Last Week in Event SPACE ...
Softbank Group (9984 JP) announced a buyback. It is ¥1 trillion or nine billlyun dollars.
(This insight covers specific insights & comments involving Stubs, Pairs, Arbitrage, share Classifications, and Events - or SPACE - in the past week)
Note: because of changes to the formatting at Smartkarma, this is the last SPACE insight where the entire week's summary (and the occasional Dr. Evil) appear above the line.
Softbank Group (9984 JP) (Mkt Cap: $100bn; Liquidity: $1bn)
The buyback programme as announced is to spend up to ¥1tn buying back up to 250,000,000 shares. Whichever limit is reached first is the limit for the programme. Of course, Softbank has a history of announcing new programmes before the old one is even finished if it has not had the appropriate effect. In this case, the appropriate effect would be a narrowing of the Discount to NAV. The buybacks in summer and winter of 2020 saw ¥500bn bought in a quarter where this one suggests a ¥1 trillion buyback could take a year. ¥1 trillion at (the then) last price was 162mm - bout 29% of Real World Float.
(link to Travis' insight: Softbank Buyback - $9 Biiiilllyun Dollars)
Sydney Airport (SYD AU) (Mkt Cap: $16.7bn; Liquidity: $53mn)
SYD granted the Sydney Aviation Alliance (SAA, comprising IFM Investors, AustralianSuper, QSuper, and Global Infrastructure Partners) non-exclusive due diligence on the 13 September after receiving an A$8.75/share conditional proposal - a 51% premium to the undisturbed price on the 4 July 2021. This followed rejections from SYD of an $8.25/share proposal on the 15 July, and an $8.45 bid on the 16 August. Now SYD has entered into a Scheme Implementation Agreement (SID) with SAA. The offer consideration is unchanged at A$8.75/share. As previously indicated, UniSuper (SYD's largest shareholder with 15.01%) will roll over its equity stake into the Consortium, rather than receive the cash consideration. The bid values SYD’s equity at $23.6bn. It is the largest ever cash-bid for an Aussie-listed company.
(link to my insight: Sydney Airport's (SYD AU) SID With SAA)
Singapore Press Holdings (SPH SP) (Mkt Cap: $2.6bn; Liquidity: $9mn)
On October 29, when Keppel Corp (KEP SP)'s Consideration was trading at S$2.09 per SPH share while the shares were trading at S$1.99/share, a new entity called Cuscaden Peak Pte. Limited, backed by Hotel Properties Limited, Capitaland, and Mapletree Investments - two Temasek-backed entities - came out and proposed a bid of S$2.10/share in cash plus the S$0.03 dividend to come. The same day Keppel said it would think about how to respond. The shares bounced, and traded "through terms" with Keppel's terms jumping as some arbitrageurs bought back their REIT baskets. Keppel has now bumped its cash component.
(link to my insight: Huat Ah! SPH Holders So Shiok, Keppel (So Kiasu!) Adds 20 Cents - Swee!)
Oil Search Ltd (OSH AU) (Mkt Cap: $6.4bn; Liquidity: $34mn)
OSH's Scheme Booklet is now out. The Scheme Meeting will be held on the 7 December. The Independent Export says the Offer is fair. The Scheme is also subject to certain PNG (Securities Commission and Independent Consumer and Competition Commission [ICCC]) and other regulatory approvals (CFIUS, now received) being obtained. PNG's competition watchdog, the ICCC, announced on Twitter that it has received an Authorisation Application from Santos on the 4th November concerning its proposed merger with Oil Search. The full application is here and the Q&A here.
Santos' application, not surprisingly, concludes the transaction will not substantially lessen competition in any relevant market, and the public benefits of the transaction outweigh the public. "Accordingly, Santos requests that the ICCC provide clearance (or alternatively, authorization) for the Transaction".
Additionally, the industry sector in which the PNG LNG Project operates is a highly regulated one. The powers given under the Oil & Gas Act include the ability to intervene if there is any suggestion of use of market power or other anti-competitive conduct. The Oil & Gas Act effectively controls the domestic price of natural gas. All told, expect the ICCC to sign off on the deal.
(link to my insight: Oil Search (OSH AU): Scheme Booklet Out. Meeting on 7 December)
Nippo Corp (1881 JP) (Mkt Cap: $4.3bn; Liquidity: $21mn)
Activist/agitator in Japan, Oasis Capital Management, has set up a website called www.protectnippo.com. The website calls for interested parties to come forth if they wish to bid, saying that the Special Committee of NIPPO and NIPPO Board, and ENEOS Board have said that those who come forth would not be considered "hostile." Apparently, there have been interested bidders but each has refrained so far because they would be perceived as hostile simply because the bid was unsolicited. This is, of course, not theoretically possible, because the Special Committee in this case noted in their Announcement of Opinion that there was no need for a Direct Market Check mechanism, and instead shareholders might rely on the Indirect Market Check effect of the Tender Offer being 30 days long, allowing other interested parties to bid.
Links to Travis' insight:
NIPPO (1881 JP) - Belated Cowbell, Worth Getting Involved
NIPPO (1881) Tender Offer to Launch - May Not Be A Done Deal
In a parent-sub consolidation which should be no surprise to anyone, simultaneous to the earnings announcements, Toppan Printing (7911 JP) announced that it would launch a Tender Offer to buy out minorities in 60%-held subsidiary Toppan Forms at ¥1,550/share. The deal comes at a 51.7% premium and while not an all-time high, it is a significant jump on recent trading levels, and is reasonably close to book value. But that doesn't mean it is the right price.
(link to Travis' insight: Toppan Printing Takes Out Subsidiary Toppan Forms (7862))
Australia-based medical equipment suppliers Paragon Care (PGC AU) and Quantum Health (QTM AU) announced today they had entered into a Scheme Implementation Deed according to which Paragon would acquire 100% of Quantum in an all-scrip Deal. Quantum Shareholders will receive 0.243 Paragon Shares per Quantum Share. Following the completion of the Deal, Quantum will be delisted and Paragon will be the surviving company. The Deal is conditional on the receipt of Quantum Shareholder approval and the completion date is expected to be in February 2022. Link to Janaghan Jeyakumar's insight: Paragon - Quantum: All Scrip Merger Could Be a Done Deal
Apparently, according to OK Corp., Kansai Super Market (9919 JP)'s third-largest shareholder, at the EGM to approve the Kansai Super's merger with two of H2O's unlisted units. one shareholder abstained, but after the vote, was allowed to change this to for, and the vote, needing two-thirds got 66.68%. OK Corp has filed a petition with the Court for a preliminary injunction for the merger scheduled for 1 December based on improper procedure at the EGM. Travis has popcorn. Shocking Shenanigans at the Kansai Super EGM and OK Says Chotto Mattaaaa!!!
Hoshino Resorts Reit (3287 JP) ("HRR") announced a follow-on equity offering after market close on 10th November 2021 to fund part of their recent property acquisition. The primary offer quantity is 19,630 units. In addition, there will also be an over-allotment quantity of 969 units. The total size of this offering could be roughly ¥13.8bn (~US$120mn). HHR has a very poor track record when it comes to follow-on equity offerings. HHR seems significantly overvalued against other JREITs. In Hoshino Resorts REIT (3287 JP): Offering Seems Unexciting, Janaghan would avoid the offering.
Brother Industries (6448 JP) announced a takeover of its TSE2 and Nagoya2-listed subsidiary Nissei Corp (6271 JP). This is a takeover which should have been expected. It was cheap, illiquid, and one might not have been able to predict the timeline, but given these deals are occurring with some regularity, it would seem that this bet and others are OK bets. The problem one has is good target governance. That is lacking in most of these deals and this one is no exception. But this deal is done, and there is not much one can do about it except go nuclear (buy a big stake in the company at a higher price and make a lot of noise). Even then it would be almost impossible. The trade is a pure balance sheet risk arb trade. Link to Travis' insight: Brother MBO/LBO of Nissei Corp (6271) - Another Too-Low Price Parent/Sub Takeout
Katakura Industries (3001 JP) announced on 8 November that KK Katakura - a private company 50/50 owned by the CEO and the Chairman - would launch a Tender Offer to take the company private in an MBO/MEBO at ¥2,150/share. For hard event people, Travis would wait until the "overbid premium" comes down a little. He could see a bump. Getting another ¥100 out of this given the LBO finance would seem easy. For those who see this as a Murakami target, he'd buy at ¥2250. If he buys and keeps the price there, it would be "easy" for the BUYERS to bump to that price. And he has ammunition, and he would only get involved if there was real room to gain. He would not jump in to buy 10% of a company for an extra ¥100 yen. Link to Travis' insight: Activist Target Katakura Industries (3001) Subject to an MBO Takeout
A fund linked to Polaris Capital on Friday 12 November announced it would launch a Tender Offer to buy out specialty systematised construction contractor/lessor Space Value Holdings (1448 JP). Sometime activist Aslead Capital and some of its funds own 24%. They have agreed to sell. The premium is not great, and comps go for more, but shareholder structure suggests this is "easy." Link to Travis' insight: Space Value Holdings (1448) LBO
Japan Petroleum Exploration (1662 JP) / Inpex Corp (1605 JP)
When the Inpex buyback programme was announced the previous Friday, and the ToSTNeT-3 buyback was announced with the footnote that Japex intended to sell shares to the tune of ¥50bn, Travis wrote about the outlook post ToSTNeT-3 buyback for both companies in INPEX Buyback Offers 2 Opportunities - INPEX (1605 JP) and INPEX Buyback Offers 2 Opportunities - JAPEX (1662 JP).
(link to Travis' insight: JAPEX Profit and BUYBACK - More To Go)
Singtel (ST SP) / Bharti Airtel (BHARTI IN)
SingTel announced a net profit of S$954mn in the 1H22 (Mar Y/E), an increase of 105% yoy. These earnings continue to highlight an improving business environment. Amid improving earnings, the market is assigning S$6.7bn less for the unlisted ops since the beginning of the year. Plus you also have the monetisation of non-core assets together with other infrastructure assets up for sale.
(link to my insight: SingTel (ST SP): Steep Discount Amid Strong First-Half Results)
In my weekly StubWorld piece, Keisei Electric Railway Co (9009 JP), which was already trading with an extreme disconnect with 22%-held Oriental Land (4661 JP), is now even further out of whack; Doosan Corp (000150 KS) is trading rich to 40%-held Doosan Heavy Industries & Construction (034020 KS), although borrow is not cheap; and a new holding company structure for Microport Scientific (853 HK) following the recent listing of Shanghai MicroPort MedBot Group (2252 HK). Re: Keisei, I think what is possibly happening here is that a few RV funds lost money in October and are unwinding positions into year-end.
Back in August, BHP decided to launch a process to achieve unification of its two entities - BHP Group (BHP AU) (a.k.a. "BHP Limited") and BHP Billiton (BLT LN) (a.k.a. "BHP PLC"). This was discussed by me in BHP Limited (BHP AU): DLC Reunification. Travis discussed the complicated mechanics of the approvals and flows in BHP DLC Unification - On Dirt-Diggers and Deckchairs the same day, and recommended to put the risk arb trade on when it is wide; SELL BHP: There would be sell flow so get ahead of it; SHORT BHP vs Rio Tinto Ltd (RIO AU): TRADE THE EVENT RANGE: Short BHP vs Rio then. Cover/switch direction near the end. Apart from the Rio trade, the other trades worked.
(link to Travis' insight: BHP DLC Unification - Spread Narrower, Waiting on the Circular and Management Press)
Just plain horrible. Following an indicative pre-market sell-off of 35%, 51job closed down 19.2%, and is now 20% adrift of the undisturbed price. The news? As per 51job's announcement: "that certain members of the buyer consortium that formed Garnet Faith Limited to acquire the Company ... have been in consultation with Chinese regulators on recent regulatory changes in China that may be applicable to the Company and the Proposed Transaction. The consultation process by these buyer consortium members is currently ongoing and a clear timeline to its completion cannot be provided at this time."
Toshiba Corp (6502 JP)'s plan to split itself into three units was, as we suggested, decidedly underwhelming. Link to Mio's insight: Toshiba – Damp Squib Is Damp
Japan-based medical devices and healthcare solutions provider PHC Holdings (6523 JP) was listed in the First Section of the Tokyo Stock Exchange (TSE) on 14th October 2021. It was kind of a disaster. The stock opened 4% off - at the stabilisation price - and 3 minutes later was down 14.4%. That said, when a company gets listed on the TSE First Section, it subsequently gets included in the TOPIX Index and as a result, TOPIX-tracking funds will have to purchase the stock during an Inclusion Event which presents interesting trading opportunities for active investors to generate sharp market-neutral returns in the space of few trading days. In TOPIX Inclusion: PHC Holdings (6523 JP), Janaghan takes a look at the timeline and the parameters of the Inclusion Event and the potential trading opportunities surrounding it.
Lord Rothermere has agreed to pay 255p a share for Daily Mail & General Trust (DMGT LN) plus debts, up 1.6% from an £810 million or 251p a share proposal first made in July. The deal will be financed with cash from the cash element from the special dividend. The deal is expected to close. Gross spread as of 10 November was 8.5%. Recommendation is long DMGT LN. Link to Jesus Rodriguez Aguilar's insight: RCL/DMGT: Package Value and Spread
The bid for alstria office reit-ag (AOX GR) was €19.5/share in cash, above expectations and the almost same level as Capital IQ consensus 22e NAV (€19.37/share). The offer has been well timed and taking advantage of the slow recovery in German offices. Brookfield increased its shareholding since bid rumours surfaced. The gross spread is c. 0% for a friendly deal highly likely to close, at the current offer price. Link to Jesus' insight: RCL/DMGT: Package Value and Spread
This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks. I number 49, mostly firm, deals around the region.
(link to my insight: Asia-Pac Weekly Risk Arb Summary: Sydney Airport, Oil Search, Nippo, Singapore Press, Toppan Forms)
My ongoing series flags large moves (~10%) in CCASS holdings over the past week or so, moves that are often outside normal market transactions. These may be indicative of share pledges. Or potential takeovers. Or simply help understand volume swings.
Name | % chg | Into | Out of |
Golden Power (1783 HK) | 30.00% | Wealth | Chaoshang |
Evergreen (1962 HK) | 29.15% | UBS | Kingsway |
Jiaxing Gas (9908 HK) | 11.60% | Citi | Bocom |
Amuse (8545 HK) | 11.36% | Easy | St Chart |
Heng Hup (1891 HK) | 51.00% | Shenwan | Outside CCASS |
Source: HKEx |
Name | % chg | Into | Out of |
Ch General (2175 HK) | 21.48% | Fulbright | Outside CCASS |
Beijing Capital Jiaye Proper (2210 HK) | 20.64% | CICC | Outside CCASS |
HC Env (2265 HK) | 17.27% | First Shanghai | Outside CCASS |
Source: HKEx |
I listen to a bunch of music when writing insights. Here are a handful of tunes, old & new, that piqued my interest during the week: Falle Nioke & Ghost Culture's Leywole, Radiohead's Follow Me Around, Alex Gopher's You, my baby, and I, Little Simz's Woman.
What are you listening to?
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