In today’s briefing:
- Revised Couche-Tard Bid for 7&I and a Flurry of News Items Ahead of Earnings
- Haitong Securities (6837 HK)/GTJA (2611 HK) Merger Is a Done Deal
- Guotai Junan (2611 HK)/Haitong (6837 HK)’s Merger: A Win For H-Shareholders
- 7&I Results and Plans – The Good, The Bad, The Ugly, The Respectable, Unfortunate, and Encouraging
- MBK Rules Out Further Tender Price Hike for Korea Zinc, Game Plans Shift
- HSCI Index Rebalance Preview: Midea Group (300 HK) To Be Added in December; Stock Connect Next Week
- Shin Kong and Taishin – There’s a Good Value Swap Trade To Do Here
- 7-Eleven Corporation: A Clear Strategy for Long-Term Value, Founding Family Return to Super-Stores
- Rio Tinto Goes All-In for Arcadium Lithium
- SENSEX Index Rebalance: And That’s a Googly
Revised Couche-Tard Bid for 7&I and a Flurry of News Items Ahead of Earnings
- This AM, partway through the morning session, Bloomberg carried an article saying Alimentation Couche-Tard (ATD CN) had upped its bid for Seven & I Holdings (3382 JP) to US$18.19/share.
- The stock popped, then faded sharply. Near and after the close we got more headlines. Some of these preview tomorrow’s earnings report. Some preview the restructuring announcements.
- The Nikkei comment regarding an earnings shortfall vs Plan suggests weaker US convenience store sales and consumer footfall are to blame. Details will matter. But I’d buy dips.
Haitong Securities (6837 HK)/GTJA (2611 HK) Merger Is a Done Deal
- Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) all-scrip merger is set at an exchange ratio of 0.62x.
- The merger is conditional on the GJTA/Haitong shareholder vote, which is low risk. Regulatory approvals are a formality as they involve two entities with SOE backgrounds.
- The share exchange ratio is attractive compared to historical price ratios and precedent transactions. The recent material re-rating of peers is irrelevant to the vote as the offer is all-scrip.
Guotai Junan (2611 HK)/Haitong (6837 HK)’s Merger: A Win For H-Shareholders
- A month after China’s leading state-backed brokerages, Guotai Junan Securities (2611 HK) and Haitong Securities (H) (6837 HK), announced an intention to merge, we have a firm deal.
- Via a share swap, each Haitong H share may be exchanged for 0.62 H shares of GJS. A similar ratio is in place for the As. Cash options are afforded
- Conditions include GJS and Haitong shareholder approval; plus the usual suspects on the regulatory front. The key risk, as with TCM (570 HK)‘s Offer, is one of timing.
7&I Results and Plans – The Good, The Bad, The Ugly, The Respectable, Unfortunate, and Encouraging
- H1 sales were GOOD. H1 earnings were BAD. New forecasts are UGLY. The CVS initiatives are RESPECTABLE, but US CVS market environment UNFORTUNATE. The creation of the new Holdco ENCOURAGING.
- The Couche-Tard Bid? That’s SEPARATE. Confidential. But three weeks after receiving the new proposal, it hasn’t been publicly rejected. So that’s a thing.
- 7&i is progressing with its Standalone Plan, as it should, because ACT’s bid is more a show of faith for discussions. The York Holdings structure is INTERESTING.
MBK Rules Out Further Tender Price Hike for Korea Zinc, Game Plans Shift
- MBK’s strategy is clear: they believe they have the upper hand with the current price level and are optimistic about a favorable ruling on the second injunction.
- All eyes are on Choi to raise the price by this Friday, the 11th, before the deadline, especially with the FSS’s scrutiny looming.
- If that happens, MBK will likely go all-in on the second injunction whose hearing is on the 18th. Choi raising the price this Friday won’t significantly boost Korea Zinc’s stock.
HSCI Index Rebalance Preview: Midea Group (300 HK) To Be Added in December; Stock Connect Next Week
- There were only 13 new listings on the Main Board of the HKEX (388 HK) in the third quarter of the year.
- Of those stocks, we only see Midea Group (300 HK) having a chance of being added to the HSCI in December.
- Midea Group (300 HK) should be added to Southbound Stock Connect next week after the price stabilisation period has ended.
Shin Kong and Taishin – There’s a Good Value Swap Trade To Do Here
- Media reports indicate that the shareholder base of Shin Kong Financial Holding (2888 TT) and Taishin Financial Holding (2887 TT) have approved their merger.
- Shin Kong meeting results were public just before the market closed. The results from Taishin were known earlier. The market and spread were un-moved. If anything, things widened a little.
- Next, the two companies try to get fair Trade Commission, FSC, and Exchange approval to join to become Taishin Shin Kong FHC. And there’s a good trade to do here.
7-Eleven Corporation: A Clear Strategy for Long-Term Value, Founding Family Return to Super-Stores
- Seven & I released 1H24 earnings today as well as details on planned restructuring of its business. Results included some one-off items hitting operating profit as well as lower footfall.
- The bigger news was the plan to hive off the non-CVS retail operations into a new company, York Holdings, leaving a newly named 7-Eleven Corporation running CVS globally.
- Unusually, Seven also mentioned the possibility of new strategic partners investing in York, including even the “original founding families”, suggesting one way of holding on to control.
Rio Tinto Goes All-In for Arcadium Lithium
- Late last evening, Rio Tinto Ltd (RIO AU) and Arcadium Lithium (LTM AU) announced a definitive agreement where Rio will acquire Arcadium for US$5.85/share in cash.
- Arcadium Lithium (ALTM US) closed nearly 31% higher at US$5.55/share and Arcadium Lithium (LTM AU) should follow when the stock opens.
- Arcadium Lithium (LTM AU) could move around 40% higher today to catch up with Arcadium Lithium (ALTM US) – that would still leave a 5.4% spread to the offer price.
SENSEX Index Rebalance: And That’s a Googly
- Adani Ports & Special Economic Zone (ADSEZ IN) will replace Wipro Ltd (WPRO IN) in the S&P BSE SENSEX Index at the close on 21 June.
- Adani Ports & Special Economic Zone (ADSEZ IN)‘s inclusion is a big surprise and there should be a move higher in the stock in the short-term.
- Wipro Ltd (WPRO IN)‘s deletion was expected and there is positioning in the stock. But there is a lot that passives need to sell too.
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