In this briefing:
- PT Indofoods’ Voluntary Offer for 74% Held Sub IFAR
- Japan Post Holdings and Japan Post Bank – Early Thoughts on a Choice of Two Trades
- MergerTalk:China Oceanwide/Genworth Financial (GNW US) – A Friend In The Spread
- StubWorld: Amorepacific Is “Cheap”, Again; Kingboard Cleans House
- Hanjin Kal Short Idea: Current Situation & Trade Approach
1. PT Indofoods’ Voluntary Offer for 74% Held Sub IFAR
Indofood Agri Resources (IFAR SP) has announced PT Indofood Sukses Makmur Tbk, its controlling shareholder with 74.52%, has made a voluntary conditional cash offer of $0.28/share for all IFAR shares it does not own. The offer price, which is a 7.7% premium to last close, is not final. Any dividend declared will reduce the consideration under the proposal.
The Offer is conditional on PT Indofood holding 90% of shares out at the close of the offer. There is no other condition.
There is no requirement for a downstream offer for Salim Ivomas Pratama (SIMP IJ), 73.46% held by IFAR.
IFAR’s share price has increased 27% this month – evidently, there was some news leakage ahead of the announcement – positioning its discount to NAV at ~50%, around its narrowest inside a year, but on a look-through basis, the Offer price backs out just 0.4x P/B.
The Offer price represents a premium of approximately 21.5%, 26.3%, 29.0% and 23.1% over the VWAP for 1M, 3M, 6M and 12M. IFAR traded above the Offer price as recent as May last year. One wonders if the consideration is sufficient to achieve the 90% condition.
2. Japan Post Holdings and Japan Post Bank – Early Thoughts on a Choice of Two Trades
Post market close on 9th of April, as per media reports, the Japanese government said that it plans to sell another 1.06bn share of Japan Post Holdings (6178 JP) (JPH). The government aims to do so as soon as Sep 2019. The sale, at around US$12bn, would amount to 23.5% of the company and nearly 41% of the government’s current shareholding. It would mark the second sell down by the government since JPH listed in 2015. Post the news release, JPH shares closed down 3% on 10th of April. They are now trading below the IPO price, below the last placement price and just off their all-time lows.
The postal service privatization act seems to be in full swing, with JPH about to enter its third round of selling and Japan Post Insurance (7181 JP) (JPI) in the midst of its first post IPO sell down. However, Japan Post Bank (7182 JP) (JPB) has yet to see a sell down even though the recent deposit ceiling revision required JPH to reduce its holding in JPB. Were JPH to sell some of its JPB stake ahead of the government sale of JPH, it could mitigate a large part of its own placement using the cash that it generates from JPI and possible JPB stake sale to buyback some stock. Thus, there is a possibility that JPB placement might come before JPH’s next placement.
For people interested in reading more about the history and background, I’ve covered the IPO and JPH sell down in the below series of insights:
- All three IPOs: When the bank is cheap and holdco discount makes the mothership cheaper, then who needs insurance?
- JPH IPO: Final call to board the mothership. They don’t come much cheaper than this
- JPH Placement: Japan Post Holdings Placement – Similar Reasons, Similar Price Will Probably Yield Similar Returns
- JPI IPO: Three’s a crowd – A minnow amongst giants risks getting lost in the chatter
- JPI Placement: Japan Post Insurance Placement – 3x the IPO Size – Basics and Index Impact
- JPI Placement: Japan Post Insurance Placement – Performance of Other Big Deals Indicates a Need for Correction
- JPB IPO: Dividend yield looks enticing versus JGBs yield, while risks are similar
3. MergerTalk:China Oceanwide/Genworth Financial (GNW US) – A Friend In The Spread
At AlphaSituations, we look for unusual spreads in announced US M&A deals of >$400MN in size with the intention of identifying and highlighting misunderstood and/or under the radar risk arb opportunities. In our current list of unusual spreads, the most compelling relates to the China Oceanwide/Genworth Financial (GNW US) transaction which was announced more than two years ago. The merger spread currently stands at 40%. Below, we explain why we are confident that this deal will move to completion giving the arbs an opportunity to profit substantially.
Unusual Merger Spreads (As at April 9, 2019)
M&A Situation | Spread | Expected Close | Comment |
CO/GNW | 40% | Apr-19 | Still waiting Canada, China SAFE, FINRA approvals/Skepticism prevails over deal completion |
TMUS/S | 27% | Jul-19 | Potential antitrust complications/Extended review period |
FMF/STC | 14% | Jun-19 | Regulatory/Pricing Adjustment Risk |
4Q 2016-1Q 2019 Live US M&A Announced Deals (>$400 MN) & Spreads
Acquirer | Target | Sector | Date Announced | Transaction Type | Expected Close | Offer Price | Target Firm Price 4/9/2019 | Spread |
4Q-2016 | ||||||||
China Oceanwide (China) | GNW | Financial – LTC,Life Insurance/Mortgage Insurance | 23-Oct-16 | Cash | Dec-18 | $5.43 | $3.88 | 39.9% |
1Q-2018 | ||||||||
SJW | CTWS | Water Utility | 15-Mar-18 | Stock | Dec-18 | $72.09 | $62.85 | 14.7% |
SJW | CTWS | Water Utility | 6-Aug-18 | Cash (OfferRevised) | Jun-19 | $70.00 | $69.60 | 0.6% |
FNF | STC | Insurance | 19-Mar-18 | Cash/Stock | Jun-19 | $49.09 | $43.07 | 14.0% |
2Q-2018 | ||||||||
Teamsport Parent | EHIC | Car Rental/Leasing Services | 6-Apr-18 | Cash | N/A | $13.50 | $10.56 | 27.8% |
Teamsport Parent | EHIC | Car Rental/Leasing Services | 19-Feb-19 | Cash | Apr-19 | $12.25 | $12.21 | 0.3% |
TMUS | S | Wireless Communications Services | 29-Apr-18 | Stock | Jul-19 | $7.32 | $5.78 | 26.7% |
Knauf (Germany) | USG | Building Materials | 11-Jun-18 | Cash | Apr-19 | $44.00 | $43.37 | 1.5% |
3Q-2018 | ||||||||
Amcor (Australia) | BMS | Packaging | 6-Aug-18 | Stock | Jun-19 | $56.08 | $55.15 | 1.7% |
HIG | NAVG | P&C Insurance | 22-Aug-18 | Cash | Jun-19 | $70.00 | $69.93 | 0.1% |
4Q-2018 | ||||||||
ESV | RDC | Oil Drillers | 8-Oct-18 | Stock | Jun-19 | $11.10 | $11.08 | 0.1% |
HRS | LLL | Aerospace & Defense | 14-Oct-18 | Stock | Jun-19 | $211.71 | $210.55 | 0.5% |
Oncor Electric | HIFR | Utility REIT | 18-Oct-18 | Cash | Jun-19 | $21.00 | $21.04 | -0.2% |
IBM | RHT | Technology- Software | 28-Oct-18 | Cash | Dec-19 | $190.00 | $183.10 | 3.8% |
ILMN | PACB | Healthcare-Diagnostics | 1-Nov-18 | Cash | Jun-19 | $8.00 | $7.34 | 9.0% |
IIVI | FNSR | Communication Equipment | 9-Nov-18 | Cash/Stock | Jun-19 | $24.42 | $24.01 | 1.7% |
NXTR | TRCO | TV Broadcaster | 3-Dec-18 | Cash | Sep-19 | $46.50 | $46.17 | 0.7% |
Siris Capital/Evergreen Coast Capital (Elliott) | TVPT | Leisure | 10-Dec-18 | Cash | Jun-19 | $15.75 | $15.70 | 0.3% |
LVMH | BEL | Lodging | 14-Dec-18 | Cash | Jun-19 | $25.00 | $24.95 | 0.2% |
ABCB | LION | Regional Banks | 17-Dec-18 | Stock | Jun-19 | $28.08 | $28.01 | 0.2% |
1Q-2019 | ||||||||
BMY | CELG | Biopharmaceuticals | 3-Jan-19 | Cash/Stock | Sep-19 | $96.03 | $94.24 | 1.9% |
DXC | LXFT | Technology-Software | 7-Jan-19 | Cash | Jun-19 | $59.00 | $58.75 | 0.4% |
NEM | GG | Gold Mining | 14-Jan-19 | Stock | Jun-19 | $11.96 | $11.68 | 2.4% |
FISV | FDC | Business Services | 16-Jan-19 | Stock | Dec-19 | $26.77 | $26.20 | 2.2% |
CHFC | TCF | Regional Banks | 28-Jan-19 | Stock | Oct-19 | $21.86 | $21.66 | 0.9% |
Hellman & Friedman | ULTI | Software Infrastructure | 4-Feb-19 | Cash | Jun-19 | $331.50 | $330.21 | 0.4% |
SXC | SXCP | Coal MLP | 5-Feb-19 | Stock | Jul-19 | $12.52 | $13.00 | -3.7% |
BBT | STI | Regional Banks | 7-Feb-19 | Stock | Dec-19 | $62.16 | $61.20 | 1.6% |
Thomas Bravo | ELLI | Mortgage Software | 12-Feb-19 | Cash | Jul-19 | $99.00 | $98.87 | 0.1% |
Qlik | ATTU | Technology-Software Application | 21-Feb-19 | Cash | Jun-19 | $23.50 | $23.37 | 0.6% |
Roche | ONCE | Biotech | 25-Feb-19 | Cash | Jun-19 | $114.50 | $112.76 | 1.5% |
Ipsen | CMTA | Biotech | 25-Feb-19 | Cash | Jun-19 | $25.00 | $26.23 | -4.7% |
Platinum Equity | LABL | Business Services | 25-Feb-19 | Cash | Sep-19 | $50.00 | $50.00 | 0.0% |
BIIB | NITE | Biotech | 4-Mar-19 | Cash | Jun-19 | $25.50 | $25.36 | 0.6% |
NVDA | MLNX | Technology – Semiconductors | 11-Mar-19 | Cash | Dec-19 | $125.00 | $118.41 | 5.6% |
SNN | OSIR | Biotech | 12-Mar-19 | Cash | Jun-19 | $19.00 | $19.00 | 0.0% |
FIS | WP | Business Services | 18-Mar-19 | Cash/Stock | Dec-19 | $116.40 | $113.94 | 2.2% |
JLL | HFF | Commercial Real Estate Services | 19-Mar-19 | Cash/Stock | Sep-19 | $47.58 | $47.31 | 0.6% |
CUZ | TIER | Office REIT | 25-Mar-19 | Stock | Sep-19 | $28.55 | $28.27 | 1.0% |
CNC | WCG | Healthcare Plans | 27-Mar-19 | Cash/Stock | Jun-20 | $315.09 | $287.14 | 9.7% |
ON | QTNA | Technology – Semiconductors | 27-Mar-19 | Cash | Dec-19 | $24.50 | $24.14 | 1.5% |
ZF Friedrichshafen | WBC | Auto Parts | 28-Mar-19 | Cash | Mar-20 | $136.50 | $133.58 | 2.2% |
2Q-2019 | ||||||||
UGI | APU | Utility – Regulated Gas | 2-Apr-19 | Cash/Stock | Sep-19 | $34.17 | $35.42 | -3.5% |
Merck KGaA | VSM | Specialty Chemicals | 8-Apr-19 | Cash | Dec-19 | $53.00 | $51.82 | 2.3% |
Source: AlphaSituations
4. StubWorld: Amorepacific Is “Cheap”, Again; Kingboard Cleans House
This week in StubWorld …
- Amorepacific Group (002790 KS)‘s discount to NAV veers towards its one-year wide level, however newsflow, liquidity and financial performance side with Amorepacific Corp (090430 KS).
- Kingboard Laminates Holdings (1888 HK)‘s more reasonable tilt for Kingboard Copper Foil Hldgs (KCF SP) has minimal bearing on the group, but one wonders when Elec & Eltek Int (ELEC SP) will similarly be taken out.
Preceding my comments on Amorepacific, Kingboard and other stubs, are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.
5. Hanjin Kal Short Idea: Current Situation & Trade Approach
This post examines the current price pushing factors being laid on Hanjin Group holdco Hanjin Kal after the second generation owner’s sudden death. It then discusses the limitations of these price pushing factors.
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