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

Car Inc (699 HK):  No, We Are Not Missing Anything

Car (699 HK): Doc Out. IFA Says Fair. Done Deal

Car Inc (699 HK): MBK Takes A Turn At The Wheel

Gravity Works As WeWork Doesn't; Now Plan B

Quiddity Advisors

Event-Driven

<div>
<p>Following the <a href="https://www.smartkarma.com/entities/luckin-coffee-inc" target="_blank" data-smartkarma-citation="entities:28046:1" rel="noopener">Luckin Coffee (LK US)</a> debacle and the ensuing fallout (discussed in <em><a href="https://skr.ma/p7ikw" target="_blank" rel="noopener">Car Inc (699 HK) - Needs A Hire Purpose</a></em> and <em><a href="https://skr.ma/4TZfG" target="_blank" rel="noopener">Car Inc (699 HK): MBK's Firm Offer</a></em>), on the 13 November MBK <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1113/2020111301538.pdf" target="_blank" rel="noopener">tabled</a> a pre-conditional general cash Offer of $4.00/share for <a href="https://www.smartkarma.com/entities/car-inc" target="_blank" data-smartkarma-citation="entities:942:1" rel="noopener">Car Inc (699 HK)</a>, a 17.99% premium to last close.  </p>
<p>A truncated summary of the announcements below brings you up to date.:</p>
</div>
<div>
<div>
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 115.258px;">
<h3>Date</h3>
</td>
<td style="width: 588.274px;">
<h3>Data in the Date</h3>
</td>
</tr>
<tr>
<td style="width: 115.258px;">9-Apr-20</td>
<td style="width: 588.274px;">Car's largest shareholder, <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0409/2020040900021.pdf" target="_blank" rel="noopener">sold</a> 44.666mn shares, or 2.11% of shares out, on the day Car's shares collapsed. NOT a good look. UCAR held ~27.65% of shares out in Car after the sale. Lu is the controller of UCAR with a 39.94% stake.<br><br>UCAR <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0512/2020051201219.pdf" target="_blank" rel="noopener">sold</a> a further 100k shares (0.0047% of shares out) on the 11 May, and <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0623/2020062301508.pdf" target="_blank" rel="noopener">7.085mn</a> shares (0.33%) between the 12 May and 22 June.</td>
</tr>
<tr>
<td style="width: 115.258px;">16-Apr-20</td>
<td style="width: 588.274px;">
<p>Amber Gem <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0416/2020041601733.pdf" target="_blank" rel="noopener">entered</a> into a SPA with UCAR to acquire 98.6mn shares (4.65% of shares out - known as the first tranche) from UCAR at HK$2.30/share; and 264.08mn shares (12.46% of shares out - the second tranche) at HK$3.40/share. This works out to an average price of $3.10/share.</p>
<p></p>
<p>At the time of the SPA, Amber Gem held 10.11%. According to the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0401/2020040101309.pdf" target="_blank" rel="noopener">2019 annual report</a> (page 49), Warburg Pincus holds a 60.47% stake in Amber Gem. </p>
</td>
</tr>
<tr>
<td style="width: 115.258px;">1-Jun-20</td>
<td style="width: 588.274px;">
<p>Car <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0601/2020060100013.pdf" target="_blank" rel="noopener">announced</a> Amber Gem and UCAR had terminated their second tranche. The first tranche <a href="https://di.hkex.com.hk/di/NSNoticePersonList.aspx?sa2=np&amp;scpid1=69816&amp;scpid3=0&amp;scpid2=109421&amp;sa1=pl&amp;scsd=21%2f07%2f2019&amp;sced=21%2f07%2f2020&amp;pn=Amber+Gem&amp;src=MAIN&amp;lang=EN&amp;" target="_blank" rel="noopener">appears</a> to have been completed on the 30 May, lifting Amber Gem's stake to 14.76%.</p>
<p></p>
<p>Separately  UCAR and BAIC Group <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0601/2020060100013.pdf" target="_blank" rel="noopener">entered</a> into a non-legally binding strategic cooperation agreement, such that BAIC would acquire 450.79mn shares in Car, or 21.26% of shares out, from UCAR.</p>
</td>
</tr>
<tr>
<td style="width: 115.258px;">9-Jun-20</td>
<td style="width: 588.274px;">Lu <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0610/2020061000043.pdf" target="_blank" rel="noopener">resigned</a> as Chairman and NED, with effect from June 9 (i.e. immediate).</td>
</tr>
<tr>
<td style="width: 115.258px;">2-Jul-20</td>
<td style="width: 588.274px;">
<p>Car announced UCAR had entered into an offer letter with <a href="https://www.smartkarma.com/entities/saic-motor-corp-ltd-a" target="_blank" data-smartkarma-citation="entities:20833:1" rel="noopener">SAIC Motor (600104 CH)</a> such that SAIC will acquire UCAR's 20.87% stake in Car at HK$3.10.</p>
<p></p>
<p>Separately, SAIC entered into an offer letter with Amber Gem to acquire an 8.05% stake in Car, also at HK$3.10/share.  The completion of these Offer letters would result in SAIC holding 28.92%, below the 30% mandatory general offer threshold.</p>
</td>
</tr>
<tr>
<td style="width: 115.258px;">20-Jul-20</td>
<td style="width: 588.274px;">
<p>Car announced that UCAR has terminated its agreement with SAIC; and that UCAR had now entered into a SPA with Jinggangshan BAIC to acquire its 20.87% stake in Car at HK$3.10/share. Jinggangshan BAIC also signed an offer letter with Amber Gem to acquire an 8.04% of shares out (@ HK$3.10/share) - to collectively give Jinggangshan BAIC 28.91%. Amber Gem would be left holding 6.7% of shares out. </p>
<p></p>
<p>Car <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0720/2020072001067.pdf" target="_blank" rel="noopener">announced</a> that it has been informed that "UCAR has received a notice from the China Securities Regulatory Commission (and that the) CSRC has initiated an investigation on UCAR in connection with suspected violations of information disclosure laws and regulations by UCAR". </p>
</td>
</tr>
<tr>
<td style="width: 115.258px;">24-Jul-20</td>
<td style="width: 588.274px;">
<p>Profit warning. Car expects a net loss n the 1H20 vs. net profit of RMB279mn in 1H19. Looking at impairment charges with respect to is vehicle fleet of RMB2.5bn-3RMBbn. </p>
</td>
</tr>
<tr>
<td style="width: 115.258px;">26-Jul-20</td>
<td style="width: 588.274px;">
<p>Amber Gem and Jinggangshan BAIC <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0726/2020072600011.pdf" target="_blank" rel="noopener">entered</a> into a SPA such that BAIC acquires 170.72mn shares (8.05% of shares out) from Amber at $3.10/share.</p>
</td>
</tr>
<tr>
<td style="width: 115.258px;">3-Aug-20</td>
<td style="width: 588.274px;">
<p>Xiaogeng Li, an NED, <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0803/2020080300015.pdf" target="_blank" rel="noopener">resigned</a>, ceasing her membership of the audit and compliance committee</p>
</td>
</tr>
<tr>
<td style="width: 115.258px;">3-Aug-20</td>
<td style="width: 588.274px;">
<p>The CSRC <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0803/2020080300019.pdf" target="_blank" rel="noopener">completed</a> its (two-week) investigation and dished out some fines to UCAR and certain directors/senior management. </p>
</td>
</tr>
<tr>
<td style="width: 115.258px;">20-Aug-20</td>
<td style="width: 588.274px;">
<p>A Reuters article suggests MBK is kicking tyres</p>
</td>
</tr>
<tr>
<td style="width: 115.258px;">10-Nov-20</td>
<td style="width: 588.274px;">
<p><a href="https://www.smartkarma.com/entities/car-inc" target="_blank" data-smartkarma-citation="entities:942:1" rel="noopener">Car Inc (699 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1110/2020111001297.pdf" target="_blank" rel="noopener">announced</a> the S&amp;P with UCAR, BAIC is terminated. MBK Partners to acquire ~20.86% of shares in Car for HK$1.77bn ($4/share).</p>
</td>
</tr>
<tr>
<td style="width: 115.258px;">13-Nov-20</td>
<td style="width: 588.274px;">
<p>MBK's <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1113/2020111301538.pdf" target="_blank" rel="noopener">firm Offer</a></p>
</td>
</tr>
<tr>
<td colspan="2" style="width: 115.258px;"><em>Source: mainly HKEx announcements</em></td>
</tr>
</tbody>
</table>
<p>The pre-conditions to the Offer may be waived, either in whole or in part; the Offer is subject to only a simple merger case by SAMR; the UCAR SPA has now completed; and the Offer is subject to a 50% tendering condition - with MBK holding 47.41% at the completion of a SPA with UCAR, together with irrevocables. </p>
<p>This looks done.</p>
<p>Yet, the gross spread has steadily widened since the 28 December. What gives? </p>
<p>More thoughts below the fold.</p>
<p></p>
</div>
</div>


Following the Luckin Coffee (LK US) debacle and the ensuing fallout (discussed in Car Inc (699 HK) - Needs A Hire Purpose and Car Inc (699 HK): MBK's Firm Offer), on the 13 November MBK tabled a pre-conditional general cash Offer of $4.00/share for Car Inc (699 HK), a 17.99% premium to last close.  
A truncated summary of the announcements below brings you up to date.:







Date


Data in the Date



9-Apr-20
Car's largest shareholder, sold 44.666mn shares, or 2.11% of shares out, on the day Car's shares collapsed. NOT a good look. UCAR held ~27.65% of shares out in Car after the sale. Lu is the controller of UCAR with a 39.94% stake.  UCAR sold a further 100k shares (0.0047% of shares out) on the 11 May, and 7.085mn shares (0.33%) between the 12 May and 22 June.


16-Apr-20

Amber Gem entered into a SPA with UCAR to acquire 98.6mn shares (4.65% of shares out - known as the first tranche) from UCAR at HK$2.30/share; and 264.08mn shares (12.46% of shares out - the second tranche) at HK$3.40/share. This works out to an average price of $3.10/share.

At the time of the SPA, Amber Gem held 10.11%. According to the 2019 annual report (page 49), Warburg Pincus holds a 60.47% stake in Amber Gem. 



1-Jun-20

Car announced Amber Gem and UCAR had terminated their second tranche. The first tranche appears to have been completed on the 30 May, lifting Amber Gem's stake to 14.76%.

Separately  UCAR and BAIC Group entered into a non-legally binding strategic cooperation agreement, such that BAIC would acquire 450.79mn shares in Car, or 21.26% of shares out, from UCAR.



9-Jun-20
Lu resigned as Chairman and NED, with effect from June 9 (i.e. immediate).


2-Jul-20

Car announced UCAR had entered into an offer letter with SAIC Motor (600104 CH) such that SAIC will acquire UCAR's 20.87% stake in Car at HK$3.10.

Separately, SAIC entered into an offer letter with Amber Gem to acquire an 8.05% stake in Car, also at HK$3.10/share.  The completion of these Offer letters would result in SAIC holding 28.92%, below the 30% mandatory general offer threshold.



20-Jul-20

Car announced that UCAR has terminated its agreement with SAIC; and that UCAR had now entered into a SPA with Jinggangshan BAIC to acquire its 20.87% stake in Car at HK$3.10/share. Jinggangshan BAIC also signed an offer letter with Amber Gem to acquire an 8.04% of shares out (@ HK$3.10/share) - to collectively give Jinggangshan BAIC 28.91%. Amber Gem would be left holding 6.7% of shares out. 

Car announced that it has been informed that "UCAR has received a notice from the China Securities Regulatory Commission (and that the) CSRC has initiated an investigation on UCAR in connection with suspected violations of information disclosure laws and regulations by UCAR". 



24-Jul-20

Profit warning. Car expects a net loss n the 1H20 vs. net profit of RMB279mn in 1H19. Looking at impairment charges with respect to is vehicle fleet of RMB2.5bn-3RMBbn. 



26-Jul-20

Amber Gem and Jinggangshan BAIC entered into a SPA such that BAIC acquires 170.72mn shares (8.05% of shares out) from Amber at $3.10/share.



3-Aug-20

Xiaogeng Li, an NED, resigned, ceasing her membership of the audit and compliance committee



3-Aug-20

The CSRC completed its (two-week) investigation and dished out some fines to UCAR and certain directors/senior management. 



20-Aug-20

A Reuters article suggests MBK is kicking tyres



10-Nov-20

Car Inc (699 HK) announced the S&amp;P with UCAR, BAIC is terminated. MBK Partners to acquire ~20.86% of shares in Car for HK$1.77bn ($4/share).



13-Nov-20

MBK's firm Offer



Source: mainly HKEx announcements



The pre-conditions to the Offer may be waived, either in whole or in part; the Offer is subject to only a simple merger case by SAMR; the UCAR SPA has now completed; and the Offer is subject to a 50% tendering condition - with MBK holding 47.41% at the completion of a SPA with UCAR, together with irrevocables. 
This looks done.
Yet, the gross spread has steadily widened since the 28 December. What gives? 
More thoughts below the fold.




Car Inc (699 HK):  Are We Missing Anything?