Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

HK Type 4 license through Ballingal Investment Advisors Ltd. 

I'm a highly experienced sell-side analyst with in excess of 22 years of covering Asia Pacific equities, the past 19 years immersed in event strategies encompassing M&A risk arbitrage, directional long/short, stub trades and restructuring.  

My background also includes accountancy (liquidation/bankruptcy/receivership) earlier in my career and as a chief financial officer of a global commodity company based in the US and Mexico.

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

On the 5 April, <a href="https://www.smartkarma.com/entities/4636" target="_blank" data-smartkarma-citation="entities:4636:1">Ap Eagers Ltd (APE AU)</a><a href="https://www.asx.com.au/asxpdf/20190405/pdf/4442hpyj004tmc.pdf" target="_blank">announced</a> an unsolicited conditional all-scrip Offer for 28.84% held <a href="https://www.smartkarma.com/entities/9266" target="_blank" data-smartkarma-citation="entities:9266:1">Automotive Holdings (AHG AU)</a>. The 1 APE share for every 3.8 AHG shares backed out an indicative Offer price of $1.916, a 7.63% and 1.06% premium to the last close and 30-day VWAP.The Offer is conditional on ACCC approval and no MACs. There is no minimum acceptance threshold nor finance condition or due diligence.Assuming 100% acceptance, AHG shareholders would hold 25% in the merged entity.AHG's initial <a href="https://www.asx.com.au/asxpdf/20190405/pdf/4442sxx2xm35ys.pdf" target="_blank">response</a> was to recommend shareholders take no action.APE has now <a href="https://www.asx.com.au/asxpdf/20190424/pdf/444j5r0vvbf9k3.pdf" target="_blank">dispatched</a> the Bidder's Statement. Again, AHG's <a href="https://www.asx.com.au/asxpdf/20190423/pdf/444h24z6ypg9qt.pdf" target="_blank">response</a> was/is:<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/738/original/WAit.PNG?1556090017" class="editor-image img-responsive" data-smartkarma-image-id="85738"></figure>adding ...<ul>
<li>the Offer remains highly conditional.</li>
<li>if you accept, you will not be able to sell your shares on market.</li>
<li>AHG shares are trading above the indicative Offer price. (AHG has traded through terms since the onset)</li>
</ul>AHG's CEO John McConnell previously said the rationale for the merger had merit, but argued the Offer may not be enough. In a recent AFR <a href="https://www.afr.com/business/transport/ahg-tells-shareholders-to-hit-brakes-on-1-8b-bid-20190423-p51gct" target="_blank">article</a> (paywalled), McConnell is quoted saying "it may be a bit light by the way we're looking at it'' in reference to APE's initial $13.5mn estimate in integration savings. APE's CEO Martin Ward has countered that estimate may potentially increase with the benefit of a full operational review.The scrip ratio is not unreasonable when viewed from a 1-month (4.1x), 3M (4.0x) and 6M (3.98x) viewpoint. Only when the timeframe extends further out to one-year (3.52x) and beyond does the ratio "appear" to take advantage.With car dealerships under the hammer amidst declining new vehicle sales, the benefits from a merger are apparent. This Offer may just require a small kiss to terms to get all parties on board.

On the 5 April, Ap Eagers Ltd (APE AU)announced an unsolicited conditional all-scrip Offer for 28.84% held Automotive Holdings (AHG AU). The 1 APE share for every 3.8 AHG shares backed out an indicative Offer price of $1.916, a 7.63% and 1.06% premium to the last close and 30-day VWAP.The Offer is conditional on ACCC approval and no MACs. There is no minimum acceptance threshold nor finance condition or due diligence.Assuming 100% acceptance, AHG shareholders would hold 25% in the merged entity.AHG's initial response was to recommend shareholders take no action.APE has now dispatched the Bidder's Statement. Again, AHG's response was/is:adding ...
the Offer remains highly conditional.
if you accept, you will not be able to sell your shares on market.
AHG shares are trading above the indicative Offer price. (AHG has traded through terms since the onset)
AHG's CEO John McConnell previously said the rationale for the merger had merit, but argued the Offer may not be enough. In a recent AFR article (paywalled), McConnell is quoted saying "it may be a bit light by the way we're looking at it'' in reference to APE's initial $13.5mn estimate in integration savings. APE's CEO Martin Ward has countered that estimate may potentially increase with the benefit of a full operational review.The scrip ratio is not unreasonable when viewed from a 1-month (4.1x), 3M (4.0x) and 6M (3.98x) viewpoint. Only when the timeframe extends further out to one-year (3.52x) and beyond does the ratio "appear" to take advantage.With car dealerships under the hammer amidst declining new vehicle sales, the benefits from a merger are apparent. This Offer may just require a small kiss to terms to get all parties on board.

Automotive Holdings

AHG & AP Eagers - Smart Carma