In this briefing:
- Embassy Office Parks REIT Trading Update – Lowest Volume Traded for Any Indian Listing Since 2018
- China’s New Semiconductor Thrust – Part 1: Why and How?
- PNB Metlife Pre-IPO Quick Take – Doesn’t Stack up Well Versus Its Larger Peers
- M&A: A Round-Up of Deals in March 2019
- Modi’s Vulnerable Domestic Flank
1. Embassy Office Parks REIT Trading Update – Lowest Volume Traded for Any Indian Listing Since 2018
Embassy Office Parks REIT (EOP IN) raised US$665m in its IPO, making it the first REIT listing for India.
In my previous insights I’ve covered the company background, its projected growth, compared it to its main listed peer and other yield assets in India:
- Embassy Office Parks REIT – Good Assets but Projections Might Be a Tad Too Bullish
- Embassy Office Parks REIT – Comparison with AIT and a Look at the Required Yield, and
- Embassy Office Parks REIT IPO – FY19 Revised Down, Yield Propped up by Zero Coupon Bond
In this insight, I will re-visit some of the deal dynamics, comment on share price drivers and provide a table with implied valuations.
2. China’s New Semiconductor Thrust – Part 1: Why and How?
China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities. This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.
In the first part of this series we will see what motivated China to enter the market and how it plans to do so.
3. PNB Metlife Pre-IPO Quick Take – Doesn’t Stack up Well Versus Its Larger Peers
Pnb Metlife (PNBM IN) plans to raise around US$350m in its IPO via a secondary sale. All the owners plan to sell a part of their stake in the IPO. The deal will likely be launched in 2H19.
While operations have been on the right track in terms of growth and product mix, the company still lags its larger peers on most key parameters. Thus, despite its large distribution network the company has failed to gain market share over the past few years.
In this insight, I’ll do a quick comparison of PNB Metlife versus its listed peers. You can find my prior IPO coverage for the sector at these links:
- ICICI Pru Life IPO Review – Cheaper than HDFC-Max Life but Still Might Be Only Fairly Valued
- SBI Life IPO – Faster, Better and Soon to Be Bigger but Expensive Nonetheless
- HDFC Standard Life IPO – Great Brand, Prudent Product Mix but Not Such a Great Price
4. 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 |
5. Modi’s Vulnerable Domestic Flank
The Indian prime minister’s announcement that India had destroyed a ‘low-earth orbit’ satellite with a missile, and thus joined an elite club, suggests that the ruling party is desperate to deflect the voters’ attention from the dire economic situation in India. This desperation points to a reality quite different from the view in the capital market, which appears to have discounted another term for Modi. In the wake of the Balakot ‘surgical strike’, this government wants to foreground its muscular national security policy to compensate for its inability to address the economic situation on employment and rural wages.
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