Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

HK Type 4 license through Ballingal Investment Advisors Ltd. 

I'm a highly experienced sell-side analyst with in excess of 22 years of covering Asia Pacific equities, the past 19 years immersed in event strategies encompassing M&A risk arbitrage, directional long/short, stub trades and restructuring.  

My background also includes accountancy (liquidation/bankruptcy/receivership) earlier in my career and as a chief financial officer of a global commodity company based in the US and Mexico.

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Concurrent with the <a href="https://www.asx.com.au/asxpdf/20180822/pdf/43xkj5sskd97hw." target="_blank">announcement</a> of its FY18 results, <a href="https://www.smartkarma.com/entities/803" target="_blank" data-smartkarma-citation="entities:803:1">Seven Group Holdings (SVW AU)</a> said it will unify its capital structure via an offer for its preference shares <a href="https://www.smartkarma.com/entities/27420" target="_blank" data-smartkarma-citation="entities:27420:1">Seven Group Holdings Ltd (SVWPA AU)</a>, more commonly known as TELYS4.
If the resolution is approved, TELYS4 holders have the option to receive either:
<ul>
<li>4.60645 SVW shares for every TELYS4 share; or</li>
<li>a partial exit option, by having 50% of their TELYS4 shares converted into SVW shares (also on a 4.60645 basis), and the option to sell the balance for at least $88.</li>
<li>If the resolution does not pass, TELYS4 holders will still have the option to voluntarily convert into ordinary shares (4.60645); but the cash/scrip option will not apply to this scenario.</li>
</ul>
As a perpetual non-cumulative share with limited rights, TELYS4 has not been afforded the same valuation principles as SVH, especially post GFC. Prior to yesterday's move for both stocks, the ords had outperformed TELYS4 over the past 6 months by ~12%. TELYS4 last traded above its $100 par-value in Jan 2008 and over the past five years has averaged a 22% discount to its par value with a discount range of 7-50%. The conversion price equates to $92.50/share (based on the 30 day VWAP), a level last achieved in November 2013, and a 15% premium to last close.
A proposed amendment to the franking system in March this year would, if enacted, result in investors no longer able to claim a cash refund on their excess franking credits, potentially reducing the cash yield for some TELYS4 investors by up to 30%. With TELYS4 having traded down as much as 8% since March, SVH's board was subsequently approached by TELYS4 holders to provide a solution. With 4.963mn TELYS4 shares outstanding, redeeming at par value (~A$0.5bn) wasn't a viable option for the board.
The "unifying" resolution is subject to a TELYS4 (75%) vote which will take place on the 24 September.

Concurrent with the announcement of its FY18 results, Seven Group Holdings (SVW AU) said it will unify its capital structure via an offer for its preference shares Seven Group Holdings Ltd (SVWPA AU), more commonly known as TELYS4.
If the resolution is approved, TELYS4 holders have the option to receive either:

4.60645 SVW shares for every TELYS4 share; or
a partial exit option, by having 50% of their TELYS4 shares converted into SVW shares (also on a 4.60645 basis), and the option to sell the balance for at least $88.
If the resolution does not pass, TELYS4 holders will still have the option to voluntarily convert into ordinary shares (4.60645); but the cash/scrip option will not apply to this scenario.

As a perpetual non-cumulative share with limited rights, TELYS4 has not been afforded the same valuation principles as SVH, especially post GFC. Prior to yesterday's move for both stocks, the ords had outperformed TELYS4 over the past 6 months by ~12%. TELYS4 last traded above its $100 par-value in Jan 2008 and over the past five years has averaged a 22% discount to its par value with a discount range of 7-50%. The conversion price equates to $92.50/share (based on the 30 day VWAP), a level last achieved in November 2013, and a 15% premium to last close.
A proposed amendment to the franking system in March this year would, if enacted, result in investors no longer able to claim a cash refund on their excess franking credits, potentially reducing the cash yield for some TELYS4 investors by up to 30%. With TELYS4 having traded down as much as 8% since March, SVH's board was subsequently approached by TELYS4 holders to provide a solution. With 4.963mn TELYS4 shares outstanding, redeeming at par value (~A$0.5bn) wasn't a viable option for the board.
The "unifying" resolution is subject to a TELYS4 (75%) vote which will take place on the 24 September.

Seven Group Holdings

Seven's Elegant Pref Share Solution