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: $18.4bn; Liquidity: $21mn)
Following Jardine Matheson Holdings (JM SP)'s surprise announcement on the 8 March to acquire the 15.11% in Strategic Jardine Strategic Holdings (JS SP) it does not own, Strategic has now released its circular to shareholders. The special general meeting (SGM) will be held on the 12 April at 8AM - in Bermuda. There is no independent financial advisor casting an opinion on the fairness of the Offer consideration. The circular simply echoes that the Strategic's transaction committee unanimously recommends that independent Strategic shareholders vote in favour of the Amalgamation resolution at the SGM.
(link to my insight: Jardine Strategic: SGM On The 12 April)
Vedanta Ltd (VEDL IN) (Mkt Cap: $11.3bn; Liquidity: $61mn)
Vedanta Resources has upped the size of its offer from 371.75mm shares (10.00%) to 651mm shares (17.51%) and raised the price from Rs 160/share to Rs 235/share which means a total payment of Rs 152.985 billion, which is US$2.11bn. This takes them to 72.53%. It's on. The change in price is big. The change in size changes the risk parameters.
(link to Travis' insight: Vedanta (VEDL) Open Offer Raised in Price and Size!)
Tilt Renewables Ltd (TLT NZ) (Mkt Cap: $2.1bn; Liquidity: <$1mn)
After announcing a strategic review of its 65.5% shareholding in Tilt on the 7 December, a day later, renewable energy specialist Infratil Ltd (IFT NZ) received a non-binding Offer, by way of Scheme, from AustralianSuper, Australia's largest superannuation fund. The NZ$7.43/share Offer was a 22.2% premium to Infratil's last close, and a lifetime high. This was discussed in Infratil (IFT NZ): Big Super's Infrastructure Grab. On the 4 February, Tilt said it has received a number of non-binding indicative proposals.
(link to my insight: Tilt Renewables: Mercury/PowAr's Big Blow)
Takeei Corp (2151 JP) (Mkt Cap: $0.3bn; Liquidity: $4mn)
Japan-based wastewater management company Takeei and metal recycling company Rever Holdings Corp (5690 JP) announced after market-close on 18th March 2021 (J-only) that they had agreed to merge in a transaction that will see both companies joined under a new combined holding company. This is a friendly scrip Deal. Both managements have agreed to the terms and the Deal will be completed if the Acquirer Shareholders and Target Shareholders agree to the Transaction. Approval will be required from shareholders representing at least a two-thirds majority of the votes of the attending shareholders.
(link to Janaghan's insight: Takeei (2151 JP) - Rever (5690 JP) Merger: TOPIX Event to Be Triggered)
Vinythai Public Co (VNT TB) (Mkt Cap: $1.4bn; Liquidity: $3mn)
VNT announced PTT Global Chemical (PTTGC TB) (24.98%) and AGC Inc (5201 JP) (58.78%) have indicated their intention to delist VNT from the SET. PTTGC will offer to purchase shares at Bt39/share - a lifetime high. AGC will not tender any of its 57.78% stake in such an Offer.
(link to my insight: Vinythai (VNT TH): Delisting Offer From PTTGC)
Japan Asia (3751 JP) (Mkt Cap: $0.2bn; Liquidity: $4mn)
The now four-month-long and more-than-sordid affair which is the Japan Asia Group MBO. Japan Asia on 9 March announced it would propose a poison pill measure to the June AGM. Unbeknownst to everyone at the time, CIE had been buying more - 2.29% from 4 March through 9 March. That was announced on the 12th and 15th. Japan Asia's stock went ex-dividend, awaiting an EGM for shareholders to approve. On the 17th of March, City Index Eleventh announced they would re-launch another Tender Offer at ¥910/share this time - the old Tender Offer Price of ¥1,210 less the ¥300/share special dividend which just went ex-. On the 18th, JAG announced CIE's plans, and got upset that CIE had not responded to the JAG "question" posed in the threat to introduce a poison pill.
(link to Travis' insight: Murakami-San Launches New JAG (3751) Tender Offer)
Roc has now bumped its non-binding proposal to A$1.12/unit, either via a Scheme or from proceeds from an asset sale. A permitted dividend of A$0.025/unit, similar to that under MAFM's Offer, would be bolted on to that. Roc added it expects to submit a binding proposal on or about the 31 March 2021. This latest salvo from Roc is sure to trigger matching rights for MAFM. Expect the Scheme Meeting on the 31 March to be delayed. Trading at a gross/annualised spread of 2.2%/20.6% - assuming late April completion. I'd get involved. MAFM is expected to at least match Roc's non-binding Offer, if not trump it. And Roc is not out of the picture to reload again.
(link to my insight: Vitalharvest (VTH AU): Roc Blinks, And Bumps)
Procurri Corporation (PROC SP) (Mkt Cap: $0.1bn; Liquidity: <$1mn)
Singapore-based independent IT hardware reseller Procurri announced they received a Voluntary Conditional Cash Partial Tender Offer from an investment vehicle controlled by Singapore-based private equity fund Novo Tellus. The Offer Price for the Partial Offer is S$0.365 per share in cash and the Offeror intends to acquire 27.91% of the total number of shares. If the Offer is successful, the Offeror will hold in aggregate 51.0% of the company. The theoretical minimum fill ratio, if successful, is 39%.
(link to Janaghan's insight: Procurri Corporation (PROC SP): Partial Tender Offers Scant Opportunity)
GL Ltd (GLL SP) (Mkt Cap: $0.8bn; Liquidity: $2mn)
Back on the 15 January, Guoco Group Ltd (53 HK) made a voluntary conditional cash Offer for 70.84%-held GLL. The Offer Price of S$0.70/share was a 25% premium to last close and 0.73x P/NAV. The Offer carried an acceptance condition of 90%, including Guoco's stake, which could be reduced to 50%. It was a lacklustre Offer. The IFA agreed in the Circular, and said the Offer was not fair; but still opined it was reasonable. The Securities Investors Association (Singapore) (SIAS) chimed in, saying it thought the Offer was low-balled.
(link to my insight: GL Limited: Guoco Bumps & Declares Offer Unconditional)
The Tender Offer for Jih Sun Financial (5820 TT) by Fubon Financial Holding Co (2881 TT) closes on 23 March. There appears to be substantial regulatory support for the deal as a first among what may be many such future financial holding company consolidations. But there remain questions as to whether this gets done or not. As discussed in Travis' insight Jih Sun Financial Deal Down To The Wire, the trade from here, for the next short period, is to wait. He has recommended to be long the Tender Offer situation, as described in previous insights. IF the tender is not extended, and breaks, he would buy any large dip which caused Jih Sun Financial to underperform a basket of peers by substantially more than 10%. That would be as a long-short trade.
CK Asset Holdings (1113 HK) intends to acquire four assets held by the Li Ka Shing Foundation by issuing new shares in tandem with a share buyback - equivalent to the new shares issued - the effect of which would elevate the Li family's stake to 45% from 36%. CK Asset will issue 333mn new shares - around 8.3% of the total issued shares - at HK$51/share, worth HK$17bn to the foundation for the acquisition. It will follow this with a share buyback, also 333mn shares, at HK$51/share. The consideration share price is a 10% premium to the average closing price for the last 10 consecutive trading days. The target companies include a 20% equity in UK Power Networks, a 20% stake in Northumbrian Water, 10% of Wales and West Utilities, and 10% of Dutch Enviro Energy. The remaining stakes of these assets are held by the CK family, including CK Infrastructure Holdings (1038 HK), CK Hutchison Holdings (1 HK), and Power Assets Holdings (6 HK). The sale and buyback are interconditional. The key condition is the whitewash waiver vote such that the Li family is not obligated to make an MGO for CK Assets.
Xiaomi Corp (1810 HK) (Mkt Cap: $85bn; Liquidity: $618mn)
First, the US District Court for the District of Columbia granted a preliminary injunction against enforcement of the Department of Defense (DoD) restrictions that would have taken effect from 9.30am EST on 15 March and would have precluded US investors from buying Xiami. Next, MSCI announced that it would not delete Xiaomi from its indices following the company obtaining a preliminary injunction - this removed a 1.1bn share overhang. Then, FTSE announced that Xiaomi would be eligible for inclusion in the FTSE All-World and other indices from the June 2021 SAIR as long as there were no developments that would cause Xiaomi to fall within the scope of EO 13959.
links to:
Travis' insight: FTSE Likely, Ceteris Paribus, to Re-Include Xiaomi in June
Brian Freitas' insight: Xiaomi (1810 HK) - Back in the Game (For Now)
Kumho Petro Chemical (011780 KS) (Mkt Cap: $5.8bn; Liquidity: $133mn)
Kumho is in play. It is currently in a M&A fight for the control of the company between Park Chul Wan (Senior Vice President at Kumho Petrochem) and Park Chan Koo (Chairman of Kumho Petrochem). Park Chul-Wan reckons his uncle is making strategic blunders that are destroying shareholder value - such as acquiring a highly indebted resort - wants higher dividends, share buyback with cancellation, new business investments that may add additional long-term value, and the separation of ownership and management.
(link to Douglas Kim's insight: The M&A Fight for Kumho Petrochem - Time Is On the Side of Park Chul Wan)
Kunlun Energy (135 HK) (Mkt Cap: 9.2bn; Liquidity: $19mn)
Kunlun has outperformed peers substantially in the past month. Earnings should be out on the 23rd of March. First payment for the Disposal should be end-April. Second payment is ~two months after that, at latest. The Special Dividend should go ex- in June. If you buy the stock today at HK$8.08/share, you are buying roughly HK$5.20-5.50 of stock, and HK$2.58-2.88/share of Special+Regular Dividend. There may be more guidance about the quantum of the dividend in a week with earnings, but if not, it is largely defined as near HK$2.50 at a base case.
(link to Travis' insight: Kunlun Energy (135 HK): It's Different Than You Think)
Imperial Hotel (9708 JP) (Mkt Cap: $1.1bn; Liquidity: <$1mn)
the Nikkei carried an article which said that today Imperial Hotel (9708 JP) had decided to renovate its flagship hotel Imperial Hotel Tokyo. This is a long-awaited development. One significant possibility is that Imperial Hotel does not remain independent. This is something to keep on one's radar screen. Travis doesn't see a huge amount of upside because he doesn't think the buyer has to pay up much. Shareholder structure says it is a done deal. But it is certainly something to watch.
(link to Travis' insight: Imperial Hotel (9708) - Redevelopment Might Hide an LBO Story)
On the 29 January 2021, Shandong Chenming Paper A (000488 CH)/(1812 HK) announced the proposed listing of its domestic (B-shares) on the Hong Kong Stock Exchange, as H-shares. The circular is here, and shareholders approved the transfer on the 9 March. B-shares closed (at the time of my insight: Shandong Chenming Paper (1812 HK): The H/B Convergence Trade) at HK$5.49/share. Yet the H-shares - in which the B-shares will be converted into - are trading at HK$6.70/share. On the expectation of a 3-6 month timeline to complete the conversion, if you can source borrow on the H's, do so, and buy the Bs.
Heading into the lock-up expiry Sumeet Singh (in Tencent Placement Lock-Up Expiry - Block and Buyback Linked Holdco Trade Update) would be inclined to short Tencent Holdings (700 HK) and go long Prosus (PRX NA) or if you prefer Naspers (NPN SJ) (as it still has the buyback ongoing). The lock-up will expire on 23rd Mar 2021. Tencent will report its full-year results on 24th Mar 2021. The selldown in 2019 was done one day post-Tencent results announcement.
Baidu (BIDU US)/ Baidu (9888 HK) (Mkt Cap: $92bn; Liquidity: $2.8bn)
Bilibili Inc (BILI US) / Bilibili Inc (9626 HK) (Mkt Cap: $38bn; Liquidity: $0.9bn)
Baidu's and Bilibili's Secondary Listing on the HKEX (388 HK) is the 23 March. It will be tough for either stock to get Fast Entry into the Hang Seng China Enterprises Index (HSCEI INDEX) but a lot bit easier to get Fast Entry into the Hang Seng Tech Index (HSTECH INDEX). There is a high probability of Baidu being included in the Hang Seng China Enterprises Index (HSCEI INDEX) and the FTSE China 50 index at the September reviews, while there is also a possibility of inclusion in the Hong Kong Hang Seng Index (HSI INDEX) at the September review, though the probability is lower. There is zero probability of Fast Entry into the HSCEI, a medium probability of Fast Entry into the HSTECH and a much better probability of Fast Entry into the Hang Seng Composite Index (HSCI) if a large number of ADR holder register their shares in HK CCASS and if most of those holder move their shares out of the ADR depository.
Shinsegae Group (including E Mart Inc (139480 KS) and Shinsegae International Co (031430 KS)) have agreed to a stock swap worth ₩250bn ($221mn) with Naver Corp (035420 KS). The main reason, reckons Douglas in Shinsegae Group's Stock Swap With Naver & Entrance of SKT to Buy Ebay Korea, is for this stock swap is to strengthen the partnerships among these companies to compete more effectively in the Korean e-commerce sector against major players such as Coupang (CPNG US).
The Nikkei newspaper reported that the Bank of Japan would increase the range of fluctuation permitted around its long-term interest rate guidance policy to 0.25% plus or minus vs the current center rate of 0.20%. The bigger news in terms of markets is likely to be the news about ETFs. The BOJ has had a "Target ETF Purchasing Rate" of ¥6 trillion/year for the past few years though actual purchasing has fluctuated up and down with demand (and famously briefly popped last March in the covid-crash). The new guidance, according to the Nikkei, will be that the ¥6 trillion/year target will be abolished and the BOJ will only step in when markets get turbulent.
(links to Travis' insight: Changes In BOJ ETF Buying - Which Stocks Impacted and How?)
GiGhas announced a tachiaigai bunbai equity offering stating that they will be working towards to a move to the TSE Prime Market. The stock is currently listed in the Second Section of the Tokyo Stock Exchange and if they qualify for a move to the Prime market, that would trigger an Inclusion into the TOPIX Index. However, to be able to qualify for a such a move, the company will have to satisfy the relevant Section Transfer requirements. In this insight, we take a look at the potential of this company to satisfy the Section Transfer requirements, the possible timeline of events, and the upside potential of the event.
FaithNetwork Co Ltd (3489 JP) (Mkt Cap: $0.1bn; Liquidity: <$1mn)
FaithNetwork yesterday announced a tachiaigai bunbai offering to take place between the 26th and 31st of March. Normally, there will be an announcement on the day before the period starts, announcing the price of the offering (usually a 2-4% discount from the close on the day before the offering period starts (i.e. 25th March likely in this case)). The goal in this case is to lower family ownership so that the company will not be liable for taxation rates for "family-owned companies" which is what happens when the family owns more than 50% of the shares outstanding.
This changes the entire dynamics of the trade, and it is highly surprising that this would occur this late after the announcement of the ascension to the TSE1. It was not necessary or the TSE would have made reassignment conditional. This is by choice.
As a company, the fundamentals are still decent. As an Inclusion Event, the Inclusion Parameters have now changed. Sell if you are in it for the event.
(link to Janaghan's insight: FaithNetwork TOPIX Inclusion: And Then The Murders Began)
Global Cord Blood (CO US) (Mkt Cap: $0.6bn; Liquidity: $1mn)
On the 4 June 2019, Cordlife (CLGL SP) announced a non-binding proposal for GCB, via the issuance of 2.497bn shares worth S$1.248bn or an indicative Offer Price of US$7.50/share. Some 18 months later, Cordlife announced the termination of the proposal. On the 2 March, less than a month after Cordlife walked away, GCB announced the receipt of a non-binding acquisition proposal from a wholly-owned subsidiary of Haitong International Securities Group (665 HK). The consideration under the proposal is US$5/share.
(link to my insight: Global Cord Blood: Haitong Raids The Bank)
Bausch Health Companies (BHC US) (Mkt Cap: $12bn; Liquidity: $150mn)
Bacl on August 16, 2020, Robert Sassoon discussed the potential impact of the decision by Bausch to spin off its largest revenue generator, the Eye Health business (Bausch & Lomb), into an independent publicly traded entity. Although details behind the proposed transaction at the time were sparse, his initial assessment was that the proposed corporate restructuring event along with the company's debt reduction efforts promised to be a substantially value-creating one.
(link to Robert's insight: ActivistTalk: Why We Think There Is Even Mor Value In Bausch Health Companies' Pending Restructuring)
Spreads narrowed sharply this week with 68 of 100 liquid spreads narrowing, 32 widening. The big winner on the week was Consumer narrowing 2.46% as every spread in the space narrowed despite five of six stocks falling in Hs (i.e. As fell even more). But overall, it was a decent week. Only two sectors saw spreads widen (Energy and Utilities), both accompanied by net southbound selling in the week to Wednesday (the last day to which we have granular name-by-name data).
Following Jardine Strategic Holdings (JS SP)'s acquisition by Jardine Matheson Holdings (JM SP) a spot will open up on the FTSE Straits Times Index (STI) (STI INDEX) that will need to be filled to keep the number of index constituents at 30. Frasers Logistics & Industrial Trust (FLT SP) is the most likely candidate that to fill that vacant spot in the FTSE Straits Times Index (STI) (STI INDEX). Suntec REIT (SUN SP) is the only stock that is a member of the MSCI Singapore Free Index (SIMSCI INDEX) but not a member of the FTSE Straits Times Index (STI) (STI INDEX). That could soon end since Suntec is a potential deletion at the MSCI May SAIR.
(link to Brian's insight: Pair Trade: Long Potential STI Inclusion/ Short Potential SIMSCI Deletion)
Global Clean Energy Index. The S&P Global Clean Energy Index is designed to measure the performance of 30 companies from around the world that are involved in clean energy-related businesses. There are two ETFs that are benchmarked to the index and these ETFs have seen massive inflows over the last year. This has caused liquidity issues in the underlying stocks and has led to S&P having multiple market consultations to reduce constituent concentration, easy liquidity limitations, and improve index replication. The changes due to these market consultations will cause large passive flows on the stocks. A few stocks have moved substantially over the last couple of months but there could be more in store for a few of them. Link to Brian's insight: Global Clean Energy Index: MASSIVE Changes Coming Up; 30-50% One-Way Turnover.
S&P500 Index Rebalance. There are 4 additions - Nxp Semiconductors Nv (NXPI US), Penn National Gaming (PENN US), Generac Holdings (GNRC US) and Caesars Entertainment (CZR US). To balance that out, there are 4 deletions - Flowserve Corp (FLS US), Sl Green Realty (SLG US), Xerox Corp (XRX US), and Vontier Corp (VNT US). Link to Travis' & Brian's insights: S&P500 March Rebalance: $18-21bn 1-Way & Global Clean Energy Index: MASSIVE Changes Coming Up; 30-50% One-Way Turnover.
FTSE Index Rebalance. The March Semi-Annual Index Review for the FTSE Global Equity Index Series (GEIS) becomes effective after the close of trading on 19 March. There are a lot of stocks that will have passive buying and selling across the region due to their inclusion/exclusion from the FTSE All-World and All-Cap indices, as well as stocks migrating between the two indices. Link to Brian's insight: FTSE Index Rebalance: India & Taiwan Perform Well; Identifying Reversal Candidates.
Jardine Cycle & Carriage (JCNC SP) has made an unconditional Offer for Cycle & Carriage Bintang (CNCB MK) at R<M2.40/share.
Kerry Properties (683 HK) said it would: "declare a special dividend to distribute approximately 25% to 30% of such net proceeds" from the sake of shares in Kerry Logistics Network (636 HK).
China Youzan Limited (8083 HK) delays the despatch of the Scheme Document no later than the 15 June.
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 |
Geotech Holdings Ltd (1707 HK) | 54.73% | Bocom | HSBC |
Magnus (1172 HK) | 28.00% | Get Nice | Outside CCASS |
Itc Properties (199 HK) | 10.00% | Oshidori | Get Nice |
Chen Xing Development Holdings (2286 HK) | 20.00% | Shanghai Pudong | Shanxi |
Impro Precision Industries (1286 HK) | 21.24% | Citibank | HSBC |
Didi (8130 HK) | 19.23% | Shanghai Pudong | Shanxi |
Jinshang Bank Co Ltd (2558 HK) | 10.30% | Shanghai Pudong | Shanxi |
Sterling (1825 HK) | 37.50% | Yuzhou | Outside CCASS |
K Group (8475 HK) | 20.80% | Easy | Outside CCASS |
China Best Group Holding (370 HK) | 12.59% | Emperor | Outside CCASS |
Vision Values Holdings (862 HK) | 31.88% | Halcyon | Haitong |
Sino Vision Holdings (8086 HK) | 26.35% | Freeman | Boci |
Kinetix (8606 HK) | 11.87% | CNI | Cepa |
Gcl New Energy Holdings (451 HK) | 10.79% | Shun Loong | GF |
Source: HKEx |
The following large movement(s) concern recently listed companies, and therefore are (likely) lock-up related.
Name | % chg | Into | Out of |
Autohome (2518 HK) | 49.48% | DB | Outside CCASS |
SMC (2381 HK) | 75.00% | MS | Elstone |
E-star (6668 HK) | 69.81% | UBS | Outside CCASS |
Hygeia Healthcare Group (6078 HK) | 15.34% | Outside CCASS | |
Source: HKEx |
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