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)
NTT Docomo Inc (9437 JP) (Mkt Cap: $119bn; Liquidity: $270mn)
There were reports across the newswires of KDDI Corp (9433 JP) and other companies (including both Softbank Corp (9434 JP) and Rakuten Mobile) sending a letter to the Ministry of Internal Affairs and Communications), calling on Japan’s Telecommunications Ministry "to ensure a fair market environment amid NTT’s planned takeover of Docomo, arguing the deal could inhibit fair competition and development of the telecom market. In practical terms, the complaint is that NTT is too big, and that its size and infrastructure advantage, particularly in wireline and fibre optic capacity, would allow the new entity to be more competitive in business services, and more competitive in providing high volume low-latency 5G/IoT services across a broad base.
(link to Travis' insight: NTT/Docomo - The KDDI Quibble and NTT - Go Big Or Go Home)
Car Inc (699 HK) (Mkt Cap: $0.9bn; Liquidity: $4mn)
On the 10 November, Car announced the SPA between UCAR and BAIC had terminated. Separately, MBK Partners had entered into a SPA to acquire ~20.86% of shares in Car for HK$1.77bn ($4.00/share) from UCAR. MBK has now tabled a pre-conditional general cash Offer of $4.00/share, a 17.99% premium to last close. There are no outstanding dividends and no dividends are expected to be declared or paid during the Offer.
(link to my insight: Car Inc (699 HK): MBK's Firm Offer)
Shimachu Co Ltd (8184 JP) (Mkt Cap: $2bn; Liquidity: $30mn)
It became clear in a Nikkei article that Shimachu was going to succumb to the charms of bidder Nitori Holdings (9843 JP) and accept its proposal of a takeover at ¥5500. Shimachu had heretofore officially supported a bid by DCM Holdings (3050 JP) at ¥4200/share, but acceptance of Nitori means that its bid will not be officially "hostile." Shimachu and Nitori have now defined that support in a set of documents and the comment in the media from Shimachu was that DCM had not responded. DCM's Tender Offer expires on 16 November. It could extend as a free option.
(link to Travis insight: Nitori's Bid for Shimachu Goes Friendly as Shimachu Dumps DCM)
Kansai Mirai Financial (7321 JP) (Mkt Cap: $1.9bn; Liquidity: $1mn)
The Nikkei carried an article suggesting that Resona Holdings (8308 JP) would seek to take private Kansai. In his first insight, Travis suggested that the Tender Offer could end up being quite low compared to Tangible Book Value. And it is. ¥500/share is just over 0.4x tangible book value per share. The alternative is 1.42 shares of Resona. That is worth ¥524 per share of Kansai, which is a bit better. Travis can imagine that minority investors would be upset by this, but there appears not much they can do.
links to Travis' insight:
Resona To Take Kansai Mirai Private?
Resona To Take Kansai Mirai Private!
Vitalharvest Freehold Trust (VTH AU) (Mkt Cap: $0.1bn; Liquidity: <$1mn)
VTH, owner of one of Australia's largest aggregations of citrus and berry farms, has received an all-cash cash Offer of $1.00/unit (27.4% premium to last close) 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 (simple majority). The headline Offer Price is in line with VTH's IPO price, which was listed on the 1 August 2018. VTH has closed above $1.00 once since listing - $1.01/share to be exact.
(link to my insight: Vitalharvest (VTH AU): Macquarie Doesn't See A Lemon)
GS Retail (007070 KS) / Gs Home Shopping (028150 KS)
GS Retail and GS Home are to merge - 4.2236834 common shares of GS Retail will be issued for 1 share of GS Home. Gs Holdings (078930 KS)has a 65.75% stake in GS Retail and a 36.1% stake in GS Home. Upon completion of the merger, GS Holdings will have a 57.9% stake in the combined GS Retail. Foreigners currently own 53.6% of GS Retail and 15.3% of GS Home Shopping. The ex-rights falls on April 16 next year, followed by the dissenting opinion notice on May 13~27. The shareholder meeting is on May 28. The new shares will be listed on July 16. Trading tight to terms.
links to:
Douglas' insight: Korea M&A Spotlight: A Merger Between GS Retail and GS Home Shopping
Sanghyun Park's insight: GS Retail/Home Shopping Merger Swap: Currently at 3.4% Div-Adj. Spread
Ts Tech Co Ltd (7313 JP) announced a friendly deal to buy a 25% stake through a 41% premium partial tender offer and another stake via a third party allotment/placement at the same price to get to a 34.0% stake after the two-step transaction is complete.
The Board of Imasen apparently decided that giving negative control to another company at just over 0.4x book and 1.1x 5-year EBITDA (or zero EV if you consider cross-holdings and net receivables) was an appropriate thing to do. They were aided by two major Japanese investment banks who also thought that within "fair" value range.
It is not fair. Shareholders should be outraged.
And if it completes as planned, crossholders and insiders will own 66% of shares out, making an eventual squeezeout trade easy.
(link to Travis' insight: Imasen Electric Partial Tender - Set Governance to Ludicrous Mode)
Tohto Suisan (8038 JP) (Mkt Cap: $0.2bn; Liquidity: <$1mn)
Aso Corp announced a Partial Tender Offer to buy 1,329,180 shares of Tohto Suisan (8038 JP) or up to 3,979,580 shares. This partial offer is slightly confusing. The premium is low at +9% or so. There is a kind of "shareholder agreement" between the Board of Tohto Suisan and Aso Corp which appears to include setting a threshold for voting rights at either 33.4% or 50.1% but not a different level (unless "appropriate"). This LOOKS easy. It is not. And if it gets done, it will not be clear why it would remain listed.
(link to Travis' insight: Tohto Suisan Partial Tender Offer - A Weird Tender Which Leads To Listed Zombie-Ism)
Honshu Chemical Industry (4115 JP) (Mkt Cap: $0.2bn; Liquidity: <$1mn)
On 11 November 2020, Mitsui & Co Ltd (8031 JP) and Mitsui Chemicals (4183 JP) announced a transaction to take out minorities in jointly-held subsidiary Honshu. The result is a governance embarrassment for the two major acquirers, and the target company itself. And the Tender Offer is long-dated. It is announced today, but it is expected to start in May 2021 after receiving anti-trust approvals both in and outside Japan. But a situation with such an embarrassing valuation contains possibilities.
(link to Travis' insight: Honshu Chemical (4115) - An Embarrassment of Riches)
3P Learning (3PL AU) (Mkt Cap: $0.15bn; Liquidity: <$1mn)
In August 2020 when IXL made a friendly bid for 3PL, it was clear that not all shareholders who could have agreed did agree. Not a single large shareholder was signed up beforehand. One large shareholder later showed they were upset and bought more.
Now Indian sector giant BYJU has stepped in with a higher bid at A$1.45/share. IXL has a matching right but BYJU's bid is not official yet so they may not have to exercise it. If they do, the matching date is Monday. Expect this to trade tight or through the new terms.
(link to Janaghan Jeyakumar, CFA's insight: 3P Learning (3PL AU) : Indian Ed-Tech Giant BYJU’s Competitive Bid)
In Leyou Tech (1089 HK): Offer Doc Despatched, I discussed the despatch of Leyou Technologies (1089 HK)'s Scheme Document, the IFA review, and the fact the deal is effectively a lock, with a tight gross/annualised spread.
In Growing Investor Opposition to CCEP's Take Over Offer: Will There Be a Bump?, Oshadhi Kumarasiri discusses an increasing number of disgruntled shareholders of Coca Cola Amatil (CCL AU) with respect to the Offer from Coca-Cola European Partners plc (CCEP).
In Korea M&A Spotlight: Hyundai Motor In Talks to Acquire Boston Dynamics from Softbank, Douglas discusses the media reports that Hyundai Motor Co (005380 KS) is in discussions to purchase Boston Dynamics.
Sunac China Holdings (1918 HK) / Sunac Services (1516 HK) (SSH)
The IPO for SSH, the latest property management service company to seek listing, is open for applications. The Offer Price is expected to be announced on the 18 November, with the commencement of trading in the shares on the 19 November. SSH is the spin-off of Sunac China, who will own 72% in SSH after the IPO, down from 100% prior to a recent capitalisation.
(link to my insight: Sunac Services (1516 HK): Lofty Metrics In A Congested Space)
Evergrande Real Estate Group (3333 HK) (Mkt Cap: $29bn; Liquidity: $54mn)
Evergrande released a statement to the Hong Kong Exchange noting that it had terminated a restructuring plan with Shenzhen Special Economic Zone Real Estate & Properties - what was meant to be a backdoor listing of the largest part of Evergrande's business through an injection of its Hengda Real Estate unit.
(link to Travis' insight: Evergrande Terminates Hengda Backdoor Listing)
Trump’s Executive Order on Chinese Military Companies
There is, as of Thursday night, an Executive Order by the White House blocking US 'persons' investment in any of the names mentioned - a list now 31 names long, targeting PRC military companies. Travis would expect some significant selldowns within private indices such as MSCI, FTSE, TSE-related indices, S&P indices, etc. relatively quickly. He would expect some effort by the Chinese "national team" to buy stocks cheaply to show that it is not a problem. The treatment of index derivatives where the indices contain some of these stocks will be a problem. There is a POSSIBILITY that if this includes HSI and HSCEI and similar, that there will be a request to delay implementation, and that would mean the commencement would end up in a Biden administration's hands. However, for the single stocks, the big impact will come sooner rather than later he expects.
(link to Travis' insight: Trump's Executive Order on Chinese Military Companies)
In JREIT Offering: Itochu Advance Logistics (3493 JP) - Take It, Janaghan Jeyakumar discussed Itochu Advance Logistics Inv (3493 JP) ("IAL") announcement of a follow-on equity offering on 9th November 2020 in order to fund their recent acquisition of four logistics real-estate properties. The size of this offering could be approximately ¥15.6bn (~US$150mn) and the domestic and foreign allocations are expected to be around 95% and 5% respectively. The Issue price will be decided between the 16th and 18th November (typically it has been the first day of this window for most JREITs) and the application period will be the next business days immediately after the pricing date.
Jardine Cycle & Carriage (JCNC SP) / Astra International (ASII IJ)
Astra is up ~47% in the past six months, against (~5%) for JCNC, resulting in the discount to NAV at ~36%, around its all-time low. The current implied stub of negative S$8.76/share - marginally above its five and half year low of S$9.24/share - compares to the long-term average of negative S$2.96/share. There is a tendency for shares to bounce off this level over the past eight years.
(link to my insight: Jardine Cycle & Carriage: "Buy The Fact" On MSCI Deletion)
Encouraging data about a potential coronavirus vaccine from Pfizer Inc (PFE US) gives a boost to Nevada-gaming stocks, which now trade "rich" to their Macau gaming holdings. Conversely, Melco is trading cheap to MLCO - a discount to NAV at ~46%, compared with the 12-month average of ~38% - as Lawrence Ho continues to add to his holding. After a 2.5 month break, Lawrence continued buying shares in Melco in mid-October, albeit in small size. Lawrence has added 2.89% in Melco or 43.09mn shares year-to-date, taking his direct stake in Melco to 58.67% according to the HKEx (59.7% if using CapIQ numbers), and elevating his look-thru stake in MLCO to 33.9%.
(link to my insight: StubWorld: A Shot In The Arm For Gaming Stocks)
SAMR, China’s antitrust regulator, announced it is publicly soliciting opinions as to preventing anti-competitive behaviour among online platforms. This extends to collaborating on customer data, eliminating smaller payers, and implementing loss-making measures/operations to squeeze out competition. There is also mention of greater regulatory oversight of variable interest entities (VIE). This development follows the proposals discussed back in January this year, in which the regulators included the internet industry in its anti-monopoly laws, which heralded a renewed focus on the internet, and internet platforms specifically.
(link to my insight: Party Poopers: Reining In China's Internet)
In Huya – As We Suspected, Huya Shareholders Probably Got a Raw Deal, Mio reckons the recent set of results for both companies reinforces the fact Huya was a noticeably superior company and that a merger of near equals situation seemed a poor deal for Huya shareholders.
Rsa Insurance (RSA LN) (Mkt Cap: $9bn; Liquidity: $33mn)
UK insurer RSA soared 45% on 5 November on rumours of takeover. RSA later published a statement regarding the proposal and a further statement. Under the proposal, Intact would pay c. £3.0 bn and Tryg would pay c. £4.2 bn. RSA said that its Board "would be minded to recommend the proposal". The consideration of 685p/share is a 48% premium to last close. A dividend of 8p per share will be added.
(link to Jesus' insight: RSA - Intact Financial & Tryg: Generous Break-Up Takeover ProposalXn)
In MSCI Korea Nov IR: Latest Checking Before Posting Tomorrow, Sanghyun Park expected SK Biopharmaceuticals (326030 KS) and Sk Chemicals Co Ltd/New (285130 KS) to make the MSCI Korean November interim review. As discussed by Brian Freitas in MSCI Korea Index Rebalance Nov20: Big Impact on the Deletions as Inclusions Outperform, the inclusions were Doosan Heavy Industries & Construction (034020 KS), Sk Chemicals Co Ltd/New (285130 KS) and SK Biopharmaceuticals (326030 KS), while the deletions were Bnk Financial Group (138930 KS), Posco International Corporation (047050 KS) and Amorepacific Corp (Preferred) (090435 KS).
In KOSPI 200 Reshuffle Final Update: Incoming/Outgoing (8 Each) & Passive In/Outflow Estimates, Sanghyun Park looks at the KOSPI 200 December rebalancing.
MSCI Singapore Index Rebalance. There are just 2 deletions to the MSCI Singapore Free Index (SIMSCI INDEX) as Jardine Cycle & Carriage (JCNC SP) and Yangzijiang Shipbuilding (YZJSGD SP) make their exit, taking the number of index constituents to 19. Link to Brian's insight: MSCI Singapore Index Rebalance Nov20: Shrinking Number of Constituents.
Separately, in MSCI Singapore: SEA Change Coming in May 2021 and MSCI Singapore Index: Impact of SEA Inclusion, Brian discussed MSCI's announcement that foreign listings would become eligible for the MSCI Singapore indices starting from the May 2021 Semi-Annual Index Review. This means that Sea Ltd (SE US) will be eligible for inclusion in the MSCI Singapore indices at the May 2021 SAIR.
JPX Nikkei 400 Index Rebalance. here are 32 inclusions and 27 deletions to bring the number of constituents back to 400 and the changes will be effective after the close of trading on 27 November. Link to Brian's insight: JPX Nikkei 400 Index Rebalance: Better Late Than Never (32 Adds; 27 Deletes).
In The 2020 JPX Nikkei 400 Rebalance: Another Messy Year, Travis also delved into JPX Nikkei 400 Index Rebalance. In summary, he views the index as being pretty awful. Every year, since the guidelines were ann9ned in January 2013, he reckons the index is designed to fail. The index has the inherent ability to sell low and buy high. The construction methodology suggested a significant number of changes every year, and was designed to kick out companies after a bad year or two, when the stock price was low, then let them back in a couple of years later after results had rebounded.
MSCI Japan Index Rebalance. The inclusions are Capcom Co Ltd (9697 JP), Koei Tecmo Holdings (3635 JP), Harmonic Drive Systems (6324 JP), Azbil Corp (6845 JP) and Ibiden Co Ltd (4062 JP). The deletions are Maruichi Steel Tube (5463 JP), Yokohama Rubber (5101 JP), Daicel Corp (4202 JP), Kamigumi Co Ltd (9364 JP), Sumitomo Rubber Industries (5110 JP), Jgc Corp (1963 JP), Mebuki Financial Group (7167 JP), Nikon Corp (7731 JP), Park24 Co Ltd (4666 JP), Mitsubishi Materials (5711 JP), Benesse Holdings (9783 JP), Electric Power Development C (9513 JP), JTEKT Corp (6473 JP), Showa Denko K.K. (4004 JP), Sumitomo Heavy Industries (6302 JP), Seven Bank Ltd (8410 JP), Japan Prime Realty Investment (8955 JP), Mitsubishi Motors (7211 JP), Kawasaki Heavy Industries (7012 JP), Aozora Bank Ltd (8304 JP) and Isetan Mitsukoshi Holdings Ltd (3099 JP). Links to Brian's insight: MSCI Japan Index Rebalance Nov20: No Surprises with 5 Adds, 21 Deletes, and Travis' insight: MSCI Japan November 2020 Rebalance.
MSCI Taiwan Index Rebalance. The inclusions are Unimicron Technology (3037 TT) and Oneness Biotech (4743 TT), while the deletions are Eva Airways (2618 TT) and Formosa Taffeta Co (1434 TT). Link to Brian's insight: MSCI Taiwan Index Rebalance Nov20: Momentum Plays Underperforming.
MSCI ASEAN Index Rebalance. There are 2 additions and 2 deletions in Thailand, 2 deletions in Malaysia, 1 deletion in the Philippines, and 2 additions and 2 deletions in Indonesia. The inclusions are Delta Electronics Thai (DELTA TB), Sri Trang Gloves (STGT TB), Sarana Menara Nusantara (TOWR IJ) and Merdeka Copper Gold Tbk PT (MDKA IJ), while stocks that have been deleted from the indices are IRPC PCL (IRPC TB), TMB Bank PCL (TMB TB), Carlsberg Brewery Malaysia (CAB MK), Ytl Corp Bhd (YTL MK), Robinsons Land Co (RLC PM), HM Sampoerna (HMSP IJ) and XL Axiata (EXCL IJ). Link to Brian's insight: MSCI ASEAN Index Rebalance Nov20: Huge Impact of Passive Selling Expected.
MSCI India Index Rebalance. The inclusions are ACC Ltd (ACC IN), Adani Green Energy (ADANIGR IN), Apollo Hospitals Enterprise (APHS IN), Balkrishna Industries (BIL IN), Ipca Laboratories (IPCA IN), Kotak Mahindra Bank (KMB IN), Larsen & Toubro Infotech (LTI IN), Mrf Ltd (MRF IN), Muthoot Finance (MUTH IN), Pi Industries (PI IN), Trent Ltd (TRENT IN) and Yes Bank (YES IN), while the 2 deletions are Bosch Ltd (BOS IN) and LIC Housing Finance (LICHF IN). Link to Brian's insight: MSCI India Index Rebalance Nov20: FOL Changes See 12 Inclusions.
In Adani Green Energy - Will It Be Included In the MSCI Standard Indices?, Brian saw a high probability of the stock NOT being included in the MSCI Standard indices.
Singapore Airlines (SIA SP) is proposing to issue up to S$850mn of bonds, convertible into new ordinary shares. The initial conversion price is S$5.743/share, a 45.77% premium to last close. The maturity date is the 3 December 2025. If fully converted, this translates to 146.006mn new shares, or 5% of exiting shares out.
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 |
Global Mastermind (8063 HK) | 18.77% | Sino Wealth | Outside CCASS |
China South City (1668 HK) | 11.70% | UBS | GS |
The following large movement(s) concern recently listed companies, and therefore are (likely) lock-up related.
Name | % chg | Into | Out of |
New Oriental (9901 HK) | 83.39% | DB | Outside CCASS |
Remegen (9995 HK) | 15.61% | HSBC | Outside CCASS |
Kintor (9939 HK) | 13.80% | MS | Outside CCASS |
Tailam (6193 HK) | 20.00% | BoC | Outside CCASS |
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