In today’s briefing:
- Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?
- JD.com (9618 HK): Index Implications of Walmart Placement
- GAPack (468 HK)’s Co-Founders (Almost) Walk The Walk
- Couche-Tard Bid for 7&I (3382) – FEFTA and Economic Security
- TCM (570 HK): Profit Warning Is No Biggie
- S&P/ASX Index Rebalance Preview: Review Period Nearly Done; Big Impact Changes
- Quiddity Leaderboard S&P500 Sep 24 Rebal: Palantir, Apollo, Workday Racing for Mega$ Flows
- NPS Will Vote Against the Merger Between SK Innovation and SK E&S
- Insulet Launches a Patent Lawsuit Against Eoflow in Europe
- A Tender Offer to Purchase a 17.5% Stake in Hanwha Galleria by Kim Dong-Sun
Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?
- In its last update, Alibaba Group announced that the company was preparing for its primary listing in Hong Kong and the process was expected to complete by the end August.
- The Board meets on 14 August to approve results for the three months ending June. Could there be an announcement on the dual primary listing too?
- Mainland Chinese own between 3.5%-15.5% of companies that converted from Secondary to Dual-Primary in the last few years. Similar buying in Alibaba could take the stock higher from here.
JD.com (9618 HK): Index Implications of Walmart Placement
- Media reports indicate that Walmart (WMT US) is looking to sell 144.5m shares of JD.com (JD US) to raise up to US$3.74bn. That would be substantially all of its stake.
- There will be passive buying from global index trackers at the time of settlement of the placement shares and could absorb around 12% of the placement shares.
- There will be no passive buying from HSI, HSCEI, HSTECH and HSIII trackers in the short-term. An increase in CCASS holdings should result in passive buying in December.
GAPack (468 HK)’s Co-Founders (Almost) Walk The Walk
- To say Greatview Aseptic Packaging (468 HK)‘s management and Shandong Xinjufeng (301296 CH) (XJF) don’t get along is an understatement. GAPack has labelled XJF’s pre-conditional Offer hostile and unwelcome.
- Last night (6th August), co-founders Jeff Bi and Gang Hong tabled a non-binding Offer. No price was mentioned. Collectively they hold 14.72% of shares out compared to XJF’s 26.8%.
- A firm Offer (and price) would have been welcome, and this probably reflects on-going funding negotiations. But the announcement will give minorities pause if/when tendering into XJF’s Offer.
Couche-Tard Bid for 7&I (3382) – FEFTA and Economic Security
- The largest potential inbound cross-border M&A in years – for a national champion no less – gets a lot of press coverage.
- This morning, a Nikkei article noted Alimentation Couche-Tard (ATD CN) was likely to need “prior approval” from Japanese regulatory authorities for its takeover “the Nikkei has learned.”
- It wasn’t difficult for the Nikkei to learn that. METI publishes a FEFTA List. 7&i has been on it for years as Type II Designated Business, requiring prior approval.
TCM (570 HK): Profit Warning Is No Biggie
- China Traditional Chinese Medicine (570 HK) flagged a 60-70% drop in its 1H24E net profit versus 1H23, due to reduced sales/profit of TCM concentrate, bad debt provisions, and remedial taxes.
- MAC triggers? No – Sinopharm won’t exercise such right, even if one was ostensibly triggered. I’d be surprised if Sinopharm wasn’t fully aware of TCM’s underlying operations.
- Get involved on any dips today. Trading wide at a 11.7%/38.7% gross/annualised spread, assuming Dec-end payment.
S&P/ASX Index Rebalance Preview: Review Period Nearly Done; Big Impact Changes
- With 2 trading days left in the review period, there could be 30 adds/deletes across the S&P/ASX family of indices in September.
- Passive trackers will need to trade a lot of stock in the forecast changes, with the impact being especially large for the changes to the S&P/ASX 200 and S&P/ASX 300.
- The forecast adds have hugely outperformed the forecast deletes. Borrow recall on the deletes and increased borrow availability on the adds could result in underperformance following announcement of the changes.
Quiddity Leaderboard S&P500 Sep 24 Rebal: Palantir, Apollo, Workday Racing for Mega$ Flows
- The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
- In this insight, we take a look at the upcoming constituent changes in the run up to the September 2024 index rebal event.
- We expect two regular changes in September 2024. There are also several live M&A events which could trigger intra-review index changes in the late-2024/early-2025.
NPS Will Vote Against the Merger Between SK Innovation and SK E&S
- NPS will vote against the merger between SK Innovation and SK E&S, mainly due to significant concerns about destroying shareholder value (especially for SK Innovation shareholders).
- Sustinvest also recommended that institutional investors vote against this merger, citing that the merger ratio between SK Innovation and SK E&S is disadvantageous to SK Innovation’s general shareholders.
- If NPS exercises its appraisal rights, this could put a knife in the wheel of the M&A merger between SK Innovation and SK E&S.
Insulet Launches a Patent Lawsuit Against Eoflow in Europe
- Eoflow announced Insulet had filed an injunction on 3 July against Eoflow and Menarini requesting a ban on the manufacture, sale, distribution, and use of EOPatch in 17 European countries.
- Given that Eoflow should have reported this event earlier, this is likely to result in further loss of confidence on Eoflow by many investors in the near term.
- If Eoflow is able to complete its rights offering (albeit lower amount than proposed), this could boost its chances to become a formidable competitor to Insulet on a global basis.
A Tender Offer to Purchase a 17.5% Stake in Hanwha Galleria by Kim Dong-Sun
- It was announced that a tender offer to purchase a 17.54% stake in Hanwha Galleria has been launched by Kim Dong-Sun (Vice President at Hanwha Galleria).
- Tender offer price is 1,600 won per share, which is 22.8% higher than the closing price on 22 August. Tender offer amount is 54.4 billion won.
- On 23 August, Hanwha Galleria’s share price is likely to rise close to the tender offer price as many investors believe the tender offer is likely to be successful.
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