Equity Analyst, LightStream Research

Oshadhi Kumarasiri

An equity research analyst with over 7 years of experience in multiple sectors. Previously worked for one of the world's largest asset managers with about USD2.5trn in AUM, covering small and micro-cap companies in the consumer sphere across Europe and developed Asia. Also experienced in covering multiple industries including banking, insurance and asset management, retail, tech, telco and REIT.

Equity Analyst

Sun Art Retail: A Quick Run Through Fundamentals as Alibaba Takes the Helm

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Event-Driven

<ul>
<li>In October 2020, <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" rel="noopener">Alibaba Group (BABA US)</a>-owned Taobao China Holding Limited acquired an additional 70.94% interest in A-RT Retail Holdings Limited (which owns 51% of <a href="https://www.smartkarma.com/entities/sun-art-retail-group-ltd" target="_blank" data-smartkarma-citation="entities:401:1" rel="noopener">Sun Art Retail (6808 HK)</a>) from its owners, the Mulliez Family, for an aggregate consideration of US$ 3.6 billion (HK$ 27.96 billion).</li>
<li>As a result, Alibaba took control of 72.35% of the Chinese supermarket chain’s share capital, triggering a mandatory offer at HK$ 8.10 per share.</li>
<li>
<a href="https://www.smartkarma.com/entities/sun-art-retail-group-ltd" target="_blank" data-smartkarma-citation="entities:401:1" rel="noopener">Sun Art Retail (6808 HK)</a> shares closed 16.7% above the implied acquisition price of HK$ 8.10 per share, on the date of the announcement. Around 170m shares changed hands on the same date, compared to an average daily trading volume of 17.0 million shares in the three months leading up to this transaction.</li>
</ul><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/175/144/original/Picture1.png?1606704586" class="editor-image img-responsive" data-smartkarma-image-id="175144"></figure></section><ul>
<li>From the 19<sup>th</sup> October to 27<sup>th</sup> November, Sun Art Retail shares traded above the minimum mandatory offer price of HK$ 8.10 per share, perhaps an indication that the market may have been expecting an offer of a higher price than HK$ 8.10 per share.</li>
<li>The mandatory offer commenced at the minimum offer price of HK$ 8.10 per share on 27<sup>th</sup> November 2020, and will remain open until 18<sup>th</sup> December 2020.</li>
<li>The independent financial advisor, Somerley Capital Limited, which was appointed by the Independent Board Committee to ascertain the fairness of the mandatory offer, has looked at the company’s historical share price range, PE ratios, and PE discount to the peers and decided that the offer is unfair to the minority shareholders.</li>
</ul>


In October 2020, Alibaba Group (BABA US)-owned Taobao China Holding Limited acquired an additional 70.94% interest in A-RT Retail Holdings Limited (which owns 51% of Sun Art Retail (6808 HK)) from its owners, the Mulliez Family, for an aggregate consideration of US$ 3.6 billion (HK$ 27.96 billion).
As a result, Alibaba took control of 72.35% of the Chinese supermarket chain’s share capital, triggering a mandatory offer at HK$ 8.10 per share.

Sun Art Retail (6808 HK) shares closed 16.7% above the implied acquisition price of HK$ 8.10 per share, on the date of the announcement. Around 170m shares changed hands on the same date, compared to an average daily trading volume of 17.0 million shares in the three months leading up to this transaction.

From the 19th October to 27th November, Sun Art Retail shares traded above the minimum mandatory offer price of HK$ 8.10 per share, perhaps an indication that the market may have been expecting an offer of a higher price than HK$ 8.10 per share.
The mandatory offer commenced at the minimum offer price of HK$ 8.10 per share on 27th November 2020, and will remain open until 18th December 2020.
The independent financial advisor, Somerley Capital Limited, which was appointed by the Independent Board Committee to ascertain the fairness of the mandatory offer, has looked at the company’s historical share price range, PE ratios, and PE discount to the peers and decided that the offer is unfair to the minority shareholders.


A Low-Ball Offer - Aimed to Keep Sun Art Retail Listed