Last Week in Event SPACE: Evergrande, Spark Infra, Naspers/Prosus, Boral, China Conch Ventures

• Prosus holders uniformly want Prosus management to DO MORE for them to shrink the discount of Prosus shares to its NAV which is nearing 40%. They do not want complexity (ISS and Glass Lewis recommended a vote against). They want value realisation. So they vote against to show their displeasure. And Prosus board will, because they got a majority of the minority, probably just say "Thank you for your considered opinion. But we're right and you're wrong."
• There is a quirk explained on p96 of the Prospectus. The interesting thing about this partial offer is that investors can effectively tailor their sale. The minimum pro-ration from a standard partial offer would be 47.59%. That is the minimum pro-ration here. But it appears that if you, the investor, now own 1,000,000 shares of Naspers and you want to guarantee that you will sell exactly 300,000 shares, you can do so.
• For Travis, the obvious trade has been at 7+% to own the borrow for a buy-stock-and-short-tender-excess-borrow trade. He could see some people abstaining, but expect this gets done with a surprisingly low pro-ration. The professionalism of the index community and the domestic broker community is paramount. High throughput of excess borrow means lower pro-ration. Inefficiency means higher pro-ration.
• Does this go through? For now, it probably gets past reasonably easily.

(link to Travis' insight: Prosus EGM Approves Partial Offer for Naspers - Next Steps Interesting, Part I)

Aussie poles and wires company Spark has rejected two take-private proposals from PR outfit firm KKR and Ontario Teachers’ Pension Plan Board (OTPPB). KKR/OTPPB's first proposal was A$2.70/share, by way of a Scheme, which would be reduced by the 1H21 dividend of A$0.0625/share. KKR/OTPPB subsequently reloaded with A$2.80/share - paltry 12.9% to last close - which was also summarily rejected on the grounds it undervalued Spark.

• Spark's investments primarily comprise minority stakes in electricity assets that are controlled by the Li family's CK Infrastructure Holdings (1038 HK) and affiliate Power Assets Holdings (6 HK). You can find those holdings here. Any suitor taking out Spark will know they will play second fiddle to the Cheung Kong group.
• The Critical Infrastructure Center facilitates FIRB's decision-making. Electricity assets are designated critical assets. Yet Spark does not hold a majority stake in its investments. This may help smooth over the application - but ultimately, the asset would be 100%-controlled by foreign investors. I think such an approval is still likely to get up.
• KKR/OTTB have deep pockets. They can pay up. But I'm disinclined to chase it. Plus there is still the question mark over FIRB approval. The Offer is pitched at ~1.4x regulatory asset base. That's approximately where DUET Group (DUE AU) was taken out by CKI in 2017. The RAB multiple for the failed APA Group (APA AU) tilt was estimated at 1.6x.

Boral Ltd (BLD AU) (Mkt Cap: $6.1bn; Liquidity: $44mn)

(link to my insight: Boral's Bump Earned, Likely to Extend, but THEN WHAT?)

Back on the 30 October 2020, iCar, owner and operator of automotive portals in Malaysia, Indonesia, and Thailand, announced it had received a non-binding proposal from China-based Autohome (2518 HK), another auto internet platform, to acquire 100% of iCar's shares for A$0.50/share by way of a Scheme of Arrangement. A trading update on the 26 February said discussions were still ongoing regarding Autohome's proposal, with similar wording in the 30 April update, and the 2020 annual report (page 34). iCar has now announced it has received a non-binding proposal from privately-held Carsome Group to acquire 100% of iCar's shares for A$0.55/share by way of a Scheme.

• Separately Malaysian-based Carsome has entered into an agreement with Catcha Group, iCar's largest shareholder, to acquire 19.9% of shares out in iCar via the issuance of shares in Carsome. That side agreement and the proposal are conditional on ASIC relief. Provided the agreement completes, Carsome and Catcha will jointly acquire the remaining shares not owned in iCar. This agreement/proposal appears an initial step towards listing Carsome/Catcha.
• Pushback? An 83% premium to last close and a five-year high? I can't think of one, although it is not clear what was holding up the discussions with Autohome. Reportedly, negotiations broke down on account of the deteriorating relationship between China and Australia - yet the majority of iCar's assets are outside of Australia.
• This looks like a knock-out bid. I suspect it is trading wide to terms given the downside to a deal break, and the low liquidity. But I expect this deal to get up. And Autohome? The relationship between Catcha and Carsome appears tight. And there is a lot overlap in the customer base for both companies. iCar is small beer to Autohome, but they appear to be shut out of discussions.