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)
Wirecard AG (WDI GR) (Mkt Cap: $5.5bn; Liquidity: $340mn)
There is a large backstory to this whole sorry saga, culminating this week with the IR saying the publication of annual and consolidated financial statements 2019 will be delayed due to indications of presentation of spurious balance confirmations. The shares immediately plummeted, hitting a low of €35.00 seven minutes after the news - down 66.5% from the previous close, and trading decent volume there (658k shares at that one price in one minute). Shares bounced from there, but the notes by auditor EY suggesting €1.9bn of cash balances - literally 25% of total assets, and materially all of equity - are potentially spurious suggests this is not over.
Travis' insight: Wirecard Whoopsy - Don't Touch It
Patryk's insights: Wirecard AG (WDI AG): MCAMathematik Strongly Support Wirecard's Viability, Wirecard AG (WDI GR): More Analysis of the Source of Current Saga Shows WDI Is Telling the Truth, Wirecard AG (WDI AG): There Are No Reasons to Hold the Stock....
Skyworth Group Limited (751 HK) (Mkt Cap: $0.9bn; Liquidity: $2mn)
After Skyworth was suspended "pursuant to the Codes on Takeovers and Mergers and Share Buy-backs", the immediate takeaway as the company would be subject to a privatization Offer similar to TPV Technology (903 HK)'s. But in a twist, Skyworth announced a partial buyback - 12.83% of shares out or 392.8mn shares, at HK$2.80/share, a 32.1% premium to last close. Stephen Wong & concert parties hold 40.88% of shares out and will not tender. Additional directors holding 0.9% have given an undertaking not to tender. That leaves 58.22% of the register subject to the buyback, implying a minimum pro-ration of 22.04%.
link to my insights:
Inside The Box: First TPV (903 HK), Now Skyworth (751 HK)?
Skyworth (751 HK)'s Partial Buyback
Nichii Gakkan Co (9792 JP) (Mkt Cap: $1bn; Liquidity: $5mn)
The BCJ-44 entity MBO Tender Offer for Nichii Gakkan expires on 22 June 2020. Travis has received a lot of questions about this Tender Offer. He has also received more comments about fairness and process than any other takeover he has been involved in over the past 20 years. To be sure, this is not the most egregiously unfairly-priced takeover proposal I have ever seen approved by a board in Japan.
Based on Travis' own "probability matrix", he expects a Tender Offer Extension and Bump to ¥1690-1750 Tender Offer is his "Median Estimated Near-Term Outcome."
(link to Travis' insight: Thinking Through Nichii Gakkan Tender Strategy)
Yixin Group Ltd (2858 HK) (Mkt Cap: $1.6bn; Liquidity: $2mn)
Bitauto Holdings (BITA US) owns ~43.72% of shares out in Yixin. Tencent holds 20.58%, JD.com 10.73%, and Hammer 1.48%. Should the BITA proposal complete (discussed below under "M&A - US"), there will be a change in statutory control in Yixin, obligating Tencent and concert parties to make an unconditional mandatory general offer. The consideration obligated under Hong Kong's chain principle rule are generally low-balled. The announcement indicates an MGO price of HK$1.9088, roughly at Yixin's closing price (at the time of the announcement), and below my earlier estimate of HK$1.96/share.
(link to my insight: Yixin (2858 HK)'s Indicative Downstream Offer)
Perennial Real Estate Holdings (PREH SP) (Mkt Cap: $1.1bn; Liquidity: $1mn)
The previous Friday, a deal by the current ownership "Consortium" (which collectively owns 82.43% of Shares) and HOPU Patners was announced, with the intention to take Perennial private. The existing 82.43% owners have made irrevocable undertakings to accept the Offer and use the proceeds to fund purchases of stakes in the new company (though the options which may be exercised can lower that to 79+%). There is a minimum acceptance condition of getting to 90%. The Offer Price of S$0.95/share, which is final, represents a 37.7% premium to last close, and the highest price in four years.
links to:
Travis' insight: Perennial Takeover - Disappointing Precedents Suggest "Fair" Even if Not Really
Brian Freitas' insight: Perennial Real Estate Holdings - Delisting Opportunism
Jinmao Hotel & Jinmao (China) Hotel Investments and Management Limited (6139 HK) (Mkt Cap: $1.2bn; Liquidity: <$1mn)
Jinmao Hotel was suspended on the 8 June "pursuant to the Code on Takeovers and Mergers", having gained ~40% in the previous three trading days. Funny that. An Offer by way of a Scheme has now been announced, at an offer price of $4.80/share, a 30.4% premium to last close. The Offer price is Final. Irrevocables total 21.04%. The Offeror (China Jinmao Holdings (817 HK)) and concert parties hold 66.81%, therefore the blocking stake at the Unitholders Meeting will be 3.319% of shares out. Jinmao is Cayman incorporated, so the headcount test applies.
(link to my insight: Jinmao Hotel (6139 HK): Priced To Check Out)
Infigen Energy (IFN AU) (Mkt Cap: $0.6bn; Liquidity: $2mn)
Iberdrola SA (IBE SM) announced that it had purchased 20% of Infigen at A$0.86 from TCI. Iberdrola also announced an Offer for Infigen at A$0.86/share vs. UAC Energy's (a JV between AC Energy and Ayala Corporation (AC PM)) A$0.80/share Offer on 2 June. Infigen announced it recommended the Iberdrola Offer and announced there would be no distribution for H2 2020 (half ending 30 June) because both bids' pricing (UAC's and Iberdrola's) were contingent on distribution being declared. That changes the landscape. Iberdrola comes in with a strong deal which resolves any questions of due diligence, funding, regulatory suitability (Iberdrola has already invested in Australia).
(link to Travis' insight: Infigen Gets Iberdrola As Overbidder)
Wheelock (20 HK)(Mkt Cap: $16.2bn; Liquidity: $9mn)
At Wheelock's Court Meeting. the Scheme was approved. The timetable previously provided in the Scheme doc remains unchanged: Wharf Real Estate Investment (1997 HK) and Wharf Holdings (4 HK) shares are to be dispatched to Scheme shareholders on (or around) the 22 July, to commence trading on the 23 July. Cheques for the Scheme consideration ($12/share) are to be dispatched on (or before) the 3 August. Wheelock was suspended from trading this past Thursday. So that's that.
(link to my insight: Wheelock’s Scheme Approved)
Augusta announced that it had received a takeover notice for a full takeover from Centuria Capital Group to acquire shares that would take Centuria's holding to 100% at an implied offer price of NZ$1 per share comprising NZ$0.2 in cash and 0.392 shares of Centuria Capital (CNI AU).
Golden Meditech Holdings (801 HK) (Mkt Cap: $0.3bn; Liquidity: <$1mn)
GMH has now announced an Offer by way of a Scheme at $0.88/share, a 41.94% premium to last close. The Offer Price will not be increased. Dividends will be netted. No final 1H20 dividend was declared. GMH has no intention to make, declare or pay any future dividend/distribution until after completion of the Proposal and the Scheme. Disinterested Shareholders comprise 482.75mn shares, or 16.55% of shares out. Therefore the blocking stake at the Scheme Meeting is 48.3mn shares or 1.655% of shares out - or HK$39mn using the last close. The 10% blocking stake is attached to ALL of the Scheme Shares held by the Disinterested Shareholders. The headcount test applies as GMH is a Cayman-incorporated company.
(link to my insight: Golden Meditech (801 HK): Prescription Renewal)
Adelaide-based outfit Uniti Group Ltd (UWL AU) tabled a cash/scrip Offer by way of a Scheme for OptiComm, with a total consideration of A$5.20/share, including a $0.10/share fully franked dividend. This backs out a 13.6x EV/EBITDA and 24.5x PER. Plus a 160% gain for shareholders since listing. Shareholders are afforded five alternatives under the Scheme: an all-cash payment; an all-scrip settlement (3.4228 Uniti shares for every OptiComm share), or three different cash/scrip combos. Cash and scrip are capped at A$407mn and 84mn Uniti shares, respectively, implying a 77%/23% cash/scrip split.
(link to my insight: Uniti/OptiComm: High-Fibre Diet)
Allied Properties (H.K.) (56 HK)'s Scheme Doc is now out, with the Court Meeting set for the 15 July, an indicative effective date of the 28 August, and payment on the 8 September. The IFA has opined the Offer is fair & reasonable. Currently trading at a gross/annualised spread of 1.6%/7.4%, having narrowed a smidgen in yesterday's trade. That's pretty tight, considering this is a Scheme vote and the Offer price is at a large discount to book. I previously estimated a $2/share Offer price was fair - this was where shares last traded three years ago. And that is what we got, including the interim dividend. APH is heavily discounted, but has historically been so - this is as good as it will get. Allied Props (56 HK)'s Scheme Document Despatched
CVC's offer to acquire a substantial stake in Healthcare Global Enterprises (HCG IN) has been approved by the shareholders, With the shareholder approval, this tender offer has effectively become unconditional now. Ankit Agrawal wrote in Healthcare Global: An Attractive Spread Trade, that the offer was at a punchy gross spread of 7.8% (at the time of the insight) over a period of ~2.25 months (until Aug 21), any price below 127.5 (gross spread of >2%) would be an attractive buy as he thinks that there is a high likelihood that the acceptance rate in the open offer will be 100%.
In Keppel Corp - Stretched Vs Proxy Baskets And Now With New Risk, Travis noted that Keppel Corp Ltd (KEP SP) has gotten expensive vs most of its proxy baskets except an Infra Heavy proxy basket, but one could easily suggest that the Infra Heavy Proxy Basket should, extraordinarily, outperform Keppel because it is not COVID-19-Impacted whereas most of Keppel's other businesses are. The only way that Keppel looks cheap is if you have substantial borrow from passive funds and expect to trade the Tender with a long-and-tender-borrow trade. The impairment risk has also gone up - a large impairment could trigger Material Adverse Change clause. There are also still anti-trust approvals outstanding.
In Healius to Sell Its Primary Care Business to BGH, Shifara Samsudeen discussed the sale of Healius (HLS AU)'s primary care business which includes large scale medical centres and dental practices, to private equity firm BGH Capital for AU$500m.
In Tencent (700 HK): Acquisition of Baidu’s IQiyi, Very Possible, Ming Lu discussed the rumours that Tencent Holdings (700 HK) will acquire Baidu (BIDU US)’s online TV subsidiary, iQiyi.
A "Delisting Offer" (aka: "Exit Offer") in India is where a promoter (usually holding a 50%~75% stake) voluntarily makes a Delisting Proposal, which if accepted, means an eventual Offer to buy out the minorities.
Delisting Offers have very often resulted in attractive returns from the time of announcement of the Acquirer's intent to the point of execution of the Reverse Book Building process (prior examples are shown in the Vedanta insight in the table above). However, not ALL Delisting Offers are successful.
In this thorough insight, Travis took a look at some of the failed Delisting Offers in India -Linde India Ltd (LIIL IN), Ricoh India Ltd (RPGR IN) & Nirma Ltd - to check if lessons from the past could raise any Red Flags for the current delisting offers. He notes that the rules have changed, and that could make a significant difference.
(link to Travis' & Janaghan Jeyakumar's insight: Failed Exit Offers in India: Lessons for VEDL, ADANI, and HEXW?)
On the 13 September 2019, Tencent Holdings (700 HK) and Hammer Capital tabled a preliminary non-binding proposal for BITA at US$16/ADS, a ~20.6% premium to last close and a 36.1% premium to the 30-day VWAP. This was discussed in Tencent's Potential Downstream Offer For Yixin. On Friday (12 June), Bitauto announced it has entered into a definitive Merger Agreement with Tencent and Hammer at the previously-announced Offer price of US$16/ADS. Shareholders holding 55.3% of shares out have agreed to vote in favour of the Merger. The proposal needs two-thirds. This is a done deal.
58.com announced it had entered into a definitive Agreement and Plan of Merger with a consortium comprising Warburg, General Atlantic, Ocean Link and Yao, who collectively hold 44.1% of shares out. The consideration price under this proposal has been (marginally) sweetened to $56/ADS, a19.9% premium to the undisturbed price. And Tencent? Still no word.
Mixi Inc (2121 JP) (Mkt Cap: $1.4bn; Liquidity: $13mn)
mixi made an announcement that the company had received approval from the Tokyo Stock Exchange to move from the MOTHERS section, where it IPOed in 2006, to the First Section of the Tokyo Stock Exchange as of 23 June 2020. TSE1 reassignment triggers inclusion into the TOPIX Index and the inclusion event should occur at the close of trading 30th July 2020. It is, at last price, $100mm worth of buying to do, and about 10 days of volume to buy in the next 29 days. There hasn't been new supply in the equity for five years.
(link to Travis' insight: Mixi TOPIX Inclusion - Out of Left Field)
Tsuzuki Denki (8157 JP) (Mkt Cap: $0.3bn; Liquidity: $1mn)
Tsuzuki confirmed (J-only) on 17th June they had received approval to move from the Second Section to the First Section of the Tokyo Stock Exchange as of 24th June 2020. TSE1 reassignment triggers inclusion into the TOPIX Index and we expect the inclusion event will be at the close of trading 30th July 2020. Based on 3-month ADV, Janaghan estimates the impact of the Inclusion to be 21-26 days of volume. This is significantly higher than our estimated median of 10.95 days for historical TOPIX Inclusions. He estimates the Inclusion Size to be ¥1.13-1.39bn - also slightly larger than the estimated mean of ¥1.06bn for historical TOPIX Inclusions.
(link to Janaghan's insight: TOPIX Inclusion (8157 JP): Tsuzuki Denki)
In Korea Sector Pairs: Glovis/Mobis At -2σ, Two Reasons for Quick Reversion, Sanghyun Park flagged Celltrion Healthcare (091990 KS) / Celltrion Inc (068270 KS) was at -1.8SRD on a 20D MA, down from 3STD; and Hyundai Glovis (086280 KS) / Hyundai Mobis (012330 KS), which is at -2STD.
The Stock Exchange of Thailand announced the results of the semi-annual review of the SET50 index. The changes will be effective from 1 July 2020 and passive funds and index arb desks will need to trade at (or by) the close on 30 June 2020. There are 2 additions Banpu Power PCL (BPP TB) and TTW Pcl (TTW TB), and 2 deletions Banpu Public (BANPU TB) and Delta Electronics Thai (DELTA TB). In SET50 Index Review - Delta to Sell, Brian estimates more than 4 days of ADV to buy on TTW and more than 4 days of ADV to sell on Delta. Banpu Power was deleted from the SET50 index in February to make way for Central Retail (CRC TB).
The Hang Seng Indexes Company Limited will announce the results of the 2020 Q2 review of the Hang Seng Family of Indexes in mid-August. The constituent changes will be effective from 7 September 2020 and the rebalancing trades will need to be done at the closing auction on 4 September 2020. In HSCEI Rebalance Preview - September 2020, Brian sees a very high probability of Meituan Dianping (3690 HK) and Alibaba Group (9988 HK) being included in the HSCEI and of Sinopharm Group Co Ltd H (1099 HK), Citic Securities (H) (6030 HK) and BYD (1211 HK)being deleted from the HSCEI. The third inclusion will either be China Overseas Land & Investment Ltd (688 HK) or Xiaomi Corp (1810 HK). Currently, China Overseas Land & Investment Ltd (688 HK) ranks higher than Xiaomi Corp (1810 HK) and has a higher probability of being included in the index.
Epistar Corp (2448 TT) & Lextar Electronics (3698 TT) to establish a new holding company. The share conversion ratios of the two companies are tentatively set at one share of Epistar for 0.5 ordinary shares of company A (the new holding company), and one share of Lextar for 0.275 ordinary share of company A.
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 |
Man Sang International (938 HK) | 14.43% | Roofer | Guoyuan |
Panda Green (686 HK) | 32.00% | HSBC | Outside CCASS |
Shenzhen Mingwah Aohan H (8301 HK) | 13.67% | Yuanta | Chuenman |
Shandong Gold Mining Co., Ltd. (1787 HK) | 15.86% | MS | St Chart |
Nanjing Sample Technology H (1708 HK) | 16.91% | CCB | Cinda |
The following large movement(s) concern recently listed companies, and therefore are (likely) lock-up related.
Name | % chg | Into | Out of |
Renrui Human Resources (6919 HK) | 19.04% | BNP | Outside CCASS |
Central China New Life (9983 HK) | 68.07% | CMB | BNP |
Accel (1283 HK) | 75.00% | MS | Outside CCASS |
Newborn (9911 HK) | 15.69% | SBI | Outside CCASS |
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