In today’s briefing:
- JFE Holdings (5411) Stock+CB Offering
- Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions
- NTT’s Partial Offer for Marketing Consultant Intage (4326) –
- JFE Holdings Placement – Well Flagged, but Would Probably Need a Wider Correction
- Intage Holdings (4326 JP): NTT’s Partial Tender Offer
- Arm IPO – Don’t Worry, It’ll Be Fine
- ARM Holdings IPO – Thoughts on Valuation – Still Very Demanding
- StubWorld: Axiata Is Coming Up Cheap
- CSI300 Index Rebalance Preview: 14 Potential Changes in December
- Single-Day ETF Flow Event Not to Be Missed in Korea in December
JFE Holdings (5411) Stock+CB Offering
- Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering.
- ¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
- This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.
Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions
- There are a bunch of stocks that are constituents of the S&P/ASX family of indices and could go private or merge prior to the next scheduled rebalance in December.
- That will lead to ad hoc inclusions for the S&P/ASX 200 (AS51 INDEX) and could also lead to ad hoc inclusions for the S&P/ASX 50 and S&P/ASX 100 indices.
- There is a fair amount of short interest on some of the potential inclusions and short covering due to index inclusion could take the stocks higher.
NTT’s Partial Offer for Marketing Consultant Intage (4326) –
- Today, NTT (Nippon Telegraph & Telephone) (9432 JP) announced a partial offer to buy a minimum of 40.0% and a maximum of 51.0% of Intage Holdings (4326 JP).
- Six crossholders holding 20.98% between them have separately agreed to tender a total of 19.9%. That means a minimum 25.4% minority participation. With success, minimum pro-ration is 51.5%.
- The dynamics of this deal and where synergies lie suggests people need to think really hard about where they underwrite future illiquid ownership.
JFE Holdings Placement – Well Flagged, but Would Probably Need a Wider Correction
- JFE Holdings (5411 JP) is looking to raise around US$870m to fund its capacity expansion plans. Together with the offering, it will undertake a US$610m CB issuance.
- The deal appears to be well flagged with the firm disclosing its JV and other related CapEx plans in its earlier earnings announcement.
- Overall, the new shares would result in a 8.2% dilution and represent 12 days of three month ADV.
Intage Holdings (4326 JP): NTT’s Partial Tender Offer
- NTT (Nippon Telegraph & Telephone) (9432 JP) has announced a partial tender offer for Intage Holdings (4326 JP) to make it a consolidated subsidiary.
- The offer is for a minimum of 15.4m shares (40.00% ownership ratio) and a maximum of 19.6m shares (51.00%) at JPY2,400 per share, a 26.4% premium to the undisturbed price.
- Irrevocables represent a 19.90% ownership ratio. The minimum acceptance condition requires a 20% minority acceptance rate. The offer is attractive and represents an all-time high.
Arm IPO – Don’t Worry, It’ll Be Fine
- So the terms are out for Softbank’s attempt to list Arm.
- In typical sparkling form, Masayoshi Son has clocked a ~19% drawdown within weeks.
- Good thing all the bankers will easily get their $8bn loan paid back in full and aren’t subject to conflicting interests…?
ARM Holdings IPO – Thoughts on Valuation – Still Very Demanding
- Softbank Group (9984 JP) aims to raisebetween US$4.5-4.9bn via selling some of its stake in ARM Holdings‘ US IPO.
- ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
- In our previous notes, we looked at the company’s past performance. In this note, we talk about valuation.
StubWorld: Axiata Is Coming Up Cheap
- Axiata Group (AXIATA MK)‘s NAV discount and implied stub are around their lows since the CelcomDigi (CDB MK) / Digi.com merger last November.
- Preceding my comments on Axiata are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
CSI300 Index Rebalance Preview: 14 Potential Changes in December
- Over 85% of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
- We estimate a one-way turnover of 1.93% at the December rebalance leading to a one-way trade of CNY 6.93bn.
- The huge inflow to passive trackers has led to the gap between the potential adds and deletes narrowing. That should reverse as passive will need to sell the deletes.
Single-Day ETF Flow Event Not to Be Missed in Korea in December
- Ecopro Co will replace Celltrion Inc. Their float market cap difference is nearly 5 trillion won, so it doesn’t seem likely that this will reverse by the end of November.
- Ecopro may not have a very significant passive impact x ADTV, given its still high trading volume. On the other hand, Celltrion seems likely to be the target of traders.
- From a trading perspective, it’s important to focus on the potential price impact of this flow event on Celltrion, which could be amplified depending on the possibility of merger cancellation.
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