In today’s briefing:
- Merger Arb Mondays (09 Dec) – HKBN, ESR, Lifestyle China, GA Pack, Latin Res, De Grey, SG Fleet
- Quiddity Leaderboard Mar25 Nikkei 225 Rebal: 2 IN, 2 OUT, $5.5bn+ Fastie to Sell, $7bn a Side
- Mitsubishi Logisnext (7105) – The Next Target in Logistics Space?
- Northern Star’s A$5bn Tilt for De Grey (DEG AU)
- S&P/ASX Index Rebalance (Dec 2024): CAR, Clarity Pharma Added; Dexus, Spark Deleted
- Suntec REIT (SUN SP): Tang’s Obligatory Offer. But … Is ESR A Seller?
- Rakuten (4755 JP) – Trying To Goose The Stock Price Before Year-End or Mobile Sub Numbers for 2025?
- Mitsubishi Logisnext (7105 JP): Mitsubishi Heavy Industries (7011 JP) Seeks to Exit
- Sanrio (8136 JP): The Current Playbook
- Paradigm Biopharmaceuticals (PAR AU): Fund Raising Amidst Pipeline Progress Raises Conviction
Merger Arb Mondays (09 Dec) – HKBN, ESR, Lifestyle China, GA Pack, Latin Res, De Grey, SG Fleet
- 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: Lifestyle China (2136 HK), Arcadium Lithium (ALTM US), Shanghai Henlius Biotech (2696 HK), ESR Group (1821 HK), Get Nice Financial Group Ltd (1469 HK), Canvest.
- Lowest spreads: Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks & System Integr (1973 JP), Capitol Health (CAJ AU), Elematec Corp (2715 JP).
Quiddity Leaderboard Mar25 Nikkei 225 Rebal: 2 IN, 2 OUT, $5.5bn+ Fastie to Sell, $7bn a Side
- The Sep24 Nikkei 225 Rebal was odd. They could have done 3. They did 2. For now, I still see 2 IN and 2 OUT for the Mar25 Nikkei225 Rebal.
- There is also a DOUBLE-capping event for Fast Retailing which on 8% outperformance could become a TRIPLE-capping event. For now, the trade is shaping up to be US$7bn a side.
- There is still a tech bent to potential ADDs. Some Consumer Goods stocks need stock splits to get in. Longer-term, the TOPIX Methodology Rejig is an interesting problem set.
Mitsubishi Logisnext (7105) – The Next Target in Logistics Space?
- A Nikkei article this morning several hours pre-open said that Mitsubishi Heavy Industries (7011 JP) was preparing to sell its listed forklift subsidiary Mitsubishi Logisnext Co., Ltd. (7105 JP).
- The story says “Investors had been pressuring Mitsubishi Heavy to spin off or delist Logisnext” and we know the TSE dislikes dual listings. I would have expected a buy-in but…
- There are a number of reasons why a buyer could find this asset attractive. I suggest reading all the way through and the tone of the Conclusions.
Northern Star’s A$5bn Tilt for De Grey (DEG AU)
- De Grey Mining (DEG AU), which boasts one of Australia’s largest undeveloped gold projects, has announced a merger, by way of Scheme, with Northern Star Resources (NST AU).
- Northern Star is offering 0.119 new shares for every De Grey share, and will hold ~80.1% of the combined entity, with De Grey shareholders the remaining ~19.9%.
- Terms back out an implied price of A$2.08/share, or a ~37% premium to last close. This Offer has the unanimous backing of both boards.
S&P/ASX Index Rebalance (Dec 2024): CAR, Clarity Pharma Added; Dexus, Spark Deleted
- CAR Group (CAR AU) replaces Dexus Property (DXS AU) in the S&P/ASX50 Index and Clarity Pharmaceuticals Ltd (CU6 AU) replaces Spark New Zealand (SPK AU) in the S&P/ASX200 (AS51 INDEX).
- Dexus Property and Spark New Zealand were deleted from a global index a couple of weeks ago, so this will heap further pressure and increase the real float of the stocks.
- There has been an increase in cumulative excess volume for all changes, but positioning in some stocks may continue post the announcement.
Suntec REIT (SUN SP): Tang’s Obligatory Offer. But … Is ESR A Seller?
- Gordan Tang (& his wife Celine) acquired 2.14% in Suntec REIT (SUN SP), lifting their stake to 31.45% from 29.31%, triggering a MGO.
- The Offer Price is $1.16/share against a recent close of $1.17. The Offer will be conditional on a 50% acceptance hurdle. That’s it. This is purely a technical Offer.
- Share popped 7% on the news, and closed up ~5%. This appears unwarranted. Tang is not going to take Suntec private. But ESR Group (1821 HK) may be exiting.
Rakuten (4755 JP) – Trying To Goose The Stock Price Before Year-End or Mobile Sub Numbers for 2025?
- Today, Rakuten (4755 JP) announced a new shareholder benefit (株主優待) program today, to reward shareholders as of end-December 2024. The stated goal? To “thank shareholders”…
- …And provide more people with the opportunity to try out the benefits of Rakuten Mobile, with 1yr free of a 30GB/mo mobile plan. There are conditions, but it’s juicy.
- Last year’s 3mo plan was given with one day of notice. This year’s larger full-year govt gets 3+wks. They are juicing the sub numbers for 2025.
Mitsubishi Logisnext (7105 JP): Mitsubishi Heavy Industries (7011 JP) Seeks to Exit
- Mitsubishi Logisnext Co., Ltd. (7105 JP) shares rose 26% after the Nikkei reported that Mitsubishi Heavy Industries (7011 JP) is contemplating selling its 64.5% stake.
- Logisnext confirmed the sale process. In a fair process, minorities should receive the tender offer price plus the proportionate share of Mitsubishi Heavy Industries’ TOB tax benefits.
- Despite the rise in share price, Logisnext trades at a discount to peer multiples. At an offer of JPY2,000, Logisnext would trade in line with median peer multiples.
Sanrio (8136 JP): The Current Playbook
- Since the announcement of the US$840 million secondary offering, Sanrio (8136 JP)’s shares have been down 3.9% from the undisturbed price of JPY5,160 per share (26 November).
- It is instructive to look at recent large Japanese placements to understand the potential trading pattern. So far, Sanrio’s shares have followed the pattern of previous large placements.
- The offering will likely be priced on 10 December. The average large Japanese placement tends to generate positive returns.
Paradigm Biopharmaceuticals (PAR AU): Fund Raising Amidst Pipeline Progress Raises Conviction
- Paradigm Biopharmaceuticals (PAR AU) has requested a trading halt to the ASX pending an announcement in relation to a capital raising. Normal trading will resume on Monday, December 9, 2024.
- Assuming quarterly cash burn rate of A$7M, Paradigm’s cash balance should provide a runway through mid-Q3FY25. The company is in a dire need to raise fund.
- With lead drug being in late-stage trial and having huge market potential, Paradigm seems to be an attractive biotech investment opportunity. Recently, optimism is growing surrounding Paradigm’s lead drug candidate.
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