In today’s briefing:
- HDFC/HDFCB Merger: Impact on Bank Nifty
- Allkem (AKE AU) & Livent (LTHM US) In a Merger of Equals: Index Implications
- Allkem/Livent (AKE AU | LTHM US) Merger Of Lithium Equals Has Index Surprises
- Nikkei 225 Market Consultation: Stepwise Additions & Technical Listings
- TOPIX Inclusions: Who Is Ready (May 2023)
- Marubeni & Secom To Launch Tender Offer for Arteria Networks (4423)
- Overlooked Aspects of KG Mobility’s Passive Flow Trading Opportunities: KOSPI 200 & KRX Auto
- Allkem/Livent: Enlarged Charging Unit
- Arteria Networks (4423 JP): JPY1,980 Tender Offer from Marubeni and SECOM
- Greatview (468 HK): Bickering And Stalling
HDFC/HDFCB Merger: Impact on Bank Nifty
- The HDFC Bank (HDFCB IN) / HDFC Limited (HDFC IN) merger will result in capping and funding changes on the Nifty Bank Index (NSEBANK INDEX) constituents.
- We estimate one-way turnover of around 8.4% resulting in a one-way trade of INR 21,865m (US$266m) at the time of merger implementation.
- The impact in terms of ADV is less than 1x on all stocks, but the impact in terms of delivery volume is higher than 1x on a few stocks.
Allkem (AKE AU) & Livent (LTHM US) In a Merger of Equals: Index Implications
- Allkem Ltd (AKE AU) and Livent (LTHM US) are combining in an all-stock merger of equals to create a global lithium chemicals producer.
- Allkem Ltd (AKE AU) shareholders will receive 1 NewCo share for each Allkem share held while Livent (LTHM US) shareholders will receive 2.406 NewCo shares for each Livent share held.
- The merger will have implications for the stocks in the MSCI, S&P/ASX, thematic, and other global indices at the time of implementation.
Allkem/Livent (AKE AU | LTHM US) Merger Of Lithium Equals Has Index Surprises
- Today, after the close, ASX-listed Allkem Ltd (AKE AU) (formerly known as Orocobre, which merged with Galaxy Resources in 2021) announced it would merge with Livent (LTHM US).
- At US$10bn, this “merger-of-equals” NEWCO (pro-forma US$1.9bn revenue, US$1.2bn EBITDA), with NYSE primary listing and foreign entity listing on the ASX, would be a global lithium player. Deal closing end-2023.
- The doc (243 pages) and presentation (42p) are worth reading. There are interesting index effects, and there may be “Lithium Risk” in this deal for arbs, but it looks good.
Nikkei 225 Market Consultation: Stepwise Additions & Technical Listings
- Nikkei has started a market consultation on amendments to the methodology of the Nikkei 225 (NKY INDEX) focusing on the stepwise addition of lower liquidity stocks and on technical listings.
- Stocks that have relatively low ADTV compared to the expected index weight will be added at half the originally planned PAF with the full PAF implemented at the next review.
- If the proposed changes are implemented, some of the potential inclusions in September will be added at half their PAF with the increase to full PAF coming in March 2024.
TOPIX Inclusions: Who Is Ready (May 2023)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- CELSYS (3663 JP) (formerly known as “Artspark”) is a name we have been Bullish on in the last few months as it was a high-probability TOPIX Inclusion candidate.
- In the last couple of trading days, the stock has popped more than 30%. In this insight, we take a closer look at this situation.
Marubeni & Secom To Launch Tender Offer for Arteria Networks (4423)
- Marubeni (8002 JP) and Secom (9735 JP) today announced a Tender Offer to take private Marubeni’s subsidiary ARTERIA Networks Corp (4423 JP) at a 54% premium to the close.
- Listed 4.5yrs ago, the company hasn’t grown hugely. Revenue growth is slow. EBITDA growth is flat. The takeout is 3.6x book, 7x estimated EBITDA, and about mid-teens PER. Without synergies.
- The price is OK, not great. The Board rejected the final price because it was too low and didn’t include synergies, then accepted because the bidders wouldn’t go further? Hmmm…
Overlooked Aspects of KG Mobility’s Passive Flow Trading Opportunities: KOSPI 200 & KRX Auto
- KG Mobility belongs to the Consumer Discretionary sector, and if we consider its market cap on April 28th, it comfortably qualifies for inclusion in KOSPI 200 in the upcoming review.
- Although the KOSPI 200 eligibility rules do not explicitly prohibit a stock based on such short trading periods, there is a chance that KRX might exercise its discretionary provision (6.1.2).
- There is another significant event approaching us. As per current market cap levels, there is a high chance of KG Mobility being included in the KRX Auto Index in September.
Allkem/Livent: Enlarged Charging Unit
- Aussie lithium miner Allkem Ltd (AKE AU) has inked a $US10bn+ merger with Livent (LTHM US) to form the world’s fifth largest lithium producer.
- Travis Lundy tackled this “merger-of-equals” and the index implications in Allkem/Livent (AKE AU | LTHM US) Merger Of Lithium Equals Has Index Surprises.
- The spoils of ongoing lithium demand for electric vehicle batteries will ostensibly go to the prevalent, low-cost producer. Yet Livent shareholders may question the lack of premium in the transaction.
Arteria Networks (4423 JP): JPY1,980 Tender Offer from Marubeni and SECOM
- ARTERIA Networks Corp (4423 JP) has recommended Marubeni Corp (8002 JP) and Secom Co Ltd (9735 JP)’s tender offer of JPY1,980 per share, a 54.1% premium to the undisturbed price.
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 16.61% ownership ratio.
- The offer is conditional on Chinese and Japanese regulatory approvals. The minimum acceptance condition requires a 33% minority acceptance rate. This is doable as the tender price is attractive.
Greatview (468 HK): Bickering And Stalling
- Back on the 1 January, Shandong Xinjufeng Technology Packaging (301296 CH) sought to acquire Jardine Matheson Holdings (JM SP)‘s 28.22% stake in Greatview Aseptic Packaging (468 HK) at HK$2.65/share.
- It was hardly a knockout price. However, Mathson had been itching to exit. Even if it involved selling its stake to one of Greatview’s competitor.
- Greatview’s board is unimpressed, and now reckons Matheson’s initial buy-in may be in breach of PRC anti-monopoly laws.
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