In today’s briefing:
- STAR100 Index Rebalance Preview: 10 Changes as Potential Adds Outperform
- India: Potential Free Float Changes & Passive Flows in May
- L’Occitane (973 HK): Conditional VGO at HK$34
- Carlyle Reportedly To Buy KFC Japan (9873) From MitCorp (8058) – Deal Likely Imminent
- Worley Placement – Largest Shareholder Selling at an Attractive Discount
- KFC Holdings Japan (9873 JP): Carlyle Edging Towards a Tender Offer
- Worley (WOR): Impact of Dar Group’s A$1.4bn Sale
- L’Occitane (973 HK): Geiger’s $34/Share Offer
- Mimasu Semiconductor (8155 JP): Shin-Etsu (4063 JP)’s Pre-Conditional Tender Offer
- Toyo Suisan: Activist Advocates For Legacy Divestiture & More Capital for Global Expansion
STAR100 Index Rebalance Preview: 10 Changes as Potential Adds Outperform
- The review period for the June rebalance ends 30 April. We expect the changes to be announced 31 May with the implementation taking place after the close on 14 June.
- We forecast 10 changes for the index, including migrations between the STAR 100 Index and the SSE STAR50 (STAR50 INDEX).
- Excluding the migrations, the potential adds have outperformed the potential deletes over the last few months and that could continue as we head to the end of the review period.
India: Potential Free Float Changes & Passive Flows in May
- Companies in India have disclosed their shareholding pattern as of end-March in April. There are companies with significant float changes from end-September and/or end-December.
- The changes in free float could be reflected in domestic and global indices over the next few weeks and months resulting in action from passive trackers.
- Depending on the date that the shareholding was published, there could be 14 stocks with passive inflows from global trackers while 7 could see passive outflows in May.
L’Occitane (973 HK): Conditional VGO at HK$34
- L’Occitane (973 HK) disclosed a conditional voluntary offer from Reinold Geiger at HK$34.00, a 15.3% premium to the last close and a 30.8% premium to the undisturbed price (5 February).
- The minimum acceptance condition is that the offeror holds at least 90% of the shares held by disinterested shareholders, which enables the offeror to exercise compulsory acquisition rights.
- Irrevocable and letters of support to accept represent 37.96% of disinterested shares. An attractive offer (representing an all-time high) should facilitate the offer being declared unconditional.
Carlyle Reportedly To Buy KFC Japan (9873) From MitCorp (8058) – Deal Likely Imminent
- On 28 Feb, the Nikkei reported (an article I missed) Mitsubishi Corp (8058 JP) would seek to unload its 35% stake in Kfc Holdings Japan (9873 JP)
- The stock popped, then continued to rise further. After the close Friday, the Nikkei reported MitCorp was close to a deal with Carlyle. A deal is apparently expected imminently.
- I expect this could be a “Split Price Deal” (like Hitachi Transport and Pasona).
Worley Placement – Largest Shareholder Selling at an Attractive Discount
- DAR Group is looking to raise A$1.5bn (US$983m) from selling the majority of its stake in WorleyParsons Ltd (WOR AU).
- DAR had attempted to privatize Worley in late 2016. Failing that attempt, it has been adding to its stake over the years.
- As the deal isn’t a cleanup, there will be an overhang post-deal, although its a relatively small one at just 4.5% of DAR’s remaining stake; locked up for 30 days
KFC Holdings Japan (9873 JP): Carlyle Edging Towards a Tender Offer
- The Nikkei reports that Carlyle is in the final stages of buying Mitsubishi Corp (8058 JP)’s 35% stake in Kfc Holdings Japan (9873 JP), which will result in a tender offer.
- The structure will likely be similar to the KDDI Corp (9433 JP)/ Lawson Inc (2651 JP) tender, where MitCorp provides an irrevocable NOT to accept but vote for share consolidation.
- The shares have been up 33.6% since Nikkei flagged the sale on 28 February. KFC Japan will trade in line with peers’ multiples at a JPY5,700 offer.
Worley (WOR): Impact of Dar Group’s A$1.4bn Sale
- Dar Al-Handasah has sold 19% of WorleyParsons Ltd (WOR AU) overnight at A$14.35/share, a 12% discount to the last close, to raise A$1.44bn (US$943m).
- This reduces Dar’s stake in WorleyParsons Ltd (WOR AU) to 4.5% and will trigger upweights from index providers in the next few days.
- The stake sale could also lead to a re-rating of the stock with a large blocking stake off the share register.
L’Occitane (973 HK): Geiger’s $34/Share Offer
- After nearly six years of conjecture, rumour – plus the key shareholder (holding 72.63% of shares out) contemplating a takeover – we finally have an Offer for L’Occitane (973 HK).
- The price? $34/share, a 30.77% premium to undisturbed, and a figure a shade below the HK$35/share flagged by Reuters last August deemed “false and without basis“. The price is final.
- This takeover is a Voluntary General Offer. The key condition is securing 90% of disinterested shareholders holding 27.36%. 9.6% of that number have provided irrevocable undertakings or letters of support.
Mimasu Semiconductor (8155 JP): Shin-Etsu (4063 JP)’s Pre-Conditional Tender Offer
- Mimasu Semiconductor Industry (8155 JP) recommended a pre-conditional tender offer from Shin Etsu Chemical (4063 JP) at JPY3,700, a 14.4% and 35.4% premium to the last close and undisturbed price, respectively.
- The pre-condition, which cannot be waived, is approval under the competition laws of Japan and Taiwan. The tender offer is expected to start in late July.
- While the offer is below the mid-point of the IFA DCF valuation range and the requested price, it is 7.7% higher than the all-time high of JPY3,435. This is done.
Toyo Suisan: Activist Advocates For Legacy Divestiture & More Capital for Global Expansion
- Japanese instant noodle manufacturer Toyo Suisan Kaisha (2875 JP) has become the newest target for activist investors in Japan.
- Nihon Global Growth Partners Management, Inc argues that Toyo Suisan’s investments are overly concentrated in its legacy businesses, despite these ventures yielding low returns.
- Therefore, they are recommending that Toyo Suisan exit its legacy businesses, increase the payout ratio to 40%, and use some of its excess cash for a share buyback of ¥20bn.
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