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)
Vedanta Ltd (VEDL IN) (Mkt Cap: $6.6bn; Liquidity: $31mn)
VEDR theoretically has until the third week of September to file with the Exchange in order to complete but that is playing it as unsafe as possible. Travis would not be surprised to see an Approval In-Principle this week or next. Then the timeline is fixed, and VERY short. There is US$3.15bn of funding taken down. US$1.75bn of that is very short-term. Another US$0.6-1.1bn should probably be taken down near-term in terms of a letter of credit against the syndicated loan VEDL has taken down this past week. If VEDR wants, it could relatively easily pay INR 200/share.
(link to Travis Lundy's insight: Vedanta: Reaching The End Game)
Cardinal Resources Ltd (CDV CN) (Mkt Cap: $0.4bn; Liquidity: $2mn)
CDV announced that Shandong Gold Mining Co., Ltd. (1787 HK) intends to increase its Offer Price to A$1.00/share. This Offer remains subject to a minimum acceptance condition of 50.1%. Shandong's offer is a 118% premium to Nordgold's initial proposal back in March, and 300% above the one-day undisturbed price. The price of gold is up ~30% since Nordgold's March Offer. The key question is - how much more are Nordgold and Shandong willing to pay? A starting point is estimating the NPV of the Namdini Project.
(link to my insight: Cardinal Resources (CDV AU): Shandong Trumps Nordgold’s Knockout Offer)
Capitaland Commercial Trust (CCT SP) (Mkt Cap: $4.8bn; Liquidity: $14mn)
The original recommendation to be short Capitaland Mall Trust (CT SP) ("CMT") or short CMT vs the rest of the S-REIT sector has worked well, with about 10-11% outperformance including dividends in the intervening 7+ months against the average basket of other S-REITs.
(link to Travis' insight: Capitaland Mall and CCT Merger: Circular Finally Out. Looks Done)
OptiComm Ltd (OPC AU) (Mkt Cap: $0.4bn; Liquidity: $1mn)
Back on the 15 June, Adelaide-based outfit Uniti Group Ltd (UWL AU) tabled a cash/scrip Offer by way of a Scheme for fiber network operator OPC. The consideration price under the Scheme was A$5.20/share, including a fully-franked $0.10/share dividend. The Offer appeared more than fair, and has largely traded around terms. The Scheme Booklet was registered with ASIC on the 7 August and a Scheme Meeting convened for the 10 September. But on the 28 August, OPC responded to media speculation regarding a potential alternative suitor. OPC said it has not received any competing proposal, nor has it been made aware of interest from any other party.
If successful, this would be the first privatisation where a super fund has stumped up 100% equity. It is also the first time a super fund is bidding on its own without an investment manager. Ironically, Uniti acquired LBNCo from a consortium comprising ROC Partners (a Sydney-based investment manager) and FSS last August. FSS is not a shareholder in either OPC or Uniti.
(link to my insight: OptiComm: First State Gatecrashes Uniti's Offer)
Japan Retail Fund Investment (8953 JP) (Mkt Cap: $3.7bn; Liquidity: $24mn)
On 28th August 2020, J-REITs JRF and Mcubs Midcity Investment Cor (3227 JP) ("MMI") announced an absorption-type Merger which is expected to form the largest diversified J-REIT based on current asset values. JRF will be the surviving corporation and MMI will be the dissolving corporation in the merger. The newly formed combined entity will be named Japan Metropolitan Fund Investment Corporation (JMF). The exchange ratio for the transaction has been set at 0.5 JRF Shares per MMI Share. The Deal is conditional on receiving approval from the shareholders of both the Target and the Acquirer. Both shareholder meetings are expected to take place in October 2020 and the Deal is expected to complete in March 2021.
(link to Janaghan's insight: MCUBS Midcity (3227 JP): Scrip Deal Trading Tight But There's a BETTER Trade)
Yuanshengtai Dairy Farm (1431 HK) (Mkt Cap: $0.4bn; Liquidity: $1mn)
YST announced the previous weekend a conditional voluntary general offer from China Feihe (6186 HK). The Offer Consideration is HK$0.63/share, a 1.6% premium to last close, and a 39.4% premium to the 90-day average close. The Offer price is final. The Offer has a low 50% acceptance condition. All other conditions can be waived. Feihe currently holds no shares in YST. No irrevocable commitments have been tabled.
(link to my insight: YST Dairy (1431 HK): VGO From China Feihe)
Hinokiya Holdings (1413 JP)(Mkt Cap: $0.2bn; Liquidity: $1mn)
Yamada Denki (9831 JP), Japan's largest electronics retailer, well-known for running large and shiny stores with more aisle space than the more aggressive electronics retailers like Bic and Yodobashi in urban areas, has agreed to buy 45.6-50.1% of Tokyo-based custom homebuilder Hinokiya from the founder and his relatives in a Partial Tender Offer at ¥2,000/share which is ~12% premium to last. The price comes out to 4.5x EBITDA, 10x PER, and 1.3x book. It isn't very impressive as a price
(link to Travis Lundy's insights: Yamada Denki Partial TOB For Hinokiya (1413 JP) & Hinokiya (1413 JP) Partial Tender Arb Grids & ProRation)
Changshouhua Food (1006 HK) (Mkt Cap: $0.3bn; Liquidity: <$1mn)
After entering a trading halt on the 3 September "pursuant to the Hong Kong Code on Takeovers and Mergers", CFC announced a privatisation by way of a Scheme. The Cancellation price of HK$4.19/share is a 16.4% premium to last close, but a 43.2% and 64.1% premium over the average closing price on a 30-day and 60-day basis. The price is Final. No dividends are expected to be paid. Optically, the offer is pitched at a key resistance level over the past four and a half years. It is also a 104% premium to its YTD low of HK$2.05/share on the 29 June.
(link to my insight: Changshouhua (1006 HK): What's Cooking?)
Kirindo Holdings (3194 JP) (Mkt Cap: $0.4bn; Liquidity: $2mn)
Bain and the founding family (founder and son) are going to own the company via a Tender Offer. Currently, the founder and son own 11.2%. The founder is tendering a small bit, his company is tendering its shares, the family is tendering a lot more (or agreeing to sell afterward). The founder and his will own 10.1% of the shares out post-deal and that will get them 40% of the ownership of the Buyout Entity. Bain will own the other 60%. This is yet another slightly offensively cheap MBO. Investors need to understand this will only continue. There are very specific reasons why this kind of structure works for inheritance/estate and succession planning. I expect this trend to only accelerate from here.
(link to Travis' insight: Kirindo (3194) - Another Cheap Bain MBO With Weak Adherence to Fair M&A Guidelines)
Allied Properties (H.K.) (56 HK)
Back on the 20 April, Allied Group Limited (373 HK) (AGL) made an Offer for 75%-held APH, by way of a Scheme, at $1.92/share (cash), a 34.2% premium to last close. The Offer consideration was Final, and would be split between a $0.42/share Scheme Consideration and a $1.50 Scheme Dividend. The Scheme Doc was despatched on the 19 June. The Court Meeting was held on the 15 July and the resolutions to approve the Scheme was approved. Shares continue to trade until the 14 August (inclusive). Cheques were supposed to be despatched on or before the 8 Sept. Then something went awry.
(link to my insight: Allied Props (56 HK). Stalled At The Finish)
Hexaware Technologies (HEXW IN) (Mkt Cap: $1.7bn; Liquidity: $6mn)
On 3 September, Hexaware announced that the Exchange had granted In-Principle Approval the day before. Hexaware's Public Announcement went out on the 3rd. The completion of the Despatch of the Offer Letter was announced on 6 September. The Reverse Book Build Auction will open on the 9th of September and close on the 15th. The last possible day to announce a counter-offer would be the 17th of September. Settlement would be expected to be the 29 September.
(link to Travis' insight: Hexaware Technologies Reverse Book Build Auction - It's On)
In Daelim Industrial Divestiture: Terms & Trading Situations (1P Diversion), Sanghyun Park discusses Daelim Industrial (000210 KS)'s three-way demerger plan.
Doosan Heavy Industries & Construction (034020 KS) announced a major rights offering worth ₩1.3tn ($1.1bn), representing 32% of its total market cap of ₩4.1tn. The expected rights offering price of Doosan Heavy Industries is ₩10,700 , which is 34% lower than the current price of ₩16,100. The expected rights offering price of Doosan Fuel Cell is ₩34,200 , which is 42% lower than the current price of ₩59,300 . More info in Douglas Kim's insight: Doosan Heavy Industries & Doosan Fuel Cell (Rights Offerings of $1.1bn & $0.3bn).
Sembcorp Marine (SMM SP) reported the Results of the Rights Issue. Sembcorp Industries (SCI SP) shareholders are going to get a lot of it. Today Sembcorp Industries confirmed the distribution to be 4.911 shares per 1 share of Sembcorp Industries held (subject to minor rounding differentials). Former minority owners of SMM get 11.7% of the company. SCI minorities get 35.3%. Other punters who bought the SMM shares get 10.0% of the company. Together, those who wanted to own new shares and put their money down total about 18% of the company. The rest own it because they owned it before and hadn't sold, or get it from SCI. SCI at S$1.92/share is CHEAP. The SMM Rights Shares started trading on 11 September. Link to Travis' insight: Sembcorp Marine Rights Issue Results : Looks Like a Scheme of Introduction
I see the HSBC NAV discount at ~53% - a one-year low - versus the 12-month average of 35%. I've simply de-consolidated Hang Seng, and netted off associates (Bank Of Communications Co H (3328 HK) and Saudi British Bank (SABB AB) ) to arrive at my stub ops. It's not a strong stub - the stake in Hang Seng accounts for 21% of HSBC's market cap. But the long-term implied stub (netting all listco investments) to de-consolidated/net book is at a multi-year low of 0.38x. vs the long-term average of 0.85x.
(link to my insight: StubWorld: Walking The Fine Line With HSBC)
Intouch Holdings PCL (INTUCH-R TB) / Advanced Info Service PCL (ADVANC TB)
Athaporn Arayasantiparb looks into Intouch Holdings (INTUCH TB), ex-Advanced Info Service (ADVANC TB). After all, Intouch owns Invent, the largest venture capital firm in Thailand. Reality Check XXVI: How Much Are the Other Intuch VC Investments Worth?
In a very brief press release, LVMH said it will not be able to complete the Tiffany acquisition, in compliance with a directive from the French European and Foreign Affairs Minister to defer the merger. LVMH also said Tiffany had undergone a Material Adverse Affect (MAE). In a strongly-worded, detailed response, Tiffany said it has no choice but to file a lawsuit to enforce the Merger. LVMH said it would lodge its own lawsuit. But, oddly, will still lodge its EU submission.
(link to my insight: LVMH/Tiffany: In The Rough. Acts of God and Legal Restraint)
CaixaBank SA (CABK SM) and Bankia SA (BKIA SM) announced that they were having conversations with the aim to merge both financial institutions (link to Bankia release). Due-diligence is being carried out. Both entities have recent experience in integration processes (CaixaBank acquired Banca Cívica and Banco de Valencia, whilst Bankia acquired Baco Mare Nostrum, and prior to that, CajaMadrid acquired Bancaja). This operation is in a fact a takeover of Bankia by CaixaBank. The operation has the blessings of the Bank of Spain, the European Central Bank and the Spanish Government. The parties are currently negotiating this ratio and the takeover premium for Bankia's shareholders. More info in Jesus' insight CaixaBank - Bankia Negotiations:La Caixa, Approvals, Badwill, Exchange Ratio and Synergies.
SIX Group has now communicated it had reached 95.315% of Bolsas Y Mercados Espanoles Sh (BME SM)'s shares. SIX will now ask the suspension of trading of BME's shares to occur after closing on 14 September and will squeeze-out the remaining shares on 14 September (at EUR 32.98 per share).More info in Jesus' insight Bolsas Y Mercados - SIX Group: Squeeze-Out.
In IAG's Jumbo Rights Issue Takes Off, Jesus Rodriguez Aguilar discusses International Consolidated Airlines Group (IAG LN)'s rights which were approved at the AGM on 8 September. The funds -EUR 2,741 mn (GBP 2,491 mn), c. 63% of its current market capitalisation - will be used to strengthen the balance sheet and reduce debt (increasing for solvency). This approach rules out state aid, as has happened with Lufthansa or KLM-AirFrance. Qatar Airways (25.1% holding), has irrevocably undertaken to subscribe for its pro-rata entitlement. The right issue would be expected to be completed by the end of September.
Medpeer Inc (6095 JP)(Mkt Cap: $0.9bn; Liquidity: $36mn)
TSE Mothers-listed Medpeer announced (J-only) after market close today it had received approval to move to TSE1 as of 15th September 2020. TSE1 reassignment triggers inclusion into the TOPIX Index and the Inclusion Event can be expected to be at the close of trading 29th October 2020.
(link to Janaghan's insight: TOPIX Inclusion (6095 JP): MedPeer Inc)
(link to Travis' insight: The TSE's Listing Criteria Revisions - Part I)
In Japanese Household Goods Pair Trade: Let The Lion Pounce As The Pigeon Lands, Oshadhi Kumarasiri concludes that all things considered, with a target Pigeon Corp (7956 JP)/ Lion Corp (4912 JP) price ratio of 1.7x, a Long Short pair trade between Lion and Pigeon could yield about 30% in market-neutral returns.
Sensex Index Rebalance Preview. At the current time, Brian Freitas see a high probability of Dr. Reddy'S Laboratories (DRRD IN) being included in the index, and of Oil & Natural Gas Corp (ONGC IN) being deleted. Depending on movements in the stock price from now to end October, Britannia Industries (BRIT IN) could also be included in the index, while Tata Steel Ltd (TATA IN) could be deleted. Sensex Index Rebalance Preview: Early Look Sees One Change, Maybe Two
China STAR Board. If the market participants and FTSE Russell choose to include the STAR market stocks into the indices, Brian sees around 76 of the 170 STAR Board listed stocks being included in the FTSE Emerging Market All Cap China A Inclusion Index. We do not see any stocks making the cut to be included in the FTSE China A50 Index (XIN9I INDEX) in the December review, but Ant Financial (1051260D CH) could be included in the index in the March 2021 review if it lists prior to 20 November this year. China STAR Board: Potential Inclusion in FTSE EM and China A50 Indices; GEIS Inclusion Needs Connect
The SFC has granted consent to an extension of the time limit for despatching the Scheme Document for Leyou Technologies (1089 HK) from 17 September 2020 to 9 November 2020. A delay was anticipated - but this is about two weeks past my expected despatch date. The delay is expected to push the despatch of cheques to mid-late December.
In its monthly update, Baoye Group Co Ltd H (2355 HK) said the "controlling shareholder of the Company is still considering the Potential Transaction and no definitive agreement or letter of intent has been entered into".
The result of the Colowide Co Ltd (7616 JP) Tender Offer for OOTOYA Holdings (2705 JP) is that Colowide purchased all 2,000,371 shares which were tendered, and now owns 46.77% of shares out. Pro-Ration was 100%.
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 |
China Tontine Wines (389 HK) | 33.56% | Yuet Sheung | Sinopac |
Golden Throat (6896 HK) | 17.43% | BNP | HSBC |
China Dili (1387 HK) | 21.41% | Haitong | Outside CCASS |
CWT International Limited (521 HK) | 23.98% | CIS | Morton |
ENN Energy (2688 HK) | 32.78% | Citi | China Merch |
Time Intercom (1729 HK) | 10.00% | Xin Yogan | China Ind |
Get Nice Holdings (64 HK) | 29.99% | Chong Hing | Get Nice |
Furniweb (8480 HK) | 10.00% | Soochow | Outside CCASS |
The following large movement(s) concern recently listed companies, and therefore are (likely) lock-up related.
Name | % chg | Into | Out of |
CMGE Tech (302 HK) | 29.76% | BNP | Outside CCASS |
Kangji Medical (9997 HK) | 17.26% | ML | Outside CCASS |
Jianzhong (589 HK) | 10.67% | China Ind | Outside CCASS |
China New Energy (1156 HK) | 16.82% | Silverbricks | Outside CCASS |
Macau E&M (1408 HK) | 11.89% | Kingkey | Outside CCASS |
Zhongliang Holdings (2772 HK) | 11.17% | HSBC | CCB |
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