In today’s briefing:
- EOFLOW/Medtronic Tender: Proposed Preliminary Injunction Is a Problem
- Haitong Int’l Securities (665 HK): A 114% Offer Premium Should Do The Trick
- Aeon (8267) Partial Tender at ¥1610 for Inageya (8182) Aiming for Takeover Next Year
- NWS Holding (659 HK): Pre-Condition Satisfied
- Liontown Resources (LTR AU): Passive Selling on Lower Float
- Index Rebalance & ETF Flow Recap: Taiwan Div+, Nifty50, Cainiao IPO, Delta Electronics
- Merger Arb Mondays (09 Oct) – Eoflow, Haitong Intl, NWS, Boustead, Newcrest, Liontown, Hollysys
- ECM Weekly (8th Oct 2023) – Kokusai, J&T Global, Doosan, Cainiao, Ecopro, UBox, JSW Infra, Seibu
- HDFC Bank (HDFCB IN): Increasing Foreign Room & Decreasing ADR Premium
- Quiddity Leaderboard for Hang Seng Index Dec 23: High Conviction Names Have Decent Momentum Vs HSI
EOFLOW/Medtronic Tender: Proposed Preliminary Injunction Is a Problem
- The US judge has proposed a preliminary injunction which prevents Eoflow (294090 KS) from using Insulet Corp (PODD US)’s trade secrets and disclosing them to any third party.
- Eoflow and other defendants must respond by 5 October. The court hearing is set for 16 October. The potential trial is to be discussed in Spring of 2024.
- Medtronic Plc (MDT US) faces a difficult choice. If the injunction is enforced, Medtronic would acquire a ring-fenced asset exposed to potential court-determined liabilities.
Haitong Int’l Securities (665 HK): A 114% Offer Premium Should Do The Trick
- When Haitong International Securities Group (665 HK) was suspended on the 27 September, a punchy premium was expected if controlling shareholder Haitong Securities Co (600837 CH) was launching an Offer.
- And that is what we got: a $1.52/share Offer, by way of a Scheme, and a 114% premium to last close. Terms have been declared final.
- This is a pre-conditional Offer, requiring approvals from approvals from Shanghai SASAC, CSRC, NDRC, and the Shanghai branch of the PBOC.
Aeon (8267) Partial Tender at ¥1610 for Inageya (8182) Aiming for Takeover Next Year
- Aeon Co Ltd (8267 JP) and Inageya Co Ltd (8182 JP) agreed in late April to prepare a plan so Aeon would buy 51% this year.
- They would combine Inageya with 53+%-owned United Super Markets (3222 JP) aiming for a ¥1trln sales supermarket chain in Kanto. That is due end- calendar 2024.
- There is a partial offer to buy 33+% of Inageya at a small premium, and inadequate price before merging next year. Cross-holders determine pro-ration.
NWS Holding (659 HK): Pre-Condition Satisfied
- The pre-condition for the Nws Holdings (659 HK) voluntary general offer from the Cheng family is satisfied. The total offer (HK$9.15 + 2H dividend) is HK$9.46 per share.
- The key condition is (majority vote) approval by independent NWD shareholders. NWD’s share price decline and dependency on NWS earnings/cash flow support a NO vote.
- A reasonable offer which reduces NWD’s gearing, results in a special dividend and helps reduce the holding company discount supports the YES vote. We think that the YES vote prevails.
Liontown Resources (LTR AU): Passive Selling on Lower Float
- Liontown Resources (LTR AU) is trading near A$3/share, the level of Albemarle Corp (ALB US)‘s revised offer and where Hancock Prospecting has been buying recently.
- With Hancock Prospecting accumulating a stake of nearly 17% over the last month, there will be a float reduction for Liontown Resources (LTR AU) in the next few months.
- Short interest has been increasing and the passive selling could provide an exit for the shorts. But Hancock Prospecting could also use the opportunity to buy more Liontown Resources stock.
Index Rebalance & ETF Flow Recap: Taiwan Div+, Nifty50, Cainiao IPO, Delta Electronics
- The Philippines Stock Exchange PSEi Index (PCOMP INDEX) rebalance was implemented last week and there were interesting moves at the close on implementation day.
- The focus this week will be on pre-positioning for a global index rebalance where the review period commences next week.
- Units outstanding on iShares Emerging Markets (EMXC US) are at a new high while there continue to be redemptions in iShares Emerging Markets (EEM US).
Merger Arb Mondays (09 Oct) – Eoflow, Haitong Intl, NWS, Boustead, Newcrest, Liontown, Hollysys
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – Haitong International Securities Group (665 HK), 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), IMAX China Holding (1970 HK), BPLANT.
- Lowest spreads – Yaizu Suisankagaku Industry (2812 JP), Healius (HLS AU), T&K Toka Co Ltd (4636 JP), Pact Group Holdings (PGH AU), Seiko Pmc Corp (4963 JP).
ECM Weekly (8th Oct 2023) – Kokusai, J&T Global, Doosan, Cainiao, Ecopro, UBox, JSW Infra, Seibu
- Aequitas Reserach puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- In the IPO space, Doosan Robotics (454910 KS) lived up to its hype, while JSW Infrastructure continued India’s strong run.
- In the placement space, IDFC First Bank Limited (IDFCBK IN) launched its well flagged QIP, while CALB Group (3931 HK)‘s shareholders were released from their IPO lockup.
HDFC Bank (HDFCB IN): Increasing Foreign Room & Decreasing ADR Premium
- Foreign shareholding in HDFC Bank (HDFCB IN) has dropped to 59% and the HDFC Bank (ADR) (HDB US) premium to the local line has dropped to 7%.
- HDFC Bank (HDFCB IN) has underperformed its peers and the local indices on expectations of lower NIMs and higher NPAs.
- There will be passive buying in HDFC Bank in December and March. Further passive buying will require foreign room to increase above 25% which will first require foreign investor selling.
Quiddity Leaderboard for Hang Seng Index Dec 23: High Conviction Names Have Decent Momentum Vs HSI
- In this insight, we take a look at a group of names with reasonably high likelihood of being involved in index changes for the Hang Seng Index in September 2023.
- The index changes for the December 2023 rebalance will be announced in mid-November (17 Nov) and implemented in early-December (with effect from 4 Dec).
- Although the Hang Seng index has a highly subjective constituent selection process and index changes are somewhat unpredictable, we will continue sharing our thoughts for each quarterly review.
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