Last Week in Event SPACE: Japan Post, Singapore Press, Siam Future, 51job, Kunlun, Shinsei Bank

An entity called Cuscaden Peak Pte. Limited has showed up with an all-cash offer (Scheme of Arrangement) for SPH at S$2.10/share, which is just over the Total Combined Consideration (cash, SPH REIT (SPHREIT SP) units, Keppel REIT (KREIT SP) units) of S$2.086/unit as of yesterday's close. Cuscaden Peak's ownership is 40% Singapore-listed Hotel Properties Ltd (led by tycoon Ong Beng Seng), 30% Capitaland parent company (Temasek-backed), and 30% Mapletree Investments, an independently managed Temasek portfolio company. Right now this is a Proposed Acquisition. Additionally, SPH Units would be subject to a chain offer obligation. If this deal goes through, there is a put option on the price of SPH REIT which will last a while.

• IF the S$2.10 bid is worth looking at for SPH, it means that cash consideration is deemed better than REITs. If it is not, then the tiny overbid is not enough. Travis Lundy thinks Keppel has room to bid up a bit more, and therefore I expect the Cuscaden team does too. This will be better known when the IFA comes out with the "fair value" of SPH units for the Keppel Scheme Meeting Circular which should be out shortly. If they say "buying Keppel at the Consideration is "fair and reasonable" because SPH is worth S$2.40/share, that means everyone could go a little higher.
• But this is probably time-sensitive. If SPH does not engage at all, then Cuscaden has to up the price to force the issue, but once the Keppel Circular goes out, SPH may be stuck on its course (or may feel it is).
• SPH shares closed at S$1.99. When they commence trading, if they commence trading at S$2.10, that will be very interesting. There may be some who have put the trade on and are short SPH REIT and Keppel REIT which would mean they are now possibly naked short those two REITs (when the REIT consideration basket still has the highest forward yield among a group of peers). Being short those REITs is not a great position. They might want to buy them back, which could push the Keppel Deal SPH Consideration higher in value. Stay long SPH now.

SBI Holdings (8473 JP)'s Tender Offer is the wrong price. The best way to get it bumped is to make sure the share price is higher than the Tender Offer Price. That is always the best way. Shinsei has pointed out good reasons why SBI's TOB is inadequate. SBI has thumbed its nose at Shinsei (and at current shareholders who agree with Shinsei). Shinsei says there is more value there because of excess capital and management forecasts. Over the medium-term, Shinsei at ¥2,000/share is NOT expensive. It is cheap.

• Could There Be A Bump? Maybe. Maybe not. But if SBI gets to 40% and someone else is at 10%, that may not bother Kitao-san (head of SBI). He doesn't want to consolidate, or turn SBI into a Bank Holding Company (yet). And if he has 40% of voting rights and an activist held 10%, as long as they agreed, he'd control the Board. So an activist may not bother SBI at all. What might cause SBI to bump the price would be someone tendering for a large number of shares at a slightly higher price - someone who would not agree with SBI and instead sided with Shinsei. The OTHER possibility is that Shinsei itself creates interference - perhaps with a strategy which would bother SBI if implemented.
• If SBI buys 58.2mm shares in the Tender to get to 48% of voting rights, Shinsei will no longer have the requisite 35% Tradable Shares ratio required to stay in TSE1 or TSE Prime/TOPIX. That would mean a long-term selldown of TOPIX-held shares from October 2022-2025. Or Shinsei might decide to sell down some of its Treasury Shares in a hurry to ensure that Shinsei was able to apply for continued presence in the TSE Prime market as of year-end. That would require a selldown of 18-20 million shares at a minimum. And to get it done in a hurry, it would require selling those shares just after the Tender Offer was "successful."
• There is still a Game of Chicken for Shinsei to play here. If Shinsei were to conduct a higher-priced Tender Offer Buyback, that would obstruct SBI's Tender Offer, and the back end would look more interesting. The shares might rise in price. If Shinsei were to allow SBI's Tender to go through, then launch a sale of Treasury shares to dilute SBI back down, on the premise that Shinsei needed to stay in TSE Prime to adequately represent its interests to the world - effectively cancelling the last 12 months' buyback - that would cause the shares to fall in price. Owning borrow would be great. One could short tender into SBI's Tender Offer.

(link to Travis' insight: Shinsei TOB: A Complicated Game of 🐓 Nobody Has Thought About?)

On the 21 June, nine months after IR solutions provider 51job first announced it had received a preliminary non-binding Proposal from DCP Capital Partners to acquire all of its shares for US$79.05/common share, 51job announced it had entered into a definitive privatisation agreement, also at US$79.05/share. What appeared to be the clincher for the deal was Recruit Holdings (6098 JP) - 51job's largest shareholder with 34.8% - joining the consortium, which also comprised DCP plus Ocean Link and CEO Rick Yan, both of whom joined following the non-binding proposal announced on the 4 May. All in, the continuing shareholders and their affiliates hold 56.1% in 51job.

• Then China's internet sector campaign kicked into gear, with 51job ostensibly finding itself lumped (rightly or otherwise) with other internet-related stocks being scrutinised. Or at least, 51job was perceived to be in the cross-hairs. It doesn't help there has been a complete lack of newsflow on the transaction since the definitive agreement. No mention whatsoever in the 2Q21 results. The current gross spread of 30.8% - well below the undisturbed price - is the widest since the transaction was first floated.

• Trading at a gross/annualised spread of 30.8%/88.3%, assuming completion at the end of 1Q22. Despite China's ongoing scrutiny of the internet industry, I've not seen any specific issue pushing back on this deal. Or as one reader put it - "isn't helping people find jobs more easily is in-line with common prosperity?"
• But that remains the key risk to the deal, one some investors may wish to avoid heading into the end of the year.

(link to my insight: (Mostly) Asia M&A: January 2020 Roundup)