This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. Thinking About Topcon (7732) And the New METI-Enabled Bad Cop-Good Cop Routine
- A Bloomberg article today said Topcon Corp (7732 JP) is weighing takeover bids received from KKR and EQT. ValueAct has been pressuring the company for 18mos (5+% in May23)
- ValueAct has apparently been pushing the company to divest assets and concentrate on core ops, or go private (and have someone else do it).
- This is further evidence of the METI-enabled “Bad Cop-Good Cop Routine” which could expand M&A and governance activity dramatically.
2. 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).
3. 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.
4. NEC Networks (1973 JP) Final Showdown I – Extendy-Extendy, But Not Yet Bumpity Bumpity
- Two days before the close of its TOB on subsidiary Nec Networks & System Integr (1973 JP), NEC Corp (6701 JP) announced it had no plans to raise the price.
- The next day, the second largest shareholder reported a stake increase from 11.68% to 13.12%. That changes the dynamic further, and a change in terms was likely.
- Today post-close, NEC extended the Tender Offer by 10 days. It is worthwhile understanding the likely current disposition of shares.
5. 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.
6. 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.
7. 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.
8. NIFTY200 Momentum30 Index Rebalance: 38 Changes; 65% Turnover; US$1.7bn Trade
- There are 19 changes a side for the Nifty200 Momentum30 Index that will be implemented at the close on 30 December. All names are exactly in line with our forecast.
- Estimated one-way turnover is 64.9% resulting in a one-way trade of INR 72.7bn (US$857m). There are 18 stocks with over 1x ADV to trade.
- The adds have continued to outperform the deletes even after the end of the review period. There could be further upside heading into year-end and implementation of the changes.
9. 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.
10. Fosun Tourism (1992 HK): Fosun Int’l’s Indirect Takeover
- When Fosun Tourism (1992 HK), a leisure-focused integrated tourism group, was suspended pursuant to the Takeovers Code, the obvious Offeror, by way of a Scheme, was Fosun International (656 HK)
- Not quite. We do have a Scheme, but it’s being enacted by way of a buyback. Fosun Int’l still abstains from voting, but will control 100% if the Scheme completes.
- The Cancellation Price is $7.80/share (not declared final), a punchy 95% premium to undisturbed. I previously speculated a 100% premium was not out of the question. Clean deal.
