Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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Just plain horrible.
Following an indicative pre-market sell-off of 35%, <a href="https://www.smartkarma.com/entities/51-job-inc-adr" target="_blank" data-smartkarma-citation="entities:532:1" rel="noopener">51 Job Inc (JOBS US)</a> closed down 19.2%, and is now 20% adrift of the undisturbed price. 
The news? As per 51job's <a href="https://ir.51job.com/ir/php/2021/PreRelease20211108.php?1108" target="_blank" rel="noopener">announcement</a>:
<blockquote>
that certain members of the buyer consortium that formed Garnet Faith Limited to acquire the Company ... have been in consultation with Chinese regulators on recent regulatory changes in China that may be applicable to the Company and the Proposed Transaction. The consultation process by these buyer consortium members is currently ongoing and a clear timeline to its completion cannot be provided at this time. 
</blockquote>
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"Recent regulatory changes" emerged shortly after <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Global (DIDI US)</a>'s listing in early July, and a broad regulatory crackdown followed, casting a net over sectors from education to technology. As quoted by Ministry of Industry and Information Technology spokesperson Zhao Zhiguo back in September: "we are guiding relevant companies to carry out self-examination and rectification".
Late last month State Administration for Market Regulation (SAMR) proposed a list of responsibilities it wanted internet platforms to uphold. This latest edict primarily targeted large platforms (such as <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, and <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>) and that they should (according to a Reuters <a href="https://www.reuters.com/world/china/china-proposes-guidelines-internet-platform-responsibilities-2021-10-29/" target="_blank" rel="noopener">article</a>) "abide by the principles of fairness when offering services and should open their services up to other platform operators. They should not obtain data without users' consent and should be transparent when using big data to recommend products."  The SAMR said these were draft guidelines that were open to public consultation until yesterday.
51job.com is the leading recruitment website/platform in China. Shares rolled over in July as the regulatory oversight on internet platforms ensnared more sectors/companies. 
Yet this latest announcement from 51job provides little new news to what was already known. Timing, admittedly, was not ideal, arriving shortly on the heels of last week's <a href="https://www.sec.gov/Archives/edgar/data/0001295484/000110465921132333/tm2131363d1_sc13da.htm" target="_blank" rel="noopener">announcement</a> that funding for the Offer had progressed.  
The significant price correction yesterday - which could all but be construed as a dealbreak - can ostensibly be put down to short-term investors piling into 51job on the financing news, then turning tail, exiting en-masse after the perceived financing head-fake.  
Yesterday's price movement appears overdone.  The gross spread to terms is now out to 45.8%.
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<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/240/535/original/image_87521874221636431612863.png?1636431613" class="editor-image img-responsive" data-smartkarma-image-id="240535"></figure>
More below the fold.
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Just plain horrible.
Following an indicative pre-market sell-off of 35%, 51 Job Inc (JOBS US) closed down 19.2%, and is now 20% adrift of the undisturbed price. 
The news? As per 51job's announcement:

that certain members of the buyer consortium that formed Garnet Faith Limited to acquire the Company ... have been in consultation with Chinese regulators on recent regulatory changes in China that may be applicable to the Company and the Proposed Transaction. The consultation process by these buyer consortium members is currently ongoing and a clear timeline to its completion cannot be provided at this time. 


"Recent regulatory changes" emerged shortly after DiDi Global (DIDI US)'s listing in early July, and a broad regulatory crackdown followed, casting a net over sectors from education to technology. As quoted by Ministry of Industry and Information Technology spokesperson Zhao Zhiguo back in September: "we are guiding relevant companies to carry out self-examination and rectification".
Late last month State Administration for Market Regulation (SAMR) proposed a list of responsibilities it wanted internet platforms to uphold. This latest edict primarily targeted large platforms (such as Alibaba Group (9988 HK), Tencent (700 HK), and Meituan (3690 HK)) and that they should (according to a Reuters article) "abide by the principles of fairness when offering services and should open their services up to other platform operators. They should not obtain data without users' consent and should be transparent when using big data to recommend products."  The SAMR said these were draft guidelines that were open to public consultation until yesterday.
51job.com is the leading recruitment website/platform in China. Shares rolled over in July as the regulatory oversight on internet platforms ensnared more sectors/companies. 
Yet this latest announcement from 51job provides little new news to what was already known. Timing, admittedly, was not ideal, arriving shortly on the heels of last week's announcement that funding for the Offer had progressed.  
The significant price correction yesterday - which could all but be construed as a dealbreak - can ostensibly be put down to short-term investors piling into 51job on the financing news, then turning tail, exiting en-masse after the perceived financing head-fake.  
Yesterday's price movement appears overdone.  The gross spread to terms is now out to 45.8%.


More below the fold.


AlphaSituations-Event/Catalyst Driven Research, AlphaSituations

Robert Sassoon

AlphaSituations-Event/Catalyst Driven Research

AlphaSituations

Since its establishment, AlphaSituations has delivered a track record of outperformance with a hit rate of winners of more than 70% of its portfolio of ideas generating annualized average returns of 20%. In January 2022, AlphaSituations was contracted by Water Tower Research, an investor engagement and stakeholder communication platform to provide coverage of Special Situations

In complete contrast to the recent Schedule 13D filing (November 1, 2021) disclosing that  <a href="https://www.smartkarma.com/entities/51-job-inc-adr" target="_blank" data-smartkarma-citation="entities:532:1" rel="noopener">51 Job Inc Adr (JOBS US) </a> Founder/CEO Rick Yan and his affiliated entities, members of the Buying Group  had entered into financing agreements with China Merchants Bank and Shanghai Pudong Development Bank putting into place the financing for the Go-Private transaction as contemplated by their commitment letters (disclosed in the press release of June 21, 2021 announcing the agreed transaction), any hope for this Go-Private deal moving quickly to consummation, if at all, appears to have evaporated. In a flash, the spread has widened from 18% to  46%.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/240/463/original/image_75543846961636410149399.png?1636410151" class="editor-image img-responsive" data-smartkarma-image-id="240463"></figure>In this insight, we attempt to read between the lines of a somewhat terse statement concerning regulatory involvement with the deal. It may not be as bad as the market's first take.

In complete contrast to the recent Schedule 13D filing (November 1, 2021) disclosing that  51 Job Inc Adr (JOBS US)  Founder/CEO Rick Yan and his affiliated entities, members of the Buying Group  had entered into financing agreements with China Merchants Bank and Shanghai Pudong Development Bank putting into place the financing for the Go-Private transaction as contemplated by their commitment letters (disclosed in the press release of June 21, 2021 announcing the agreed transaction), any hope for this Go-Private deal moving quickly to consummation, if at all, appears to have evaporated. In a flash, the spread has widened from 18% to  46%.In this insight, we attempt to read between the lines of a somewhat terse statement concerning regulatory involvement with the deal. It may not be as bad as the market's first take.

MergerTalk: Thoughts On Today's Disclosure-Why It Is Not The Deal Killer The Market May Think It Is

Last Week in Event SPACE: Singapore Press Holdings, Afterpay, Link Admin, Razer, AusNet, 51job

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.

As a reminder, <a href="https://www.smartkarma.com/entities/51-job-inc-adr" target="_blank" data-smartkarma-citation="entities:532:1" rel="noopener">51 Job Inc Adr (JOBS US)</a> entered into a definitive agreement for a privatisation transaction at $79.05 in cash per ADS on 21 June. The consortium consists of DCP, Ocean Link Partners, <a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit Holdings (6098 JP)</a> and Mr Rick Yan, the CEO since 2000. The merger was expected to close during the second half of 2021. The merger required shareholders representing two-thirds of shares present and voting to approve the deal. However, since the announcement of the definitive agreement, the gross spread reached a high of 33% on 29 October largely due to the radio silence on the deal completion. In the current uncertain Chinese regulatory climate, 51job did little to soothe investors’ nerves by failing to even mention the privatisation deal in its 2Q21 results released on 24 September.Encouragingly, the shares climbed 10% on 2 November due to the release of a Schedule 13D filing on 1 November which highlighted the consortium’s acquisition facilities agreement of $1.8 billion entered on 21 October and Mr Rick Yan’s facility agreement of $450 million entered on 28 October, both with China Merchants Bank. We think that the signing of the acquisition facilities is a significant step towards deal completion. While the privatisation price is not a knockout bid and is a modest premium to historical VWAPs over a 3-years and 1-year time period, the offer is reasonable in the context of 51job’s forecasted growth (PEG basis). Nevertheless, for shareholders seeking to be paid the fair value of their shares, dissenter rights are available.  <div class="content-highlight">The announcement on 21 June stated that Mr Rick, Recruit and certain other existing shareholders have agreed to vote their shares, which represent 54.9% of the voting rights, in favour of the privatisation deal. We continue to think that this level of support should be enough to get past the two-thirds shareholder approval threshold. The gross spread to the offer price is 17.3% at the last close price of $67.40 per ADS. </div>

As a reminder, 51 Job Inc Adr (JOBS US) entered into a definitive agreement for a privatisation transaction at $79.05 in cash per ADS on 21 June. The consortium consists of DCP, Ocean Link Partners, Recruit Holdings (6098 JP) and Mr Rick Yan, the CEO since 2000. The merger was expected to close during the second half of 2021. The merger required shareholders representing two-thirds of shares present and voting to approve the deal. However, since the announcement of the definitive agreement, the gross spread reached a high of 33% on 29 October largely due to the radio silence on the deal completion. In the current uncertain Chinese regulatory climate, 51job did little to soothe investors’ nerves by failing to even mention the privatisation deal in its 2Q21 results released on 24 September.Encouragingly, the shares climbed 10% on 2 November due to the release of a Schedule 13D filing on 1 November which highlighted the consortium’s acquisition facilities agreement of $1.8 billion entered on 21 October and Mr Rick Yan’s facility agreement of $450 million entered on 28 October, both with China Merchants Bank. We think that the signing of the acquisition facilities is a significant step towards deal completion. While the privatisation price is not a knockout bid and is a modest premium to historical VWAPs over a 3-years and 1-year time period, the offer is reasonable in the context of 51job’s forecasted growth (PEG basis). Nevertheless, for shareholders seeking to be paid the fair value of their shares, dissenter rights are available.  The announcement on 21 June stated that Mr Rick, Recruit and certain other existing shareholders have agreed to vote their shares, which represent 54.9% of the voting rights, in favour of the privatisation deal. We continue to think that this level of support should be enough to get past the two-thirds shareholder approval threshold. The gross spread to the offer price is 17.3% at the last close price of $67.40 per ADS. 

51job’s Privatisation Spread Risk/Reward

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Back on the 21 June, IR solutions provider <a href="https://www.smartkarma.com/entities/51-job-inc-adr" target="_blank" data-smartkarma-citation="entities:532:1" rel="noopener">51 Job Inc (JOBS US)</a> <a href="https://sec.report/Document/0001193125-21-195283/" target="_blank" rel="noopener">announced</a> it had entered into a definitive privatisation agreement at US$79.05/share. 
Just last week in <a href="https://skr.ma/d8W2a" target="_blank" rel="noopener">51job (JOB US): Searching For Answers</a>, when the gross spread to terms was 30.8% -  the widest since the take-private transaction was first floated on the <a href="https://sec.report/Document/0001104659-20-105912/" target="_blank" rel="noopener">17 September 202</a>0 - I thought this was the right price to get involved. 
Despite China's ongoing scrutiny of the internet industry, I had not seen any specific issue pushing back on this deal. Additionally,  wasn't helping people find jobs more easily in-line with common prosperity?
51job has now <a href="https://www.sec.gov/Archives/edgar/data/0001295484/000110465921132333/tm2131363d1_sc13da.htm" target="_blank" rel="noopener">updated</a> its Schedule 13D - an SEC form to be filed when a person or group acquires more than 5% of a company. The amendment discusses facility agreements entered into with China Merchants Bank, the lead arranger, and Shanghai Pudong Development Bank Co (joint lead arranger). The facilities provide funding of US$2.275bn, just shy of the US$2.6bn required to complete the transaction.
Shares gained 9.8% on this development, the only newsflow since the firm agreement was entered into. 
Timing still remains unknown. However, this is a buy here.
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More below the fold


Back on the 21 June, IR solutions provider 51 Job Inc (JOBS US) announced it had entered into a definitive privatisation agreement at US$79.05/share. 
Just last week in 51job (JOB US): Searching For Answers, when the gross spread to terms was 30.8% -  the widest since the take-private transaction was first floated on the 17 September 2020 - I thought this was the right price to get involved. 
Despite China's ongoing scrutiny of the internet industry, I had not seen any specific issue pushing back on this deal. Additionally,  wasn't helping people find jobs more easily in-line with common prosperity?
51job has now updated its Schedule 13D - an SEC form to be filed when a person or group acquires more than 5% of a company. The amendment discusses facility agreements entered into with China Merchants Bank, the lead arranger, and Shanghai Pudong Development Bank Co (joint lead arranger). The facilities provide funding of US$2.275bn, just shy of the US$2.6bn required to complete the transaction.
Shares gained 9.8% on this development, the only newsflow since the firm agreement was entered into. 
Timing still remains unknown. However, this is a buy here.

More below the fold

51job (JOB US): Shares Pop As Financing Progresses

China

51job, Inc. provides integrated human resource services in China, with a strong focus on recruitment related services.  The Company's recruitment related services are delivered in both print and online formats.

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51 Job Inc Adr (JOBS US)

51job (JOB US): That Was An Overreaction

Trading at a gross spread of 45.8%. I expect this spread to stay wide given the opaqueness of the regulatory overlay, the (likely) vacuum of...

David Blennerhassett

MergerTalk: Thoughts On Today's Disclosure-Why It Is Not The Deal Killer The Market May Think It Is

The somewhat terse statement concerning regulatory involvement with the the JOBS Go-Private deal may not be as bad as the market's first take

Robert Sassoon

Last Week in Event SPACE: Singapore Press Holdings, Afterpay, Link Admin, Razer, AusNet, 51job

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

51job’s Privatisation Spread Risk/Reward

We think that the signing of the acquisition facilities is a significant step towards deal completion. The gross spread to the offer price is 17.3%...

Arun George

51job (JOB US): Shares Pop As Financing Progresses

Trading at a gross/annualised spread of 19.8%/56.3%, assuming completion at the end of 1Q22. That still looks attractive,

David Blennerhassett

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