Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

Gelex Officially Decides to Go After Viglacera - A Vietnamese Pre-Event

Quiddity Advisors

Event-Driven

<p>On 2 July, <a href="https://www.smartkarma.com/entities/vietnam-electrical-equipment-j" target="_blank" data-smartkarma-citation="entities:23213:1" rel="noopener">Vietnam Electrical Equipment J (GEX VN)</a> known as Gelex officially announced that it would launch a Tender Offer to buy an additional 21.19% of tilemaker <a href="https://www.smartkarma.com/entities/viglacera-corp" target="_blank" data-smartkarma-citation="entities:23226:1" rel="noopener">Viglacera Corp (VGC VN)</a> of which it was already the largest independent shareholder. </p>
<p>At the time, Gelex held 24.97% of Viglacera, with direct ownership of 5.54%, indirectly holding through its subsidiary Gelex Electric (19.43%). The largest shareholder is still Ministry of Construction at 38.85%.</p>
<p>I wrote about this in <a href="https://www.smartkarma.com/insights/gelex-officially-decides-to-go-after-viglacera-a-vietnamese-pre-event" target="_blank" data-smartkarma-citation="insights:40941" rel="noopener">Gelex Officially Decides to Go After Viglacera - A Vietnamese Pre-Event</a>. </p>
<div class="content-highlight">
<p><strong>It was, indeed, a pre-event despite what the "official" nature of the pronouncement.</strong> Event traders trading in Vietnam need to understand the timing and the rules.</p>
</div>
<p>The original announcement was made for an Indicative Offer Price VND 17,917 but that was when the stock was VND 20,500/share. It was a placeholder, because it usually takes time to get through the filing and approval process and when they did get through the process and launched the Offer seven weeks later, the share price was considerably higher. </p>
<p>My advice at the time was to wait until the shares dipped away from the VND 21,000 level because there were indications from Gelex that they had budgeted that amount. they dipped to sub VND-19,000 a few weeks later. Then bounced back. </p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/160/057/original/Screenshot%202020-09-19%20at%201.49.33%20PM.png?1600494592" class="editor-image img-responsive" data-smartkarma-image-id="160057"></figure>
<p>Despite that, on 25 August Gelex announced a deal <a href="https://static2.vietstock.vn/vietstock/2020/8/24/20200824_20200824%20-%20GEX%20-%20CBTT%20Chao%20Mua%20Cong%20Khai%20VGC.pdf" target="_blank" rel="noopener">here</a> at VND 17,700/share. The market did not budge.  On the 11th of September, Gelex raised the price to VND 21,100, which was still below the market price and was below all but one market close in the previous month (the one closing price it was not below was 14 August at VND 21,100). </p>
<h3>The NEW News</h3>
<p>On the 18th of September, GELEX <a href="https://gelex.vn/data/files/Tin%20tuc%20nha%20dau%20tu%202/Gelex_QD_Tanggiachaomuacongkhai_CP_VGC_Lan2.pdf" target="_blank" rel="noopener">announced</a> a revision of the bid to VND 23,500 - a bump of 32.8% and a premium of 2.8% from where it had been trading the day before, and a premium of 12.4% from where it had been trading the day before it officially launched its intentions. The announcement by the company of the CEO's decision to raise the price is <a href="https://static2.vietstock.vn/vietstock/2020/9/18/20200918_20200918%20-%20GEX%20-%20QD%20TGD%20Ve%20Tang%20Gia%20Chao%20Mua%20VGC.pdf" target="_blank" rel="noopener">here</a>. According to Securities Law Clause 2, Article 48, Decree 58/2012 / ND-CP, any increase in the Tender Offer Price must be made a minimum of 7 days before the close of the Tender Offer. This one is set to close 25 September (and I cannot find the rules on possible extension). </p>
<h3>So Here We Are...</h3>
<p>There is a reason why GELEX wants to buy 95,000,000. That would mean in any subsequent selldown by the Ministry of Construction - whether they tender or not this time (because they own 38.85%, even if they tender this time there will be another selldown later) - GELEX could buy 4.99% of the shares out in the market and not have to conduct a Tender Offer. That would get them to 51%. </p>
<p>This deal is now <em>possibly</em> good to go.  But if the MOC does not tender, GELEX may not get all the shares it wants. That may be OK, but I am sure they'd like to get all of them.</p>
<p>There are still quirks here given the Ministry of Construction's specific marching orders vis-a-vis "equitization" and the resulting position of GELEX, the MOC and minority ownership. </p>
<p>More below the fold. </p>

On 2 July, Vietnam Electrical Equipment J (GEX VN) known as Gelex officially announced that it would launch a Tender Offer to buy an additional 21.19% of tilemaker Viglacera Corp (VGC VN) of which it was already the largest independent shareholder. 
At the time, Gelex held 24.97% of Viglacera, with direct ownership of 5.54%, indirectly holding through its subsidiary Gelex Electric (19.43%). The largest shareholder is still Ministry of Construction at 38.85%.
I wrote about this in Gelex Officially Decides to Go After Viglacera - A Vietnamese Pre-Event. 

It was, indeed, a pre-event despite what the "official" nature of the pronouncement. Event traders trading in Vietnam need to understand the timing and the rules.

The original announcement was made for an Indicative Offer Price VND 17,917 but that was when the stock was VND 20,500/share. It was a placeholder, because it usually takes time to get through the filing and approval process and when they did get through the process and launched the Offer seven weeks later, the share price was considerably higher. 
My advice at the time was to wait until the shares dipped away from the VND 21,000 level because there were indications from Gelex that they had budgeted that amount. they dipped to sub VND-19,000 a few weeks later. Then bounced back. 

Despite that, on 25 August Gelex announced a deal here at VND 17,700/share. The market did not budge.  On the 11th of September, Gelex raised the price to VND 21,100, which was still below the market price and was below all but one market close in the previous month (the one closing price it was not below was 14 August at VND 21,100). 
The NEW News
On the 18th of September, GELEX announced a revision of the bid to VND 23,500 - a bump of 32.8% and a premium of 2.8% from where it had been trading the day before, and a premium of 12.4% from where it had been trading the day before it officially launched its intentions. The announcement by the company of the CEO's decision to raise the price is here. According to Securities Law Clause 2, Article 48, Decree 58/2012 / ND-CP, any increase in the Tender Offer Price must be made a minimum of 7 days before the close of the Tender Offer. This one is set to close 25 September (and I cannot find the rules on possible extension). 
So Here We Are...
There is a reason why GELEX wants to buy 95,000,000. That would mean in any subsequent selldown by the Ministry of Construction - whether they tender or not this time (because they own 38.85%, even if they tender this time there will be another selldown later) - GELEX could buy 4.99% of the shares out in the market and not have to conduct a Tender Offer. That would get them to 51%. 
This deal is now possibly good to go.  But if the MOC does not tender, GELEX may not get all the shares it wants. That may be OK, but I am sure they'd like to get all of them.
There are still quirks here given the Ministry of Construction's specific marching orders vis-a-vis "equitization" and the resulting position of GELEX, the MOC and minority ownership. 
More below the fold. 

Vietnam Electrical Equipment JSC (GEX VN)

Gelex Bumps Viglacera Bid Again. High Pro-Ration Likely.