In this briefing:
- Beleaguered Panalpina Gets An Unsolicited Takeover Offer
- Hitachi Tender for Yungtay Engineering Launches
- Softbank – A Sizeable and Tactical Tender?
- StubWorld: CK Infra/Power Assets, Amorepacific, JCNC
- Early Investors Say “Xiaomi The Money” Post LockUp Expiry
1. Beleaguered Panalpina Gets An Unsolicited Takeover Offer
After investors lashed out at Panalpina Welttransport Holding (PWTN SW)‘s board late last year (after years of griping by some of the top holders), forcing the main shareholder to support the installation of a new chairman of the board, management may have thought they had some breathing room.
They did not.
Rival Kuehne + Nagel International A (KNIN VX) quickly (a couple of days later) showed interest in friendly negotations via the press, and Panalpina responded in the press that it wanted to stay independent. Danish rival DSV A/S (DSV DC) had shown interest before, then had gone after Ceva Logistics AG (CEVA SW) as discussed by David Blennerhassett in CEVA’s Days Of Independence Appear Numbered when the CMA CGM deal came out.
Now DSV has lobbed in a bid for the company.
The New News
On January 16th Panalpina Welttransport announced that it had received an unsolicited, non-binding proposal from DSV A/S (DSV DC) to acquire the company at a price of CHF 170 per share, consisting of 1.58 DSV shares and CHF 55 in cash for each Panalpina share.
The offer comes at a premium of 24% to Panalpina’s closing share price of CHF 137.5 as of 11 January 2019 and 31% to the 60-day VWAP of CHF 129.5 as of 11 January 2019.
Following the announcement, Panalpina’s shares surged above the terms of the offer implying that the market was anticipating a higher bid from DSV or one of its competitors.
DSV claimed in its announcement that the “combination of DSV and Panalpina would create a leading global transport and logistics company with significant growth opportunities and potential for value creation” and that the structure of the offer will allow Panalpina’s shareholders to participate in the benefits of the combination.”
They also stated that “the combined business would generate expected revenues of more than DKK 110bn and EBITDA of more than DKK 7bn on a pro-forma 2018 basis (excluding any synergy benefits).”
DSV’s approach to Panalpina comes just months after it failed in an attempt to buy Switzerland’s Ceva Logistics AG (CEVA SW). Given the fragmented nature of the industry, DSV sees scale as a clear competitive advantage in the logistics market as operational leverage and purchasing power increase with rising freight volumes. As a result, M&A is currently an integral part of their strategy.
Media reports suggested that Switzerland’s Kuehne & Nagel was also rumored to be considering an offer for Panalpina.
Panalpina’s response is “According to its fiduciary duties, the Board of Directors of Panalpina is reviewing the proposal in conjunction with its professional advisers.”
Amid Panalpina’s struggles in ocean freight, IT system delays and below-average growth, activist investor Cevian Capital, which owns 12.3% of Panalpina has publicly urged Panalpina to be open for a takeover.
Panalpina’s largest shareholder, Ernst Goehner Foundation, owns a stake of approximately 46% and any deal will depend significantly on its approval.
Given the fragmented nature of the industry, DSV sees scale as a clear competitive advantage in the logistics market as operational leverage and purchasing power increase with rising freight volumes. As a result, M&A is currently an integral part of their strategy.
This is an interesting situation. The question is whether it gets interestinger.
2. Hitachi Tender for Yungtay Engineering Launches
Hitachi Ltd (6501 JP)announced today after the close that it had received approvals from the relevant government organs for its proposed Tender Offer for Yungtay Engineering (1507 TT) and that the Tender Offer would be launched through Hitachi Elevator Taiwan Co. Ltd at TWD 60/share starting tomorrow. The statement filed by Yungtay on the TWSE website is linked here.
The Tender Offer will go through March 7th 2019 with the target of reaching 100% ownership. Son of the founder, former CEO, and Honorary Chairman Hsu Tso-Li (Chou-Li) of Yungtay has agreed to tender his 4.27% holding. The main difference is a minimum threshold for success of reaching just over one-third of the shares outstanding, with a minimum to buy of 88,504,328 shares (21.66%, including the 4.27% to be tendered by Hsu Tso-Li).
This one detail is different from the original announcement in October, which had set a minimum of 50.1% holding after the tender.
The other details of the Tender Offer are the same as described in Going Up! Hitachi Tender for Yungtay Engineering (1507 TT) from when the deal was announced last October.
Since the announcement of a deal at a 22% premium, the stock has risen gently from about TWD 56 to just below the TWD 60 Tender Offer price in ever-decreasing volume.
There has been little to no news on the stock regarding the deal in English, and only limited news in Chinese since the announcement of the deal.
The price evolution makes it look like a pretty straightforward deal. The lowered threshold for success obviously increases the likelihood of success. Weaker markets may also contribute.
But there is a reason why the threshold was lowered.
3. Softbank – A Sizeable and Tactical Tender?
Post the close of market, Softbank Group (9984 JP) announced a $750mn USD tender offer through an unmodified Dutch auction to purchase a portion of its outstanding USD and EUR senior notes. This could be an interesting deal from a timing perspective and could portend action for the equity – more details below.
4. StubWorld: CK Infra/Power Assets, Amorepacific, JCNC
This week in StubWorld …
- What’s up with Ck Infrastructure Holdings (1038 HK) reducing its stake in Power Assets Holdings (6 HK)?
- Trading around its lowest implied stub inside the past five years, improving sentiment toward cosmetic stocks should support an Amorepacific Group (002790 KS) setup.
Preceding my comments on CKI/PAH, Amorepacific and JCNC 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 as a % – of at least 20%.
5. Early Investors Say “Xiaomi The Money” Post LockUp Expiry
Xiaomi Corp (1810 HK) is likely to break HK$10 this morning again after a placement equal to about 1% of shares outstanding was proposed to buyers last night at a sharp discount to the close. This insight attempts to nail down the shape and size of the ongoing overhang.
After the HK Stock Exchange announced in late April 2018 that it would permit companies with Weighted Voting Rights (WVRs) to list on the HKEx, after sticking to the one-share one-vote principle for years (losing the Alibaba Group Holding (BABA US) listing to NASDAQ in the process), Xiaomi Corp (1810 HK) quickly raised its hand with the prospect of a US$10bn IPO and a US$100bn market cap – heady numbers even for a fast-growing company. This was quickly followed by the launch of the China Depositary Receipt program which saw a quick establishment and even quicker acceptance of a Xiaomi application, potentially setting up a situation where demand was pulled from HK to China.
Then investors got cold feet, and what was a $100bn valuation dropped to $90bn then $70bn. The CSRC also pushed back on the possible CDR issuance to such an extent that Xiaomi withdrew its application, and then pricing delivered a valuation of approximately US$50bn at a sharply reduced IPO price of HK$17/share.
Day1 saw a 6% fall on the open and the shares closed down 1%. After the Day 1 close, fast-track inclusion into the Hang Seng indices was a pleasant and somewhat unexpected surprise for IPO buyers and responded by rising almost 12% on Day 2 on sharply higher volume. MSCI did not follow suit (it had not been expected) but several days later on inclusion day, the stock was 25% higher than the IPO price. 10 days later the over-allotment option had been fully-exercised.
Xiaomi last year grew its ecosystem and its hardware base, but saw lower market share in China (13%) than in 2017 (14%) according to several sources, including Counterpoint Research quoted in the media. The company, which has targeted 50% of revenue from overseas is now just shy of that mark at 44% after ramping up sales in India, Europe, and MENA.
Global weakness in handsets on mobile tech led by Apple did not spare Xiaomi, but MOST notable was the sharp drop in the share price in December from HK$14.30-50 area to just below HK$13 at year end. The first day of the new year saw the shares fall 5.5%, and the next day the price fell another 3.6%. The shares fell a little more in the next few days but somewhat stabilised until the morning of the 8th.
Then the volume picked up. The lockup had expired.
In five days, the shares have traded 880mm shares, and that is before a large placement proposed after the close on 15th January.
“Xiaomi The Money” was the title of David Blennerhassett‘s initial pre-IPO insight ( Xiaomi The Money!), followed when details came out by Xiaomi the Ecosystem!
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