Brief Event-Driven: Omron into the Nikkei 225, Pioneer Out and more

In this briefing:

1. Omron into the Nikkei 225, Pioneer Out
2. Another MGO For HKICIM As HNA Sells Stake Back To Blackstone

1. Omron into the Nikkei 225, Pioneer Out

Friday 8 March after the close, the Nikkei announced that because the third party share sale of Pioneer Corp (6773 JP)  had been completed, it would be deleted from the Nikkei 225 Average (and the Nikkei 500 Index). Omron Corp (6645 JP) will replace Pioneer in the Nikkei 225 Average, with a deemed par value of 50 yen per share.

The date for this index deletion and inclusion event is the 15th of March, as per the schedule of the February 19th announcement as to how the Pioneer event would be treated. 

This affords special sits/events followers a couple of different events to look at. 

2. Another MGO For HKICIM As HNA Sells Stake Back To Blackstone

Late Friday night, Hong Kong International Construction Investment Management Group Co., (687 HK) (“HKICIM”) announced HNA Finance had entered into a SPA in which Times Holdings, a Blackstone-controlled vehicle, had conditionally agreed to buy 69.54% of HKICIM’s issued shares for HK$3/share in an HK$7bn transaction. Should the SPA complete, Times will make a mandatory unconditional offer – also at $3.00/share (14.5% premium to last close) – for the remaining 30.46% of shares out.

This proposal arrives nearly three years after HNA bought a 66% in Tysan Holdings  – as HKICIM was previously known – from Blackstone for HK$4.53 per share, triggering an MGO.

This share sale underlines HNA Group’s ongoing strategy to ease its debt burden and align its core business focus towards aviation, not construction and property.

HKICIM made headlines in the past not just for its eye-watering property acquisitions at Kai Tak (up to HK$13.5k/sqft in March 2017), the former site of Hong Kong’s international airport; but that HNA was also oddly motivated to acquire these parcels of land at record breaking prices to “snatch land and pricing power from the city’s real estate cartel“.

HKICIM sold its last Kai Tak site to Wheelock & (20 HK) last month (for a loss of $740mn), leaving the company with an estimated net cash position of ~$6.0bn (using FY18 interim numbers) or ~$1.80/share, it’s foundation piling operations, a development site in Hong Kong and a residential and commercial property development project in Shenyang.

The closing of the SPA is subject to the satisfaction or waiver of various conditions. However, the short time frame (13 business days from this announcement) in which to secure, fulfill or waive these conditions suggest minimal deal risk.

This will trade tight to, if not through terms, with an anticipated completion late April. There will be no bump to the Offer. Times does not intend to avail itself to compulsory acquisition and intends to maintain HKICIM’s listing; while both Times and HKICIM will take appropriate steps to maintain a sufficient public float after the close of the Offer.