Last Week in Event SPACE ...
Plus, other events, CCASS movements and Mood Spins.
(This insight covers specific insights & comments involving Stubs, Pairs, Arbitrage, share Classification and Events - or SPACE - in the past week)
Huatai Securities Co Ltd (A) (601688 CH) (Mkt Cap: $20.7bn; Liquidity: $234mn)
The Huatai Sec GDR (Global Depositary Receipt) pricing came out the 11th of June at US$20.00 to US$24.50 per GDR, conveniently after a day with a 5% gain in both the H-share and the A-share issues, announcing the deal at a then 12.5-28+% discount, which was wider than most seemed to have expected. Now with the deal well-subscribed at the low end, there are warnings investors need to be bid higher than the bottom end to get any paper.
(link to Travis' insight: Huatai GDRs - Prices Lower, Then Sooner, Then Later, Then Higher)
Hanjin Kal Corp (180640 KS) (Mkt Cap: $1.9bn; Liquidity: $95mn)
KCGI has accumulated 15.95% in Hanjin at a cost of ₩270bn, the last 1% at a 5.3% premium to last close. KCGI appears to be angling for management takeover. The question is whether the Cho family - holding 28.93% of the common shares and 3.02% of the prefs - are willing/forced sellers. And there are also rumours Mirae is asking KCGI for full repayment on ₩40bn worth of stock collateral loans.
links to Sanghyun's insights:
Hanjin Kal Special Situation: KCGI's Takeover Attempt Is Tougher than Previously Appeared
Hanjin Kal Special Situation: Market Wide Shorting Looming
Vocus Communications (VOC AU) (Mkt Cap: $1.9bn; Liquidity: $10mn)
Vocus has announced it has received an A$3.02bn (US$2.1bn) non-binding, indicative proposal from Aussie energy outfit AGL Energy Ltd (AGL AU) by way of a Scheme, at A$4.85/share in cash, a 26.63% premium to last close. This proposal arrives one week after Swedish PE outfit EQT and Vocus terminated takeover talks - and just two weeks since that lofty $5.25/share indicative offer was first announced.
(link to my insight: AGL Takes A Turn At Vocus)
Cocokara Fine (3098 JP) (Mkt Cap: $1.2bn; Liquidity: $7mn)
Japan’s drugstore industry began a new era of consolidation after a decade of already unprecedented growth at the top. Cocokara Fine, the seventh-ranked drugstore retailer in Japan announced it was not only in talks with fourth-ranked Matsumotokiyoshi (Matsukiyo), as it had already confirmed a month before, but had now also begun negotiations with Sugi Holdings (7649 JP), the sixth largest firm. This was also discussed in Travis' Insight Cocokara Fine は Cocokara いいね.
(link to Michael's insight: Drug-Fuelled Marriages and Macho Shachos* in Japan)
Ruralco Holdings (RHL AU) (Mkt Cap: $302mn; Liquidity: $1mn)
Although the release of the ACCC's Statement of Issues (SOI) is less than ideal development in the Nutrien Ltd (NTR CN) / Ruralco merger - an informal clearance from the ACCC would have been preferable - it was not an unforeseen development, nor is it viewed as a deal breaker. The ACCC's concerns are not definitive or strongly worded, therefore the possibility of a formal clearance remains. But on balance, my read is that there is sufficient weight surrounding merchandising issues such that a divestment of stores is likely required for this deal to get up.
The ACCC highlighted 7 areas (one each in WA and NSW, two in Queensland and three in the Northern Territories) where the remaining competition - subsequent to a successful merger - is limited. The ACCC also flagged some regional centres only source wholesale supplied from either Ruralco or Nutrien. This may lead to the amalgamated company discriminating on prices and supplies to stores within its own network compared to independent stores in the same catchment.
(link to my insight: ACCC Raises Concerns With Ruralco/Nutrien)
Skc Co Ltd (011790 KS) (Mkt Cap: $1.1bn; Liquidity: $4mn)
SKC has agreed to acquire a 100% stake in KCFT (KCF Technologies) for ₩1tn (US$1bn) from KKR. SKC plans to use about ₩400bn-₩500bn of its own equity capital to fund the transaction with the remaining ₩700bn-₩800bn sourced from debt financing. KKR will make a tidy profit from the deal - in February 2018, it acquired a 100% stake of LS Mtron's copper foil and thin film business for ₩300bn and renamed it KCFT.
(link to Douglas Kim's insight: Korea M&A Spotlight: SKC Acquires KCFT for $1 Billion)
Briefly ...
Reportedly LG Corp (003550 KS) plans to sell a 35% or more stake of LG CNS for about ₩1tn. LG CNS is the system integration IT service unit of the LG Group. Douglas believes this sale will provide a positive boost to LG Corp's share price since it could increase the probability of paying out higher dividends. (link to Douglas' insight: Korea M&A Spotlight: LG Corp Plans to Sell 35% Stake of LG CNS for About 1 Trillion Won)
United Technologies (UTX US) (Mkt Cap: $108bn; Liquidity: $100mn)
The market raction to the proposed 'merger of equals' between aerospace giant UTX and US defense contractor Raytheon Company (RTN US) announced at the beginning of the week, has so far been underwhelming.
(link to Robert's insight: MergerTalk: UnitedTech/Raytheon - It's The UTX Share Price That Needs Adjusting, Not The Terms)
Italian Banks
The Italian banking system’s lack of concentration makes it, on paper at least, ripe for M&A consolidation, and open to cross-border M&A. Yet prospective Italian banking M&A activity has more recently been domestic, largely due to Italian-specific challenges, which have acted as “poison pills”, and are still a drag on bank M&A domestically.
(link to Victor's insight: Italian Banks M&A - The Complex Italian Job)
Three weeks have now elapsed since the Offer for Harbin Electric Co Ltd H (1133 HK) was extended. That means shareholders who had previously tendered are now entitled to withdraw their acceptances, if they so choose, which takes about 10 days. I estimate ~9.2mn shares have additionally tendered since the extension, or 1.4%, giving a total acceptance level of 87.2%. But, 9.5mn shares or ~1.4% have now moved back into CCASS - which appear to be shares to be withdrawn. Shares closed Friday at $4.41, the lowest since the extension announcement. ~5.8% of issued shares have changed hands since the extension, more than enough for the deal to get up.
Shortly after publishing my insight, Netcomm Wireless (NTC AU) released the supplementary disclosure. The directors reaffirm their recommendation to vote for the Scheme. The disclosure sought to clarify how the directors can recommend the Offer yet maintain a bright future. In short, the directors consider the Scheme crystalises value now. There doesn't appear to be any news out of the ordinary here. But delaying the vote so as to make this disclosure is unusual. Shares closed firm at $1.08 compared to the $1.10/share Scheme Offer. The Scheme Meeting will be held on the 18th June.
Indofood Agri Resources (IFAR SP) issued a notice which simply reiterates the final Offer Price and the closing date (25 June - 60th day from dispatch). No update to the % tendered was provided.
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, amongst others. For those mentioned below, I could not find an obvious reason for the CCASS move.
Name | % chg | Into | Out of |
RMH (8437 HK) | 59.67% | UBS | Pacific Found |
China Tian Lun Gas (1600 HK) | 33.93% | HSBC | CCB |
Agritrade Resources (1131 HK) | 22.15% | HK Stock Link | Citi |
iDreamsky Technology Limited (1119 HK) | 12.19% | China Int | Outside CCASS |
Zhejiang Changan Renheng Technlgy (8139 HK) | 23.08% | Yuet | Outside CCASS |
Ever Sunshine (1995 HK) | 18.68% | BOCI | Outside CCASS |
Xiezhong International Holdings (3663 HK) | 12.00% | Ever Joy | Outside CCASS |
Hin Sang Group International Hldg (6893 HK) | 27.43% | Hang Seng | Outside CCASS |
Newton Resources (1231 HK) | 10.00% | Kingston | Satinu |
Tongcheng-Elong Holdings Ltd (780 HK) | 19.00% | Morgan Stanley | Outside CCASS |
Tongcheng-Elong Holdings Ltd (780 HK) | 15.01% | HSBC | Outside CCASS |
China Nt Pharma Group (1011 HK) | 14.81% | JPM | Outside CCASS |
For the past fifteen months, I've flagged 345 large moves (>10%) in my weekly Event SPACE insights. So I analysed those moves across 112 brokers. Some of the observations include:
(link to my insight: CCASS: Why Large Moves Matter Redux)
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