Last Week in Event SPACE ...
(This insight covers specific insights & comments involving Stubs, Pairs, Arbitrage, share Classifications, and Events - or SPACE - in the past week)
ARA LOGOS (ALLT SP) (Mkt Cap: $1bn; Liquidity: $3mn)
ESR-REIT (EREIT SP) and ALOG have proposed a S$1.4bn merger, where ESR-Reit will acquire all of ALOG's units in a cash & scrip transaction by way of a Scheme. ALOG unitholders will receive an indicative Scheme Consideration of S$0.95/ALOG unit, comprising S$0.095 in cash and 1.6765 new ESR-Reit units, to be issued at S$0.51/unit. However, if using ESR's last closing price, the implied Offer is $0.8746/unit, or a 6.46% discount last close. That discount to the undisturbed is less than inspiring. However, the indicative Offer Price is a six-year high, you're receiving 90% of the consideration in scrip, and the exchange ratio is in line with the 12-month average. That's probably enough to get it over the line
Links to:
my insight: ARA Logos (ALLT SP) To Merge with ESR-REIT (EREIT SP)
Brian Freitas' insight: ESR-REIT's Proposed Merger With ARA LOGOS Logistics Trust)
Z Energy Ltd (ZEL NZ) (Mkt Cap: $1.3bn; Liquidity: $6mn)
Back on the 23 August, Kiwi fuel distributor ZEL announced it had received a non-binding indicative acquisition proposal from Ampol (ALD AU). The Offer of NZ$3.78/share, by way of a Scheme, was a 22% premium to the last closing price. Ampol was granted four weeks of exclusive due diligence. On the 27 September, the DD was extended by a further two weeks. ZEL and Ampol have now announced a binding Scheme under which ZEL shareholders would receive $3.78/share plus NZ$0.05/share in dividends - or NZ$3.83/share all-in. ZEL shareholders will also be entitled to further dividends (upward of NZ$0.10/share) if the takeover is not completed by the end of March.
(link to my insight: Z Energy (ZEL NZ) Enters Into Scheme With Ampol)
Ausnutria Dairy Corp (1717 HK) (Mkt Cap: $1.9bn; Liquidity: $6mn)
Ausnutria is suspended pursuant to the Hong Kong Code on Takeovers and Mergers. Shares had gained 7.8% on Monday (the 11th) on the largest volume since November of last year. SOE CITIC Group is the largest shareholder with 22.05%, having being introduced as a strategic investor back in October 2018. Reportedly Inner Mongolia Yili Industrial Group (A) (600887 CH), China’s biggest dairy producer, has been running a ruler over the infant-formula firm.
(link to my insight: Will Yili Gulp Down Ausnutria (1717 HK)?)
MatsukiyoCocokara (3088 JP) (Mkt Cap: $7.3bn; Liquidity: $22mn)
Nearly 21 months after starting talks to merge when a rival had made a bid for Cocokara Fine (3098 JP), Cocokara and Matsumoto Kiyoshi Holdings (3088 JP) announced a merger in February 2021 which undervalued Cocokara, to the chagrin of Travis Lundy's earlier ratio guesstimates and activist investors disappointed with how cheaply Matsumoto Kiyoshi acquired control. The merger between Matsumoto Kiyoshi and cocokara fine resulting in a NEWCO called MatsuKiyoCocokara is now effective. The result is the largest drug store operator in Japan by revenues for the year to March 2022, and a company with big plans for cost synergies and revenue growth opportunities.
(link to Travis' insight: MatsuKiyoCocokara Merged - Interesting Implications Indeed)
Yorkey Optical Intl Cayman (2788 HK), an optical and opto-electronic products manufacturer, has now announced an Offer, by way of a Scheme, from Asia Optical Co (3019 TT), Yorkey's largest shareholder. The consideration is $0.88/share, a 54.4% premium to last close - and shares gained 14% on Friday. The Offer Price has not been declared final. No dividends are expected to be declared during the Offer period. The blocking stake at the forthcoming Court Meeting is 5.837% of shares out. Activist investor David Webb holding at least 5.01%, has been consistently vocal about Yorkey's large net cash position, and demanding a distribution of the surplus cash. With Webb close to holding a blocking stake, an illiquid arb situation, and the fact Hong Kong events have been somewhat of a disaster this year, expect this to trade wide to terms. A bump in terms, somewhat of a rarity for HK events, cannot be ruled out. The Offer Price has not been declared final. Link to my insight: Yorkey Optical (2788 HK)'s Scheme: What Will Webb Do?
Yuexiu Transport Infrastructure (1052 HK) has announced that CAMC and CITIC have submitted the application materials on the registration and listing of CAMC-Yuexiu Expressway Close-end Infrastructure Securities Investment Fund to the CSRC and the Shenzhen Stock Exchange. The application concerns the Wuhan - Xiaogan Expressway (漢孝高速公路) or Han-Xiao Expressway, one of 10 expressways operated by Yuexiu. The spin-off, should it proceed, is not expected to have a material impact on Yuexiu. But this could pave the way for additional expressways to be bundled into a REIT which should lift valuations. Additionally, selecting Yuexiu to pilot this REIT should be viewed as a vote of confidence in the company's assets. Yuexiu's three-year average trailing/forward P/B prior to the onset of Covid was 0.92x and 0.87%. That would indicate ~30% upside to the current price based on today's valuations. Link to my insight: Yuexiu (1052 HK): REIT Application Lodged
Power disruptions are expected to prevail into winter due to the tight supply of thermal coal. This may be further exacerbated via global supply chain disruptions. In a rising market for coke products, China Risun (1907 HK)may benefit from the widening spread between the prices of raw materials and their products. In a falling market, that spread may narrow. From the second half of 2016, that spread has widened. Near term, expect profitability to remain stable. Risun doesn't appear overly expensive, relative to historical pricing. Given its size, it has an advantage when negotiating the purchase of raw materials. Risun's share price may have doubled since the beginning of the year, but so has the top line in the 1H21 and the bottom line nearly four-fold. Its one-year forward PER is 6.3x against 5.4x currently. Around 16% upside to the forward average is around its all-time high close (last month) of $5.85/share. Link to my insight: China Risun (1907 HK): Even Greater Profits Or A Steel Trap? & Mio's insight: China Risun – Coke-Coking Coal Spread Inverting).
In Celltrion Inc - The Minority Shareholders Upheaval & Concerns About Potential Inheritance Tax Issue, Douglas Kim explains the recent minority shareholders upheaval of Celltrion Inc (068270 KS). He also discusses the increasing concerns about the excessive inheritance taxes and the transition of the major shareholding from the former Chairman of Celltrion Group Seo Jung-Jin to his sons; the timing of the merger of the three major Celltrion companies (Celltrion Inc, Celltrion Healthcare (091990 KS), and Celltrion Pharm (068760 KS)); & rising inventory at Celltrion Healthcare & tax Issue for Founder Seo Jung-Jin.
On 7 October, Hellman & Friedman (H&F) matched EQT’s €470/share offer for zooplus AG (ZO1 GR), for an implied equity value of c. €3,360 mn. H&F recovers the leading position, as it already counted with the support of the Board of zooplus AG, as well as irrevocable undertakings for c. 17% of zooplus AG’ share capital. Those supports include the Management Board Members and Maxburg Beteiligungen GmbH & Co. KG, a longstanding key investor in zooplus AG who is also represented on its Supervisory Board. Those commitments remain therefore binding. The acceptance period for H&F's offer will therefore be extended to 3 November. Link to Jesus' insight: Hellman & Friedman Matches EQT in Contest for Zooplus AG.
The bid was saved at the eleventh hour. As per the CNMV release, IFM achieves 10.83% of the capital of Naturgy Energy Group SA (NTGY SM) in the takeover bid. The fund waives the minimum requirement of 17% and complete the deal. There is no apportionment. Link to Jesus' insight: IFM/Naturgy: Tender Results & Ibex-35 Index Implications.
This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks. I number 40, mostly firm, deals around the region.
(link to my insight: Asia-Pac Weekly Risk Arb Summary: Z Energy, ARA Logos, Yorkey Optical)
STOXX Europe Indices. The European Benchmark Indices (BMI) of the STOXX Index family are reviewed on a quarterly basis in March, June, September and December. In this insight, we take a look at the potential adds and deletes for the next review which will take place in December 2021 for the STOXX Europe 600 Index and the EURO STOXX Index. Link to Janaghan's insight: STOXX Europe Indices: Quiddity Leaderboard for December 2021 Rebalance
My ongoing series flags large moves (~10%) in CCASS holdings over the past week or so, moves which are often outside normal market transactions. These may be indicative of share pledges. Or potential takeovers. Or simply help understand volume swings.
Often these moves can easily be explained - the placement of new shares, rights issue, movements subsequent to a takeover, lock-up expiry, amongst others. For those mentioned below, I could not find an obvious reason for the CCASS move.
Name | % chg | Into | Out of |
Heng Hup (1891 HK) | 51.01% | Shenwan | Outside CCASS |
China Bright Culture Group (1859 HK) | 10.27% | Futu | St Chart |
Amuse (8545 HK) | 15.50% | Easy | Quasar |
CBK (8428 HK) | 11.95% | Grand China | China Prospect |
Source: HKEx |
Name | % chg | Into | Out of |
Linklogis (9959 HK) | 16.70% | CICC | Outside CCASS |
Source: HKEx |
I listen to a bunch of music when writing insights. Here are a handful of tunes, old & new, that piqued my interest during the week: Canned Heat's On The Road Again, Rosebud's Box Car, Kalabrese's Pain A Rollin' Away, Sofy's Strawberry Milkshake.
What are you listening to?
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