In this briefing:
- The GER Weekly EVENTS Wrap: Anta/Amer, Trade Me, Hengan and API/Sigma
- API/Sigma Merger: Sigma Shareholders Need a Better Offer
- Historical TOPIX Inclusions: How Do They Do Around Inclusion Date?
- Small Potatoes Nikkei 225 Changes on Christmas Day
- Softbank Corp, Takeda, and Newton’s Three Laws of Motion
1. The GER Weekly EVENTS Wrap: Anta/Amer, Trade Me, Hengan and API/Sigma
Below is a recap of the key event-driven research produced by the Global Equity Research team. This week Arun develops a differentiated view on the deal between Anta Sports Products (2020 HK) and Amer Sports Oyj (AMEAS FH) which he thinks is worse for the former and better for the latter. In addition, we check the bump possibilities for Trade Me (TME AU) which we think is limited by valuation. Further, we find some validity in the short-seller case on Hengan Intl Group (1044 HK) and believe a bump is needed for Australian Pharma Industries (API AU) to close the deal on Sigma Healthcare (SIG AU)
The rest of our event-driven research can be found below
Best of luck for the new week – Arun, Venkat and Rickin
2. API/Sigma Merger: Sigma Shareholders Need a Better Offer
Australian Pharma Indus (API AU), a pharmaceutical wholesaler, has lobbed an indicative cash-scrip proposal for its competitor, Sigma Healthcare (SIG AU). Under the proposal, Sigma shareholders would receive 0.31 API shares and A$0.23 cash for each Sigma share, implying $0.686 per Sigma share. If the proposal is successful, API/Sigma shareholders would own 63%/37% of the merged API-Sigma.
Unsurprisingly, API believes its proposal delivers fair value to both API and Sigma shareholders. However, our analysis suggests that Sigma shareholders need a bump for the bid to cross the finish line.
3. Historical TOPIX Inclusions: How Do They Do Around Inclusion Date?
There are seven stocks which were promoted/reassigned from TSE2, MOTHERS, and JASDAQ in November 2018 leading to the same seven stocks being included in TOPIX at the end of December.
A couple are decently largecap. Most are smaller.
A good question to ask when looking at these stocks might be… What Really Happens Around TOPIX Inclusions?
Having traded them for much of the last 20yrs, I had my hypotheses, and had done studies over the years for my own purposes, but I had not done a study recently. To check my personal hypotheses I tested 340+ TOPIX inclusions over the past five years.
There are patterns to the history of trading these events which are worth a look. Some of the patterns are reasonably interesting.
4. Small Potatoes Nikkei 225 Changes on Christmas Day
Specialty steel maker Nisshin Steel (5413 JP) is slated to merge with parent company Nippon Steel & Sumitomo Metal (5401 JP) as of January 1, 2019. For that, Nisshin Steel will be delisted on December 26th (i.e. the last day of trading is the 25th) and that means the Nikkei Inc was obliged to choose a replacement to take Nisshin Steel’s place in the Nikkei 225 and other indices.
On December 11th, the Nikkei Inc announced Itoham Yonekyu Holdings Inc (2296 JP) would take Nisshin’s place in the Nikkei 500 Index, announced that Japan Post Holdings (6178 JP) would join the Nikkei 300 Index, and announced that Dic Corp (4631 JP) would replace Nisshin Steel in the Nikkei Stock Average, better known as the Nikkei 225.
The only one which matters is the Nikkei 225 (the other two have tiny tracking), and this is not a huge index trade as both Nisshin Steel and DIC are deemed 500 yen par value stocks.
This is an event one could “miss.”
And it will happen on Christmas Day, after a long weekend for Japan traders.
5. Softbank Corp, Takeda, and Newton’s Three Laws of Motion
It has been a huge Q4 for Japan capital markets and banking, and the result is some fat fees for global investment bankers on the Takeda/Shire deal, and a Softbank Corp IPO which I’d be totally OK not owning. A result of this activity is the fun in index land.
And there is a lot of fun to be had.
Some of that fun has been described in Softbank Corp IPO – Dividends, Index Buying, and Offer Structure. More was described in the various insights in the Takeda/Shire series, most recently in Takeda/Shire VI: Now For The Real Fun.
But it is worth revisiting because it involves, over the five weeks starting just before the Christmas holidays, across the two deals, probably…
US$35 billion of index flows…
Timing and impact is discussed herein.
