In today’s briefing:
- NEC Network (1973 JP) Tender Offer – The Landscape Has Fully Changed
- Sanrio (8136 JP): The Current Playbook
- NEC Networks & System (1973 JP): Oasis Stake Could Be a Headache for NEC
- Yuanta/P-Shares Taiwan Div+ ETF Rebalance: 15 Changes, 44% Turnover, US$4.8bn Trade, BIG Impact
- Select Sector Indices and S&P Equal Weight Rebalance: US$16bn Trade; More Buying for APO and WDAY
- CPMC Holdings (906 HK): Steady Nerves Required
- S&P500/400/600 Index Rebalance: Apollo Global, Workday Added to SPX; AppLovin Misses Out
- Flow Dynamics from NPS Exercising Appraisal Rights on Doosan Merger
- Sanrio (8136 JP) Placement: Price Likely Determined Today; What Next?
- CNBM (3323 HK)’s Buyback Ups Parent’s Stake >50%
NEC Network (1973 JP) Tender Offer – The Landscape Has Fully Changed
- On 29-October, NEC Corp (6701 JP) announced a low-ball TOB to buy out subsidiary Nec Networks & System Integr (1973 JP). It deserved activism, but finding an activist was tough.
- On 7 November, it got an activist, and I wrote on 8-November the Landscape Had Changed that they might have bought 6mm shares more in 5 days. They bought 8.4mm.
- The Landscape Has FULLY Changed. The details now matter quite a bit. NEC has two basic choices. Neither are that palatable. But Target Advisor DCF was ¥3,073-4,688 without synergies.
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.
NEC Networks & System (1973 JP): Oasis Stake Could Be a Headache for NEC
- Oasis has become a substantial shareholder of Nec Networks & System Integr (1973 JP), representing 13.2 million shares or an 8.83% ownership ratio.
- Oasis has not commented on its intentions, but its stake signifies two possibilities – the start of an activist campaign to secure a bump or a play on appraisal rights.
- A bump while possible is not a certainty. NEC is likely to wait to see to if Oasis increases its stake to a level which threatens its offer.
Yuanta/P-Shares Taiwan Div+ ETF Rebalance: 15 Changes, 44% Turnover, US$4.8bn Trade, BIG Impact
- There are 8 adds and 7 deletes for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December. We had a 100% hit rate on our forecasts.
- Estimated one-way turnover is 22.1% resulting in a one-way trade of TWD 78.8bn (US$2.4bn). There are 16 stocks with over 5 days of ADV to trade.
- There has been a big increase in short interest on some of the deletions and there could be some short covering the stocks closer to implementation date.
Select Sector Indices and S&P Equal Weight Rebalance: US$16bn Trade; More Buying for APO and WDAY
- Constituent changes to the S&P 500 INDEX and capping changes will result in a round-trip trade of US$15.9bn across the Select Sector indices and the S&P500 Equal Weight Index.
- The Select Sector index trackers and S&P 500 Equal Weight trackers will need to buy Apollo Global Management and Workday, adding to the buying from S&P 500 INDEX trackers.
- The flows will change over the next week as stock prices move around and final capping is done after the close on 13 December.
CPMC Holdings (906 HK): Steady Nerves Required
- ORG Technology Co., Ltd. A (002701 CH)’s offer for CPMC Holdings (906 HK) has one remaining precondition: SAFE approval.
- Mr Wei’s irrevocable was terminated. Nevertheless, as a seller, he will accept the offer, as the shares trade below the offer price, and there is no competing offer.
- The precondition long stop date is 6 January, sufficient time to satisfy the precondition. It would be highly unusual to secure MOFCOM and NDRC approval but not SAFE approval.
S&P500/400/600 Index Rebalance: Apollo Global, Workday Added to SPX; AppLovin Misses Out
- There are 2 changes for the S&P 500 INDEX, 2 changes for the S&P Midcap400 Index and 6 changes for the S&P SmallCap600 Index at the December rebalance.
- Apollo Global and Workday will have large flows from S&P 500 INDEX trackers while AppLovin misses out. The SPX adds will have large inflows from the Select Sector index trackers too.
- The outright adds are up a lot in the after-hours and there could be further upside over the next couple of weeks as positioning ramps up.
Flow Dynamics from NPS Exercising Appraisal Rights on Doosan Merger
- If stocks close above the appraisal prices on the 10th, NPS will support the merger; otherwise, they’ll abstain to secure their appraisal rights.
- Due to cancellation risk hitting the ceiling, NPS will likely exercise half its position and start buybacks after the results.
- With both stocks heavily weighted in KOSPI 200, NPS is likely to opt for a tight buyback window, boosting chances for upward price action on Doosan’s shares in that period.
Sanrio (8136 JP) Placement: Price Likely Determined Today; What Next?
- The Sanrio (8136 JP) placement is likely to be priced today. With the stock 8.8% lower from undisturbed, expect a small discount to today’s close.
- The stock has traded as expected over the last 9 trading days – a sharp drop followed by a strong upward move and then profit taking.
- We expect there will be strong interest in the placement and oversubscription could lead to upside from here. Shorts have increased and will look to cover into the placement.
CNBM (3323 HK)’s Buyback Ups Parent’s Stake >50%
- China National Building Material (3323 HK) (CNBM), a leading PRC building materials company, is offering to buy back 841,749,304 H-shares at HK$4.03/share, a 15.1% premium to undisturbed.
- CNBM’s parent – the CNBM Parent Concert Group – will not participate in the tender, therefore elevating its stake to 50.01% of total shares from 45.02% currently.
- That % increase necessitates a whitewash waiver so as to not make a mandatory general Offer.
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