisition at the final offer price of S$0.205/share. It was also announced that the last day of trading of the stock would be 15th March 2019, with the stock being suspended from 18th March 2019. | |
On 6th March 2019, it was announced that the offeror had acquired 72.89% of the total number of shares, and held 92.20% of the shares of M1 Ltd, and that Konnectivity launched an offer to acquire the remaining shares not tendered in by 18th March 2019. On 18th March 2019 at the close of the offer they had managed to acquire an aggregate of 94.55% of shares. | |
On 18th March 2019, it was announced that the scheme meeting will be held on 2nd April 2019. |
South Korea | Comments (with links) |
No March Update |
Taiwan | Comments (with links) |
On 6th March 2019, Hitachi announced that they had decided to extend the period of the public tender offer (originally from January 17, 2019 to March 7, 2019) to April 22, 2019. There was news that there would be an EGM (called by a dissenting director) on April 18th designed to renew the board of directors. On 22nd March 2019, Hitachi had amended the Public Purchase statement by raising the Purchase Price to NT$65/share. |
Thailand | Comments (with links) |
Delta published a document which included amendments to the Conditional Voluntary Tender Offer on 1st March 2019, which confirmed that the Bt 71.0/share, will be the final offer, and that the offer is expected to close on 1st April 2019. The independent financial advisers opinion was published on 14th March 2019, recommending the offer. 9.12% of shares out have tendered into Delta’s Offer, bringing the Offeror’s total holding to 30.05% as at 26 March. | |
The purchase price of the offer was adjusted to Bt91.9906/share, from Bt94.892/share, according to the announcement released on 11th March 2019. | |
No March Updates | |
No March Updates |
UK | Comments (with links) |
The scheme document was published on the 8th March 2019. | |
The Mastercard offer for Earthport lapsed on 8th March 2019, as the acceptance condition was not satisfied. On 13th March 2019 Visa’s offer had been extended to 30th April 2019. As at 12th March 2019 Visa had 41.02% of the issued ordinary share capital of Earthport, which counted towards satisfaction of the acceptance condition to the Offer. | |
On 8th March 2019, the Bidder announced that the Competition Commission of South Africa had granted unconditional approval for the acquisition, thus satisfying one of the conditions of the Scheme. |
Europe | Comments (with links) |
The final results of the Tender Offer, which closed on 7th March 2019, was released on 12th March 2019, according to which the offeror had managed to acquire 94.98% of all the shares. The offeror then opened a subsequent offer from 13th to 27th March in order to allow the remaining shareholders to tender in their shares. On 28th March 2019, the offeror announced that according to the preliminary results of the Subsequent Offer Period, the shares tendered represent approximately 3.13% of all the shares in Amer Sports. Together with the shares tendered during the Offer Period, the total shares acquired represent approximately 98.10% of all the shares. The consideration for the shares tendered during the Subsequent Offer Period, will be paid on or about 2nd April 2019. | |
On 4th March 2019, Nasdaq raised their offer to NOK 158/share (from NOK 152/share) to match the Euronext offer, reduced the minimum acceptance requirement to at least two-thirds of the shares of Oslo Børs (from more than 90%), and extended the offer period expiry to 29th March 2019 (from 4th March 2019), as well as the drop dead date to the date which is the later of: (i) March 4, 2020; and (ii) the date which is sixty days after the Euronext Offer lapses, closes or is withdrawn. It was also announced that shareholders representing more than 1/3 if the shares in Oslo Børs have reaffirmed their support for Nasdaq’s offer. | |
On 14th March 2019, the provisional interim results of the tender offer was released. It stated that 78.69% of the CEVA Shares to which the Tender Offer relates were tendered in, which results in CMA CGA holding 89.47% of share capital. A subsequent offer was made to acquire the remaining shares, running from 20th March to 2nd April 2019. | |
On 5th March 2019, Panalpina announced that an extraordinary general meeting will be held on 5th April 2019 to vote on a “one share one vote” scheme to replace the current cap on holdings over 5%. All major shareholders who would see their voting rights increase have come out against it because they want to see the Ernst Gohner Foundation have their voting rights come down. ISS and Glass Lewis have both come out against the proposal. A couple of minor European proxy solicitors and agents have come out in favor. Late Sunday night it was reported by Bloomberg that DSV had improved its offer once again and that the Foundation had agreed to the sweetened bid of 2.375 DSV shares per Panalpina share, worth CHF 195.8 |
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