Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Jardine Strategic Holdings / Event-Driven

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<p><em><strong>Corrigenda: There is an error in this Insight. Please note the correction.</strong></em></p>
<p><em><strong>Correction: There is NO “headcount” test at the Jardine Strategic special general meeting. The vote is therefore done. Apologies for the misinterpretation.</strong></em></p>
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<p>Whilst I did not believe that the Keswicks - the controlling family - had any need to <em>immediately</em> restructure the <a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a> / <a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a> organisation, the ultimate restructuring of the group was most likely to be done in a way where value for the family was maximised.</p>
<p>A buyout offer for Strategic would allow Matheson to capture value from minorities if the buyout offer was made below NAV. It is a cheaper alternative to a full buyout of Matheson. It maintains the group ownership levels in Strategic-held subsidiaries. And the family’s ownership in the group (which would be just Matheson and its direct subsidiaries) increases to ~43%, up from ~17.5% by my estimate currently.</p>
<p>And now we have a long-awaited <a href="https://links.sgx.com/FileOpen/JMH%20J.ashx?App=Announcement&amp;FileID=651169" target="_blank" rel="noopener">transaction</a>. And just like that it is also done and dusted.</p>
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<p>Jardine Matheson Holdings Limited has today announced its plans for the simplification of the parent company structure of the Group. This will result in a single holding company with a conventional ownership structure and a further increase in the Group’s operational efficiency and financial flexibility.</p>
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<p>Under the terms of the Acquisition, Strategic shareholders (other than Matheson) will receive US$33.00/share in cash.</p>
<p>The Acquisition will be implemented by way of an Amalgamation under the Bermuda Companies Act, which requires approval by a majority (the headcount test) of at least 75% of the votes cast by Strategic shareholders. Matheson, holding 940,903,135 Strategic shares - representing 84.89% of shares out - is entitled to vote on the amalgamation resolution, all but assuring Strategic shareholder approval.</p>
<p>Apart from playing the Strategic arb, the key questions are where Matheson should trade, and what next for key listed subsidiaries.</p>
<p>More below the fold.</p>


Corrigenda: There is an error in this Insight. Please note the correction.
Correction: There is NO “headcount” test at the Jardine Strategic special general meeting. The vote is therefore done. Apologies for the misinterpretation.


Whilst I did not believe that the Keswicks - the controlling family - had any need to immediately restructure the Jardine Matheson Holdings (JM SP) / Jardine Strategic Holdings (JS SP) organisation, the ultimate restructuring of the group was most likely to be done in a way where value for the family was maximised.
A buyout offer for Strategic would allow Matheson to capture value from minorities if the buyout offer was made below NAV. It is a cheaper alternative to a full buyout of Matheson. It maintains the group ownership levels in Strategic-held subsidiaries. And the family’s ownership in the group (which would be just Matheson and its direct subsidiaries) increases to ~43%, up from ~17.5% by my estimate currently.
And now we have a long-awaited transaction. And just like that it is also done and dusted.

Jardine Matheson Holdings Limited has today announced its plans for the simplification of the parent company structure of the Group. This will result in a single holding company with a conventional ownership structure and a further increase in the Group’s operational efficiency and financial flexibility.

Under the terms of the Acquisition, Strategic shareholders (other than Matheson) will receive US$33.00/share in cash.
The Acquisition will be implemented by way of an Amalgamation under the Bermuda Companies Act, which requires approval by a majority (the headcount test) of at least 75% of the votes cast by Strategic shareholders. Matheson, holding 940,903,135 Strategic shares - representing 84.89% of shares out - is entitled to vote on the amalgamation resolution, all but assuring Strategic shareholder approval.
Apart from playing the Strategic arb, the key questions are where Matheson should trade, and what next for key listed subsidiaries.
More below the fold.

Jardine Matheson: Collapsing The Circularity

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<p><em>This week in StubWorld ...</em></p>
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<a href="https://www.smartkarma.com/entities/tokyo-electron-ltd" target="_blank" data-smartkarma-citation="entities:280:1" rel="noopener">Tokyo Electron (8035 JP)</a> outperforms as global carmakers face a chip shortage;</li>
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<a href="https://www.smartkarma.com/entities/gulf-energy-development-public-company-limited" target="_blank" data-smartkarma-citation="entities:26038:1" rel="noopener">Gulf Energy Development Public Company (GULF TB)</a> increases its questionable stake in <a href="https://www.smartkarma.com/entities/intouch-holdings-pcl" target="_blank" data-smartkarma-citation="entities:17638:1" rel="noopener">Intouch Holdings (INTUCH TB)</a>; and</li>
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<a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a>'s ramps up its buybacks.</li>
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<p>Preceding my comments on these holdcos are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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This week in StubWorld ...




Tokyo Electron (8035 JP) outperforms as global carmakers face a chip shortage;

Gulf Energy Development Public Company (GULF TB) increases its questionable stake in Intouch Holdings (INTUCH TB); and

Jardine Matheson Holdings (JM SP)'s ramps up its buybacks.




Preceding my comments on these holdcos are the weekly setup/unwind tables for Asia-Pacific Holdcos.


These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.


StubWorld: TBS/Tokyo Electron, Intouch/Gulf, Jardines' Buybacks

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<p>Back on the 23 October, <a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a> <a href="https://links.sgx.com/FileOpen/JMH.ashx?App=Announcement&amp;FileID=636187" target="_blank" rel="noopener">announced</a> an intention to invest up to US$500mn in a share buyback program through to 30 June 2021. Any shares repurchased would be canceled.</p>
<p>Using the then-last-traded price of US$44/share, US$500mn translated to 11.4mn shares or 1.56% of shares out, or 3.8% of minorities, excluding <a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a>'s stake.</p>
<p>JM has repurchased 3.2mn shares at a cost of US$166mn since that announcement, at an average price of US$51.69/share. Shares acquired accounted for roughly 30% of daily volume. And that is one-third of the buyback programme.</p>
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<p>At this clip, the stated buyback program could be completed by the 1Q20, or early 2Q. </p>
<p>But there's nothing to stop Matheson from reloading another US$500mn program. Or more.</p>
<p>More below the fold.</p>


Back on the 23 October, Jardine Matheson Holdings (JM SP) announced an intention to invest up to US$500mn in a share buyback program through to 30 June 2021. Any shares repurchased would be canceled.
Using the then-last-traded price of US$44/share, US$500mn translated to 11.4mn shares or 1.56% of shares out, or 3.8% of minorities, excluding Jardine Strategic Holdings (JS SP)'s stake.
JM has repurchased 3.2mn shares at a cost of US$166mn since that announcement, at an average price of US$51.69/share. Shares acquired accounted for roughly 30% of daily volume. And that is one-third of the buyback programme.

At this clip, the stated buyback program could be completed by the 1Q20, or early 2Q. 
But there's nothing to stop Matheson from reloading another US$500mn program. Or more.
More below the fold.

Jardine Matheson: Buybacks Ahead Of Schedule

<p>Uncharacteristically, <a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a> has <a href="https://links.sgx.com/FileOpen/JMH.ashx?App=Announcement&amp;FileID=636187" target="_blank" rel="noopener">announced</a> it intends to invest up to US$500mn in a share buyback program extending until 30 June 2021. Any shares purchased will be canceled.</p>
<p>JMH has bought back 13.1mn shares at a cost of US$629mn since it resumed buybacks in September last year. As discussed here in the past, that leaves JMH with ~US$1.5-US$1.6bn in the kitty to continue buybacks after <a href="https://www.mmc.com/offer-for-jlt.html" target="_blank" rel="noopener">selling</a> <a href="https://www.smartkarma.com/entities/jardine-lloyd-thompson-group-p" target="_blank" data-smartkarma-citation="entities:22017:1" rel="noopener">Jardine Lloyd Thompson Group P (JLT LN)</a> in 2018 for US$2.2bn. </p>
<p>I say "uncharacteristically" as JMH is not regulatorily obligated to inform the market of any forward buyback program after moving its primary listing to London's standard board in 2014. Why this announcement is being made now is not immediately apparent. Apart from the obligatory SGX share repurchase announcement, JMH has provided zero guidance on the size of the intended buyback to date. The transparency now, however, is welcome.</p>
<p>Using the last traded price, US$500mn translates to 11.1mn shares or 1.53% of shares out, 3.7% of minorities, excluding <a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a>'s stake, and 6.6% if excluding JSH's and the Keswick's family stake. Once shares bought are canceled, this should theoretically lift the Keswick's direct stake in JM to ~18.3%.</p>
<p>As always, more below the fold.</p>

Uncharacteristically, Jardine Matheson Holdings (JM SP) has announced it intends to invest up to US$500mn in a share buyback program extending until 30 June 2021. Any shares purchased will be canceled.
JMH has bought back 13.1mn shares at a cost of US$629mn since it resumed buybacks in September last year. As discussed here in the past, that leaves JMH with ~US$1.5-US$1.6bn in the kitty to continue buybacks after selling Jardine Lloyd Thompson Group P (JLT LN) in 2018 for US$2.2bn. 
I say "uncharacteristically" as JMH is not regulatorily obligated to inform the market of any forward buyback program after moving its primary listing to London's standard board in 2014. Why this announcement is being made now is not immediately apparent. Apart from the obligatory SGX share repurchase announcement, JMH has provided zero guidance on the size of the intended buyback to date. The transparency now, however, is welcome.
Using the last traded price, US$500mn translates to 11.1mn shares or 1.53% of shares out, 3.7% of minorities, excluding Jardine Strategic Holdings (JS SP)'s stake, and 6.6% if excluding JSH's and the Keswick's family stake. Once shares bought are canceled, this should theoretically lift the Keswick's direct stake in JM to ~18.3%.
As always, more below the fold.

Jardine Matheson's Buybacks: A Bargain Upon Itself

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<p>This week in StubWorld ...</p>
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<p><a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a> is trading "cheap" at a 32% discount to NAV, adjusting for cross-holding. <a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a> is even wide at 51% discount to NAV, also adjusting for cross-holdings. Is the time ripe for the Keswicks to collapse the structure? Would a move back to Hong Kong help narrow the discount?</p>
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<p><a href="https://www.smartkarma.com/entities/jardine-cycle-carriage-ltd" target="_blank" data-smartkarma-citation="entities:347:1" rel="noopener">Jardine Cycle &amp; Carriage (JCNC SP)</a> was trading cheap on a NAV and stub basis this time last month (<a href="https://skr.ma/15ciq" target="_blank" rel="noopener">StubWorld: Matheson Buybacks As Ratio Mean Reverts; JCNC Looking Cheap</a>). It is now even cheaper. Time for a JCNC breakout.</p>
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<p>Preceding my comments on Jardines, are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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This week in StubWorld ...



Jardine Matheson Holdings (JM SP) is trading "cheap" at a 32% discount to NAV, adjusting for cross-holding. Jardine Strategic Holdings (JS SP) is even wide at 51% discount to NAV, also adjusting for cross-holdings. Is the time ripe for the Keswicks to collapse the structure? Would a move back to Hong Kong help narrow the discount?

Jardine Cycle &amp; Carriage (JCNC SP) was trading cheap on a NAV and stub basis this time last month (StubWorld: Matheson Buybacks As Ratio Mean Reverts; JCNC Looking Cheap). It is now even cheaper. Time for a JCNC breakout.


Preceding my comments on Jardines, are the weekly setup/unwind tables for Asia-Pacific Holdcos.




These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.




StubWorld: Would Jardines Move Back To HK?

United Kingdom

Jardine Lloyd Thompson Group plc is an international provider of insurance, reinsurance and employee benefits related advice, brokerage and associated services.

Jardine Lloyd Thompson Group PLC (JLT LN)

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Jardine Lloyd Thompson Group PLC (JLT LN)

Jardine Matheson: Collapsing The Circularity

Only the headcount test stands in the way of the Strategic's privatisation completion. Elsewhere, Mandarin Oriental looks inexpensive, as does JCNC.

David Blennerhassett

StubWorld: TBS/Tokyo Electron, Intouch/Gulf, Jardines' Buybacks

Tokyo Electron (8035 JP) outperforms as global carmakers face a chip shortage; Gulf Energy increases its questionable stake in Intouch; and Jardine...

David Blennerhassett

Jardine Matheson: Buybacks Ahead Of Schedule

JMH has aggressively committed itself to the buyback program. Previously I advocated setting-up a Long JMH/Short JSH at 2.0x or below. I'd move...

David Blennerhassett

Jardine Matheson's Buybacks: A Bargain Upon Itself

After a year of buybacks, will no clear mandate, Jardine Matheson provides transparency on its repurchase program into 2021.

David Blennerhassett

StubWorld: Would Jardines Move Back To HK?

This week in StubWorld ... Jardine Matheson Holdings (JM SP) is trading "cheap" at a 32% discount to NAV, adjusting for cross-holding. Jardine...

David Blennerhassett

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