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)
Jardine Strategic Holdings (JS SP) (Mkt Cap: $18.2bn; Liquidity: $15mn)
We now have a long-awaited transaction to collapse the circularity. And just like that it is also done and dusted. Under the terms of the Acquisition, Strategic shareholders (other than Jardine Matheson Holdings (JM SP)) will receive US$33.00/share in cash. The Acquisition will be implemented by way of an Amalgamation under the Bermuda Companies Act, which requires approval by a majority of at least 75% of the votes cast by Strategic shareholders. Matheson, holding 84.89% of shares out - is entitled to vote on the amalgamation resolution, assuring Strategic shareholder approval.
links to my insight: Jardine Matheson: Collapsing The Circularity & Jardine Strategic: What's Yours Is Mine
link to Brian Freitas's insight: JM SP/JS SP: Acquisition and Index Implications
Sanken Electric (6707 JP) (Mkt Cap: $1.2bn; Liquidity: $10mn)
A month ago, known active (and occasional activist and concentrated investor) Effissimo Capital Management announced an unsolicited partial Tender Offer to purchase 4,834,343 shares of Sanken to take it from 9.97% to 30.00% at ¥5210/share. The announcement was deliberately couched in terms to make it seem friendly. Effissimo is not going for negative control, or seeking to interfere with management in any way. They say they just want more stock. Since then, Allegro MicroSystems (ALGM US) shares - Sanken's 52% subsidiary which it listed in November (and the key value driver for Sanken Electric), have fallen nearly 20% from just under US$31/share on 8 Feb the day after the announcement to US$25.14 yesterday. And Sanken itself has fallen back down to ¥5300/share, ~1.7% above the Tender Offer Price.
(link to Travis' insight: Effissimo, Sanken, and Allegro - Thinking About the Future) and the original insight Effissimo Launches Unsolicited/Hostile Partial Tender On Sanken Electric)
Vocus Communications (VOC AU) (Mkt Cap: $2.6bn; Liquidity: $13mn)
The fifth time's a charm it would seem. On the 8 February, Vocus announced it had received an indicative, non-binding proposal from Macquarie Infrastructure and Retail Assets Holdings (MIRA). The proposal was a Scheme at $5.50/share, a 25.6% premium to last close, valuing Vocus at ~A$3.4bn. This was the fifth approach for Vocus since mid-2017. Vocus and MIRA/Aware Super have now entered into a Scheme Implementation Deed. The consideration under the Offer remains unchanged at $5.50/share. Vocus' board unanimously recommends the Offer.
(link to my insight: Vocus Comms (VOC AU): MIRA/Aware's Done Deal)
Cocokara Fine (3098 JP) (Mkt Cap: $1.7bn; Liquidity: $9mn)
As regular readers of the series on Matsumotokiyoshi Holdings Co., Ltd. (3088 JP) and Cocokara Fine (3098 JP) over the past nearly two years will know, Travis has expected Cocokara to benefit on the exchange ratio. He thought the ratio that was reached - 1.7 Matsukiyo shares for every share of Cocokara - was a little light, and not just because the ratio announced was lower than the closing price pre-announcement. Now Singapore-based fund Hibiki Path Advisors announced that it opposed the merger ratio of this combination.
(link to Travis' insight: Matsukiyo-Cocokara Situation Gets Its Activist Noise Started which followed MatsukiyoCocokara & Co - The Merger and MatsuKiyoCocokara Merger and Implied Forward Forecasts)
Vitalharvest Freehold Trust (VTH AU) (Mkt Cap: $0.2bn; Liquidity: $1mn)
On the 9 November, VTH received an all-cash cash Offer of $1.00/unit from Macquarie Infrastructure and Real Assets (MIRA), by way of a Scheme. Should the Scheme not be approved by unitholders, MIRA is offering to buy all of VTH's assets for A$300mn in cash, which requires a reduced shareholder approval threshold. On the 17 November, Macquarie Agricultural Funds Management (MAFM) and VTH entered into a SID, for A$1.00/unit. The SID covered both the Scheme and asset sale. On the 1 February, an agreement was reached whereby MAFM would pay an additional A$0.025/share from rent received in the first half the year up to 31 December. The combined value of the distribution - be it under the Scheme or the asset sale - would be A$1.025/share.
(link to my insight: Vitalharvest (VTH AU): Macquarie Ups Its Offer)
Vedanta Ltd (VEDL IN) (Mkt Cap: $11.3bn; Liquidity: $59mn)
Three weeks ago Vedanta reached new two-year highs reaching to INR 195.00/share. Travis wrote in Vedanta Soars Beyond Indicative Open Offer Level. Not Expensive that the stock was indeed quite a bit higher than the Indicative Open Offer level of INR160 - above which it had traded since December - but that it was not expensive. Q3 earnings had turned out to be quite respectable. Since then, oil, iron ore, aluminum, copper are all up, and zinc and silver are down slightly. Theoretically, the combination of all these factors should mean VEDL would outperform its Hindustan Zinc (HZ IN) subsidiary in the short term, and indeed that has been the case.
(link to Travis's insight: Vedanta (VEDL) Awaits Open Offer Revision. Now Less Event-y More Commodity-y)
Mainstream Group Holdings Ltd (MAI AU) (Mkt Cap: $0.1bn; Liquidity: <$1mn)
On 9th March 2021, Australia-based third-party fund administration services provider MAI announced they had signed a Scheme Implementation Deed to be acquired by Hong Kong-headquartered Vistra in an all-cash deal that valued the company at a market cap of ~A$170mn. The Offer Price is A$1.20 per share in cash. The Offer Price of A$1.20 is an all-time high for the stock. However, the Offer Price translates to a weak premium of +8.6% to the pre-announcement closing price. The transaction will be conditional on the receipt of regulatory approvals and Target shareholder approval. The Deal is expected to be completed in June 2021. Following the announcement of the Deal, MAI shares closed above terms at A$1.22.
(link to Janaghan's insight: Mainstream Group (MAI AU): Go-Shop Provision Makes It Interesting)
Sakai Ovex (3408 JP) (Mkt Cap: $0.2bn; Liquidity: $2mn)
Last month, an MBO was launched on Sakai at ¥2850/share. It was launched at an all-time high, but it was the wrong price. And one of the well-known value players in Japan knew it was the wrong price, because he was the bidder as was discussed in Sakai Ovex MBO - Wrong Price (And the Bidder Knows It). Travis suggested a bump might be necessary. This past week, the Bidder for Sakai Ovex announced they had raised their bid from ¥2850/share to ¥3000/share, for a bump of 5.26%. A little arithmetic will tell you this is STILL the wrong price.
(link to Travis' insight: Savai Ovex MBO - A Very Weak Bump follows Sakai Ovex MBO - Wrong Price (And the Bidder Knows It))
In Panasonic in Talks to Buy Blue Yonder; Supply Chain Management Likely to Be a Key Growth Driver, Shifara Samsudeen, ACMA, CGMA focuses reports than Panasonic Corp (6752 JP) is set to acquire Blue Yonder, a leader in the US supply chain software market for ¥700bn (approx. US$6.5bn). Blue Yonder is mainly focused on supply chain management and Panasonic in May 2020 bought a 20% stake in the former for about ¥86bn.
In Youzan Technology IPO Quick Look- Great Headline Numbers but Client Growth Is Slow and Churn Is High, Sumeet Singh runs a ruler over Youzan Technology's (YT) listing by way of introduction, as its parent China Youzan Limited (8083 HK) aims to distribute its shares in YT and pay some cash on top and delist. That proposal was discussed in China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech.
Xiaomi Corp (1810 HK) (Mkt Cap: $74bn; Liquidity: $606mn)
Unexpectedly, on 10 March 2021, MSCI delayed its announcement about a possible deletion of Xiaomi from its indices until 12th March pending the possibility that Xiaomi obtains an injunction in the suit against the U.S. Defense and Treasury depts that it filed 29 January, seeking to remove Xiaomi from an official list of companies with ties to China's military. Xiaomi said its suit that the U.S. decision to designate the company as a "communist Chinese military company" was "factually incorrect" and asked the Washington DC District Court to declare the decision illegal.
links to:
Travis' insights: Will Xiaomi Get the National Team Bounce? & FTSE & S&P To Delete Xiaomi This Week; MSCI To Come and Brian Freitas's insight Xiaomi (1810 HK) Buyback: Surely Not at These Prices? followed by the latest addition discussing the court injunction MSCI Interrupted - Is The Xiaomi Ban Court Injunction A Game Changer? by Travis.
Shinsei Bank (8303 JP) (Mkt Cap: $3.8bn; Liquidity: $19mn)
11 weeks ago , for the end of 2020, Travis published my report 2021 High Conviction - Shinsei Bank idea. Since the close of the next day, the shares are up 46.7%. A large part of that performance has been due to the rise in the TOPIX Bank Index - up 26.7% in the same period. Much of that move has occurred in the past five weeks as The Great Rotation, driven by higher rates, a steeper curve, and inflationary expectations, has propelled last year's losers to this year's winners, and Tesla Motors (TSLA US), SaaS stocks, junk stocks, and others have underperformed. But there were a couple of other bits in the story too. A buyback, an asset sale, and understanding of the float dynamics given the over-arching goal of Shinsei and its shareholders is to be able to get the government out of its shares (and accompanying oversight) it purchased in March 2000.
(link to Travis's insight: 2021 High Conviction Update - Shinsei Bank Float Squeeze to Mitigate Near-Term)
Sawada Holdings (8699 JP) (Mkt Cap: $0.3bn; Liquidity: $1mn)
Sawada made an announcement (Japanese only) that its main operating entity, its 60%-held Mongolian Bank operating subsidiary Kahn Bank LLC had received a notice from the Mongolian Central Bank. The notice had three main points, that: a) the voting rights and dividend rights of "qualifying shareholders who became so without pre-approval from the Mongolian Central Bank might be suspended if shares sold by 30 June 2021 (with some technical detail in this portion); b) That changes in the number of shares held, and the fact that they are held, by qualifying and/or eligible shareholders must be pre-approved by the Mongolian Central Bank; & c) that Sawada Holdings must identify the natural person behind its own shareholdings by 30 June 2021.
(link to Travis' insight: Sawada (8699 JP) Stuck Between Mongolian Central Bank Idealism and Reality)
Back in December, Kerry Logistics Network (636 HK) IPO'ed Kerry Express Thailand (KEX TB). Last month Kerry Properties (683 HK) and Kerry Logistics Network (636 HK) ("KLN") announced a pre-conditional Partial Offer from S.F. Holding (002352 CH). This is an ongoing transaction - see Kerry Logistics (636 HK): SF Holdings' Pre-Conditional Partial Offer. Shangri-La Asia (69 HK), majority-owned by the Kerry Group, is well up on its March 2020 COVID low, and up 9.5% YTD. Around half of its hotels are in China, which have witnessed a strong uptick in local leisure and corporate traveling, generating positive EBITDA as early as June last year, the first time since the first outbreak of the pandemic. In Shangri-La Asia (69 HK): Stay Safe, with shares currently trading at 0.6x P/B against a pre-COVID average multiple of 0.8x, this is worth a second look.
Meiko is a Japanese designer and manufacturer of double-sided/multi-layer through-hole PCBs and slightly complex PCBs of other sorts, with factories in Japan, China, and Vietnam, and sales around the world. It is not a really exciting or terribly glamorous business, but it gets 10% EBITDA margins on that unglamorous business. The stock was listed on JASDAQ in 2000 but never bothered to make the jump to TSE. Now Meiko has announced that it had applied for such a reassignment in order to improve social creditworthiness, expand the investor base, and provide more financial flexibility. This may be the first explicit application by a JASDAQ-listed stock in the new TSE1 Listing Criteria era and as a TOPIX pre-event trade, it is worth a look.
(link to Travis' insight: TOPIX Inclusion Pre-Event for Meiko Electronics (6787))
Apollo Global Management Inc (APO US) has agreed to acquire Athene Holding (ATH US), the life insurance company it created at the height of the financial crisis, in an all-share deal worth $11 bn. Consideration. 1.149 APO US x 1 ATH US. The implied value is $56.94 per share for Athene (based on 5 March closing prices and using 191.6 mn of Athene Class A shares), for a total consideration to Athene shareholders of $11,018.6 mn, or an implied transaction value/assets of 5.45%, and 6.9x Fwd P/E. Jesus reckons play the spread in Apollo Integrates Athene.
ION Capital and Singapore's sovereign wealth fund GIC have offered to acquire Italian financial services group Cerved Information Solutions S (CERV IM) for €1.86 bn. There is a minimum acceptance condition of more than 90%, antitrust approval, and approval from the Office of the Italian Prime Minister. Link to Jesus' insight: Cerved Group - Castor Srl: Sweet Opportunity in Loans Gone Sour.
Spreads were mixed this week with 48 out of 100 observed pair spreads narrower and 52 wider. The big winner on the week was Financials with spreads 119bp narrower on average. Banks and Big Insurance generally narrowed.
(link to Travis' insight: Quiddity Weekly H/A: Financials Outpace Everything Else: Marketwide 87% Upside to A-Share Parity)
HSI Index Rebalance Preview. Potential inclusions in the index at the June review are Smoore International (6969 HK), Nongfu Spring (9633 HK), China Resources Beer Holdings (291 HK), Sunac China Holdings (1918 HK), Country Garden Services Holdings (6098 HK), China Gas Holdings (384 HK), JD Health (6618 HK), Hansoh Pharmaceutical (3692 HK) and Xinyi Solar Holdings (968 HK). Link to Brian's insight: HSI Index Rebalance Preview: Potential Changes in June.
STAR50 Index Rebalance June Preview. A maximum of 5 changes are permitted in a single review. At the June review, Brian sees Suntar Environmental Techn-A (688101 CH), Shenzhen Qingyi Photomask Ltd (688138 CH), Traffic Control Technology Co (688015 CH), Hillstone Networks Co Ltd (688030 CH) and Ningbo Solartron Technolog-A (688299 CH) being deleted from the index. The likelier inclusions are Ninebot Ltd (689009 CH), CanSino Biologics Inc (688185 CH), Sansure Biotech Inc (688289 CH), VeriSilicon Microelectronics (688521 CH) and Cathay Biotech Inc (688065 CH). The less likely inclusions are Beijing Huafeng Test & Con-A (688200 CH), Zhejiang Orient Gene Biote-A (688298 CH), Bio-Thera Solutions Ltd (688177 CH), Hangzhou Raycloud Technolo-A (688365 CH) and HitGen Inc (688222 CH). Link to Brian's insight: STAR50 Index Rebalance June Preview: Selloff Presents Opportunity.
ASX200 Index Rebalance. There are 6 inclusions and 6 exclusions in this review. This is more than what we expected - we had 3 adds and 3 deletes, and another 2 potential adds and 2 potential deletes. The inclusions are Codan Ltd (CDA AU), Champion Iron (CIA AU), Hub24 Ltd (HUB AU), Nickel Mines Ltd (NIC AU), Nuix Limited (NXL AU) and Pilbara Minerals (PLS AU). The exclusions are Bravura Solutions (BVS AU), Gwa Group Ltd (GWA AU), Sandfire Resources Nl (SFR AU), Smartgroup Corp (SIQ AU), Service Stream (SSM AU) and Tassal (TGR AU). Link to Brian's insight: ASX200 Index Rebalance: More Change Than Expected.
There are some subtle changes to the MOU terms announced by Sichuan Languang Justbon Service Group (2606 HK) announced earlier this week. Share to be acquired include 115,090,200 H shares AND 750,000 domestic shares or 65.04% of shares out, up from 64.62% in the initial announcement. The price per H shares will be RMB42.8546/share, up from RMB42.1105.
Phew - that was close. 89.32% voted FOR but the headcount scrapped in at 56.56%. Last day of trading in Soilbuild Business Space REIT (SBREIT SP) is the 26 March.
After all was said and done, the Tender Offer was completed, with Nippon Steel Corporation (5401 JP) getting to 19.9% after buying 1.625mm shares at JPY 1500/share. Pro-ration was quite high at 75.86%.
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 |
Guorui Properties (2329 HK) | 22.50% | Zhongrong | Outside of CCASS |
Global Mastermind (8063 HK) | 12.48% | Global Mastermind | Outside of CCASS |
Echo International (8218 HK) | 12.04% | Bluemount | Outside of CCASS |
Source: HKEx |
The following large movement(s) concern recently listed companies, and therefore are (likely) lock-up related.
Name | % chg | Into | Out of |
Values (1740 HK) | 10.60% | Zhongtai | Outside of CCASS |
Kwong Luen (1413 HK) | 12.66% | Space | Outside of CCASS |
Source: HKEx |
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