IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

Seven & i Holdings Co., Ltd. is a holding company which was established through the merger of Ito-Yokado Co., Seven Eleven Japan Co., and Denny's Japan. The Company plans, manages, and operates mainly convenience stores, supermarkets, and department stores.

<ul>
<li>We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.</li>
<li>Highest spreads: <a href="https://www.smartkarma.com/entities/arcadium-lithium-plc" target="_blank" data-smartkarma-citation="entities:40438:1" rel="noopener">Arcadium Lithium (LTM AU)</a>, <a href="https://www.smartkarma.com/entities/seven-i-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:1041:1" rel="noopener">Seven &amp; I Holdings (3382 JP)</a>, <a href="https://www.smartkarma.com/entities/get-nice-financial-group-ltd" target="_blank" data-smartkarma-citation="entities:29667:1" rel="noopener">Get Nice Financial Group Ltd (1469 HK)</a>, <a href="https://www.smartkarma.com/entities/esr-group-ltd" target="_blank" data-smartkarma-citation="entities:27983:1" rel="noopener">ESR Group (1821 HK)</a>, <a href="https://www.smartkarma.com/entities/goldlion-holdings-ltd" target="_blank" data-smartkarma-citation="entities:12359:1" rel="noopener">Goldlion Holdings (533 HK)</a>. </li>
<li>Lowest spreads: <a href="https://www.smartkarma.com/entities/lifestyle-china-group-ltd" target="_blank" data-smartkarma-citation="entities:26090:1" rel="noopener">Lifestyle China (2136 HK)</a>, <a href="https://www.smartkarma.com/entities/renewable-japan-co-ltd" target="_blank" data-smartkarma-citation="entities:35211:1" rel="noopener">Renewable Japan (9522 JP)</a>, <a href="https://www.smartkarma.com/entities/macromill-inc" target="_blank" data-smartkarma-citation="entities:24026:1" rel="noopener">Macromill, Inc (3978 JP)</a>, <a href="https://www.smartkarma.com/entities/fuji-soft-inc" target="_blank" data-smartkarma-citation="entities:17504:1" rel="noopener">Fuji Soft Inc (9749 JP)</a>, <a href="https://www.smartkarma.com/entities/nec-networks-system-integr" target="_blank" data-smartkarma-citation="entities:16396:1" rel="noopener">Nec Networks &amp; System Integr (1973 JP)</a>.     </li>
</ul>


We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Arcadium Lithium (LTM AU), Seven &amp; I Holdings (3382 JP), Get Nice Financial Group Ltd (1469 HK), ESR Group (1821 HK), Goldlion Holdings (533 HK). 
Lowest spreads: Lifestyle China (2136 HK), Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks &amp; System Integr (1973 JP).     


Merger Arb Mondays (23 Dec) - Seven & I, Fuji Soft, NEC Networks, Pentamaster, Goldlion, Henlius

Shanghai Henlius Biotech, Inc develops and produces drugs. The Company develops and produces monoclonal antibody biosimilar drugs, bio betters, novel monoclonal antibodys, and other drugs. Shanghai Henlius Biotech throughout China.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shanghai-henlius-biotech-inc" target="_blank" data-smartkarma-citation="entities:27888:1" rel="noopener">Shanghai Henlius Biotech (2696 HK)</a>’s IFA opines that <a href="https://www.smartkarma.com/entities/shanghai-fosun-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:8045:1" rel="noopener">Shanghai Fosun Pharmaceutical (Group) (2196 HK)</a>’s HK$24.60 offer is fair and reasonable. The vote is on 22 January. </li>
<li>The key condition is approval by at least 75% of independent H Shareholders (&lt;10% of all independent H Shareholders rejection). There are recent movements in H Share substantial shareholders. </li>
<li>Key shareholders should be supportive of the cash/scrip offer. At the last close and for a 15 February payment, the gross/annualised spread is 2.9%/16.9%.</li>
</ul>



Shanghai Henlius Biotech (2696 HK)’s IFA opines that Shanghai Fosun Pharmaceutical (Group) (2196 HK)’s HK$24.60 offer is fair and reasonable. The vote is on 22 January. 
The key condition is approval by at least 75% of independent H Shareholders (&lt;10% of all independent H Shareholders rejection). There are recent movements in H Share substantial shareholders. 
Key shareholders should be supportive of the cash/scrip offer. At the last close and for a 15 February payment, the gross/annualised spread is 2.9%/16.9%.


Henlius (2696 HK): Interesting Shareholder Movements with the Vote on 22 January

Pentamaster International Limited designs, manufactures, and installs automated equipment. The Company serves semiconductor, pharmaceutical, medical devices, automotive, food and beverages, and consumer goods industries. Pentamaster International serves customers worldwide.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/pentamaster-international-ltd" target="_blank" data-smartkarma-citation="entities:31099:1" rel="noopener">Pentamaster International (1665 HK)</a> disclosed a Cayman scheme privatisation offer from <a href="https://www.smartkarma.com/entities/pentamaster-corp-bhd" target="_blank" data-smartkarma-citation="entities:15302:1" rel="noopener">Pentamaster Corp (PENT MK)</a> and AchiCapital at HK$1.00 (HK$0.93 cash + HK$0.07 dividend), a 56.3% premium to the undisturbed price. </li>
<li>The offer is final but unattractive compared to peer multiples. The shareholder with a blocking stake is a seller, but there is risk due to a high AGM participation rate.</li>
<li>An arguably light offer in which the Holdco is privatising its OpCo by arbitraging the valuation discrepancies across two exchanges may not sit well with minorities.</li>
</ul>



Pentamaster International (1665 HK) disclosed a Cayman scheme privatisation offer from Pentamaster Corp (PENT MK) and AchiCapital at HK$1.00 (HK$0.93 cash + HK$0.07 dividend), a 56.3% premium to the undisturbed price. 
The offer is final but unattractive compared to peer multiples. The shareholder with a blocking stake is a seller, but there is risk due to a high AGM participation rate.
An arguably light offer in which the Holdco is privatising its OpCo by arbitraging the valuation discrepancies across two exchanges may not sit well with minorities.


Pentamaster International (1665 HK): Pentamaster Corp and AchiCapital’s Light Scheme Offer

MACROMILL, INC. is a market research company utilizing Internet System. The Company collects and analyzes data and prepares research reports. MACROMILL also provides digital marketing solutions.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/macromill-inc" target="_blank" data-smartkarma-citation="entities:24026:1" rel="noopener">Macromill, Inc (3978 JP)</a> has recommended CVC’s tender offer at JPY1,150, a 40.1% premium to the last close.</li>
<li>While the offer is attractive compared to historical trading ranges, it is 41% below the IPO price and 11% below the midpoint IFA DCF valuation range. </li>
<li>The lack of an irrevocable, open shareholder register and large foreign institutions' shareholding increases the odds of activism to force a bump.  </li>
</ul>



Macromill, Inc (3978 JP) has recommended CVC’s tender offer at JPY1,150, a 40.1% premium to the last close.
While the offer is attractive compared to historical trading ranges, it is 41% below the IPO price and 11% below the midpoint IFA DCF valuation range. 
The lack of an irrevocable, open shareholder register and large foreign institutions' shareholding increases the odds of activism to force a bump.  


Macromill (3978 JP): CVC’s Light Tender Offer at JPY1,150 Begs for Activism

<ul>
<li>Due to several factors, the gross spread of <a href="https://www.smartkarma.com/entities/shanghai-fosun-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:8045:1" rel="noopener">Shanghai Fosun Pharmaceutical (Group) (2196 HK)</a>’s HK$24.60 offer for <a href="https://www.smartkarma.com/entities/shanghai-henlius-biotech-inc" target="_blank" data-smartkarma-citation="entities:27888:1" rel="noopener">Shanghai Henlius Biotech (2696 HK)</a> has widened to 21.5%.</li>
<li>The wide gross spread reflects the China TCM deal break hangover, slow progress in satisfying the precondition, Fosun Pharma’s potential funding challenges, and the shareholder vote. </li>
<li>NDRC approval should calm nerves about precondition satisfaction. Even with lingering deal-break concerns, a 21.5% gross spread is excessive.</li>
</ul>


Due to several factors, the gross spread of Shanghai Fosun Pharmaceutical (Group) (2196 HK)’s HK$24.60 offer for Shanghai Henlius Biotech (2696 HK) has widened to 21.5%.
The wide gross spread reflects the China TCM deal break hangover, slow progress in satisfying the precondition, Fosun Pharma’s potential funding challenges, and the shareholder vote. 
NDRC approval should calm nerves about precondition satisfaction. Even with lingering deal-break concerns, a 21.5% gross spread is excessive.


Henlius (2696 HK): NDRC Approval Should Calm Nerves

Arun has over 15 years’ experience covering the Technology sector. During this time, he has worked with technology start-ups and as an equity analyst in investment banks and independent research firms. He was formerly a Technology Analyst for Canaccord Genuity, Altium Securities, Espirito Santo Investment Bank, Noble Group and Clear Capital. He has a dual Master’s degree in Financial Engineering and Industrial and Operations Engineering from the University of Michigan. He obtained his Bachelor’s degree in Mechanical Engineering from the Indian Institute of Technology, Bombay. He is also a CFA charterholder.

Arun George
IPOs and Catalysts/Events
• Global Equity Research Ltd

Merger Arb Mondays (23 Dec) - Seven & I, Fuji Soft, NEC Networks, Pentamaster, Goldlion, Henlius

This week, the highest gross spreads are Arcadium Lithium (20.6%), Seven & I (17.8%), Get Nice Financial (10.3%), ESR (8.9%), Goldlion (7.3%),...

Arun George

Henlius (2696 HK): Interesting Shareholder Movements with the Vote on 22 January

Key shareholders will be supportive, and this is a done deal. At the last close, the gross/annualised spread for a 15 February payment was 2.9%...

Arun George

Pentamaster International (1665 HK): Pentamaster Corp and AchiCapital’s Light Scheme Offer

The risk/reward is unattractive. An arguably light offer in which the Holdco is privatising its OpCo by arbitraging the valuation discrepancies...

Arun George

Macromill (3978 JP): CVC’s Light Tender Offer at JPY1,150 Begs for Activism

Oasis has become a substantial shareholder with a 2.9m or 7.42% ownership ratio. Oasis has bought several times over terms – the highest price paid...

Arun George

Henlius (2696 HK): NDRC Approval Should Calm Nerves

Fosun Pharma has satisfied the precondition related to its Henlius’ HK$24.60 offer. The composite document will be despatched by 23 January. Key...

Arun George