In today’s briefing:
- S&P/ASX Index Rebalance Preview: Potential Adds Have Outperformed
- Celltrion Merger: Index Implications
- Celltrion Merger Swap: Conditions & Schedule
- Celltrion (068270 KS) Merger with Celltrion Healthcare (091990 KS)
- Sanei Architecture Planning (3228) Finds Saviour from Mafia-Linked Former Boss and Majority Owner
- Quiddity Leaderboard STAR 50 Dec 23: The Real Deal
- Second Go-Round Tender for T&K TOKA (4636) As Bain Wants It All At ¥1,400/Share
- Amorepacific Group: SoTP Valuation and Meaning of Min-Jung Suh Taking One Year Leave of Absence
- Addressing Misconceptions: Lotte Tour’s Short-Selling Entry Point
- NIFTY NEXT50 Index Rebalance: Five Changes; Big Impact; Cross Index Flow
S&P/ASX Index Rebalance Preview: Potential Adds Have Outperformed
- We forecast 26 changes across the ASX50 Index, ASX100 Index, S&P/ASX 200 (AS51 INDEX) and ASX300 Index at the September rebalance.
- The review period ends tomorrow, so most changes are high probability. Though there are some changes that will be up to the discretion of the index committee.
- There will be a lot of stock to trade on the changes to the ASX200 and indices higher up the hierarchy. But there will be a lot of pre-positioning too.
Celltrion Merger: Index Implications
- Celltrion Inc (068270 KS) and Celltrion Healthcare (091990 KS) will merge later this year. Celltrion Pharm (068760 KS) has been left out for now; it could be merged next year.
- For each share of Celltrion Healthcare (091990 KS) held, shareholders will receive 0.449262 shares of Celltrion Inc (068270 KS).
- There will be implications for the Korea Stock Exchange Kospi Index (KOSPI INDEX) and KOSDAQ 150 Index (KOSDQ150 INDEX) with funding flows and index replacements.
Celltrion Merger Swap: Conditions & Schedule
- The swap prices, ₩148,853 for Celltrion Inc and ₩66,874 for Celltrion Healthcare, specified below are not tentative prices but confirmed prices. So, the merger ratio has been determined as 1:0.4492620.
- The key focus now is the appraisal rights exercise. Both offer attractive spreads. Yet, the ₩1T combined ceiling might seem restricted considering potential dissenting Celltrion Inc shareholders exceeding expectations.
- Nonetheless, considering the strong determination of the company towards this merger, we should consider a strategy of approaching this spread aggressively while keeping the cancellation risk in mind.
Celltrion (068270 KS) Merger with Celltrion Healthcare (091990 KS)
- Celltrion Inc (068270 KS) will merger with Celltrion Healthcare (091990 KS). Celltrion Healthcare shareholders will receive 0.4492620 Celltrion shares per Celltrion Healthcare share.
- The merger requires shareholder (approval by at least two-thirds of the votes of the shareholders present representing at least one-third of the outstanding shares) and Fair Trade Commission approval.
- The merger ratio, based on regulations, is attractive compared to historical VWAP exchange ratios and multiples. At last close prices, Celltrion Healthcare shares are trading broadly at terms.
Sanei Architecture Planning (3228) Finds Saviour from Mafia-Linked Former Boss and Majority Owner
- [cue Tom Hardy gif saying “That’s Bait”]. But yes, this story has a backstory to the Japanese underworld, and while the original sin may have been minor, it’s everything.
- The firm was raided, the CEO resigned, a govt authority “recommended” Sanei get rid of Mr Koike’s influence, banks got antsy, employee morale dropped. Sanei needed a saviour.
- Koike-San asked Open House (3288 JP) to buy his shares. They agreed to take over the company. It’s basically a done deal with a possible twist.
Quiddity Leaderboard STAR 50 Dec 23: The Real Deal
- STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
- Recently, I discussed the historical price and volume performance of STAR 50 rebalance events in Quiddity Primer for STAR 50 Index Rebalance Events.
- In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the December 2023 Rebalance event.
Second Go-Round Tender for T&K TOKA (4636) As Bain Wants It All At ¥1,400/Share
- In January 2023, NAVF and Michael 1925 LLC – affiliates of Dalton Investments LLC – announced a hostile partial Tender Offer for T&K Toka Co Ltd (4636 JP).
- It failed. They wanted to buy 21.72% at ¥1300 to get to 44% post-Tender. The Company objected. Dalton/etc didn’t get the shares. Shares fell afterward.
- Today, Bain announced a deal to take over the company at ¥1,400/share. T&K TOKA has agreed. It may not be as easy as that. And there is a fulcrum investor.
Amorepacific Group: SoTP Valuation and Meaning of Min-Jung Suh Taking One Year Leave of Absence
- About a week ago, it was announced that Chairman’s elder daughter Min-Jung Suh will take a long one year leave of absence.
- Chairman Suh is very dissatisfied with the company’s results in the past three years and wants to shake up the company to improve its operations, in our view.
- Our base case NAV valuation of Amorepacific Group (002790 KS) is 39,611 won, which is 29% higher than current price.
Addressing Misconceptions: Lotte Tour’s Short-Selling Entry Point
- Lotte Tour has emerged as a prominent short-selling target in the Korean market, and there are efforts to use an ₩80B convertible bond (CB) to exploit its dilution/overhang risk.
- Linden Capital and LMR, upon obtaining the CB, promptly borrowed 4.6M shares from Donghwa for short selling. Thus, the CB conversion incentive remains largely unaffected by stock price changes.
- We should avoid synchronizing our entry point with CB conversion. Instead, we should target the likely rights issuance in the latter half of the year, anticipated in the market.
NIFTY NEXT50 Index Rebalance: Five Changes; Big Impact; Cross Index Flow
- NSE Indices has continued to use the current index methodology to come up with the 5 adds/deletes. The proposed methodology seems to be put on ice for reasons unknown.
- Punjab National Bank, Shriram Transport Finance, Trent, TVS Motor and Zydus Lifesciences will replace ACC, FSN E-Commerce Ventures, HDFC Asset Management, Indus Towers and Page Industries.
- The adds, deletes, capping and funding changes will result in one-way turnover of 13% and in a one-way trade of INR 20.77bn. The impact on the adds/deletes is big.
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