Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<ul>
<li>The CEO of pre-IPO <a href="https://www.smartkarma.com/entities/anjuke" target="_blank" data-smartkarma-citation="entities:33003:1" rel="noopener">Anjuke (ANJ HK)</a> said, authorities should fine KE RMB4 billion for its exclusive contracts.</li>
<li>Anjuke’s user base is larger than KE, but its revenue is lower than KE.</li>
<li>We believe KE’s database of real apartments for sale angers Mr. Yao.</li>
<li>We also believe there is no evidence that KE abuses market power.</li>
</ul>
Our previous coverage on KE (BEKE):
<a href="https://www.smartkarma.com/insights/ke-beke-the-estate-agency-grew-53-and-housing-market-continues-to-boom" target="_blank" data-smartkarma-citation="insights:49252" rel="noopener">KE (BEKE): The Estate Agency Grew 53% and Housing Market Continues to Boom</a>
<a href="https://www.smartkarma.com/insights/ke-beke-outperform-competitors-in-booming-property-market" target="_blank" data-smartkarma-citation="insights:47942" rel="noopener">KE (BEKE): Outperform Competitors in Booming Property Market</a>


The CEO of pre-IPO Anjuke (ANJ HK) said, authorities should fine KE RMB4 billion for its exclusive contracts.
Anjuke’s user base is larger than KE, but its revenue is lower than KE.
We believe KE’s database of real apartments for sale angers Mr. Yao.
We also believe there is no evidence that KE abuses market power.

Our previous coverage on KE (BEKE):
KE (BEKE): The Estate Agency Grew 53% and Housing Market Continues to Boom
KE (BEKE): Outperform Competitors in Booming Property Market 

KE (BEKE): Pre-IPO Anjuke Asks Authorities to Fine KE Following Alibaba Case

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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Some 14 months after <a href="http://chinabiologic.investorroom.com/2019-09-18-China-Biologic-Announces-Receipt-of-Preliminary-Non-Binding-Going-Private-Proposal" target="_blank" rel="noopener">announcing</a> the receipt of a preliminary non-binding proposal from Beachhead Holdings, CITIC, <a href="https://www.smartkarma.com/entities/pw-medtech-group-ltd" target="_blank" data-smartkarma-citation="entities:9891:1" rel="noopener">Pw Medtech (1358 HK)</a>, Parfield International, Hillhouse, and V-Sciences Investments for US$120/share, in cash, <a href="https://www.smartkarma.com/entities/china-biologic-products-hold" target="_blank" data-smartkarma-citation="entities:22633:1" rel="noopener">China Biologic Products (CBPO US)</a> entered into a <a href="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=115451875&amp;type=PDF&amp;symbol=CBPO&amp;companyName=China+Biologic+Products+Holdings+Inc.&amp;formType=6-K&amp;dateFiled=2020-11-19&amp;CK=1369868" target="_blank" rel="noopener">definitive merger agreement</a>, also at US$120/share, on the 19 November last year.
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The merger was conditional on an affirmative vote from shareholders representing at least two-thirds of the shares out, and that the aggregate quantity of dissenting shares being less than 8% of shares out.
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Yesterday shareholders <a href="https://www.sec.gov/Archives/edgar/data/1369868/000110465921029688/tm218258d1_ex99-1.htm" target="_blank" rel="noopener">approved</a> the merger at an EGM. 84.5% of CBPO's outstanding shares attended in person or via proxy at the EGM, and ~92.2% voted in favour of the proposal to authorize and approve the Merger Agreement. This was no surprise - the Buyer Consortium (including PW Medtech) and the Rollover Management Members, beneficially owned ~68.84% of shares out.  
However, CBPO also announced that it "had received notices of objection from certain shareholders that in the aggregate hold more than 8% of the total outstanding shares of the Company".
This deal now looks set to mirror the timeline currently underway for <a href="https://www.smartkarma.com/entities/sina-corp-china" target="_blank" data-smartkarma-citation="entities:22691:1" rel="noopener">Sina Corp (Class A) (SINA US)</a>.
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More below the fold.
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Some 14 months after announcing the receipt of a preliminary non-binding proposal from Beachhead Holdings, CITIC, Pw Medtech (1358 HK), Parfield International, Hillhouse, and V-Sciences Investments for US$120/share, in cash, China Biologic Products (CBPO US) entered into a definitive merger agreement, also at US$120/share, on the 19 November last year.

The merger was conditional on an affirmative vote from shareholders representing at least two-thirds of the shares out, and that the aggregate quantity of dissenting shares being less than 8% of shares out.


Yesterday shareholders approved the merger at an EGM. 84.5% of CBPO's outstanding shares attended in person or via proxy at the EGM, and ~92.2% voted in favour of the proposal to authorize and approve the Merger Agreement. This was no surprise - the Buyer Consortium (including PW Medtech) and the Rollover Management Members, beneficially owned ~68.84% of shares out.  
However, CBPO also announced that it "had received notices of objection from certain shareholders that in the aggregate hold more than 8% of the total outstanding shares of the Company".
This deal now looks set to mirror the timeline currently underway for Sina Corp (Class A) (SINA US).


More below the fold.






Back on the 6 July last year, <a href="https://www.smartkarma.com/entities/sina-corp-china" target="_blank" data-smartkarma-citation="entities:22691:1" rel="noopener">Sina Corp (Class A) (SINA US)</a> <a href="http://ir.sina.com/index.php/static-files/69e95aee-2729-457f-be56-73628090b8ea" target="_blank" rel="noopener">announced</a> the receipt of a preliminary non-binding “going private” proposal from New Wave MMXV - a company controlled by its chairman/CEO Charles Chao - at US$41/share. This was followed by an <a href="http://ir.sina.com/static-files/de1ddd0f-354f-42de-9b33-b1bc414ab1b4" target="_blank" rel="noopener">Agreement and Plan of Merger</a> pursuant to which New Wave will acquire all of the outstanding ordinary shares not owned at US$43.30/share.
Despite an undemanding Offer price, shareholders approved (93.6% of the total votes) the merger on the <a href="http://ir.sina.com/static-files/ea4a5614-30e8-472c-895c-31e120de3261" target="_blank" rel="noopener">23 December</a>.
Completion of the merger was contingent on the satisfaction or waiver of the closing conditions set forth in the Merger Agreement, including no more than 10% of the ordinary shares dissenting.
Prior to the  EGM, <a href="http://ir.sina.com/static-files/722deb54-0426-4b43-a58a-1c8be8b59b61" target="_blank" rel="noopener">21.5mn shares or 35.9%</a> of the total issued and outstanding shares of Sina issued notices of objections to the company. 
On or prior to January 12, 2021, Sina intended to issue written notices of authorization to all the objecting shareholders. Within 20 days immediately after the date on which these notices were given, any objecting shareholder was required to give written notice of its decision to dissent.
There has been no update on the merger from Sina since the 28 December. Behind the scenes, Charles Chao can choose to walk, negotiate a superior price with dissentient shareholders, or waive the condition.  Should he waive the condition, dissentient shareholders have the right to be paid fair value for their shares, as determined by the Cayman Island's Grand Court.
More below the fold.<a href="https://www.collascrill.com/news-updates/articles/grand-court-confirms-that-dissent-rights-are-available-to-minority-shareholders-in-short-form-mergers/" target="_blank" rel="noopener"></a>

Back on the 6 July last year, Sina Corp (Class A) (SINA US) announced the receipt of a preliminary non-binding “going private” proposal from New Wave MMXV - a company controlled by its chairman/CEO Charles Chao - at US$41/share. This was followed by an Agreement and Plan of Merger pursuant to which New Wave will acquire all of the outstanding ordinary shares not owned at US$43.30/share.
Despite an undemanding Offer price, shareholders approved (93.6% of the total votes) the merger on the 23 December.
Completion of the merger was contingent on the satisfaction or waiver of the closing conditions set forth in the Merger Agreement, including no more than 10% of the ordinary shares dissenting.
Prior to the  EGM, 21.5mn shares or 35.9% of the total issued and outstanding shares of Sina issued notices of objections to the company. 
On or prior to January 12, 2021, Sina intended to issue written notices of authorization to all the objecting shareholders. Within 20 days immediately after the date on which these notices were given, any objecting shareholder was required to give written notice of its decision to dissent.
There has been no update on the merger from Sina since the 28 December. Behind the scenes, Charles Chao can choose to walk, negotiate a superior price with dissentient shareholders, or waive the condition.  Should he waive the condition, dissentient shareholders have the right to be paid fair value for their shares, as determined by the Cayman Island's Grand Court.
More below the fold.

On the 24 January last year, <a href="https://www.smartkarma.com/entities/changyou-com-ltd-ads" target="_blank" data-smartkarma-citation="entities:19287:1" rel="noopener">Changyou.com (CYOU US)</a> <a href="http://ir.changyou.com/file/New-Comet-20200124.pdf" target="_blank" rel="noopener">entered</a> into a definitive agreement with <a href="https://www.smartkarma.com/entities/sohu-com-ltd" target="_blank" data-smartkarma-citation="entities:22853:1" rel="noopener">Sohu.com Inc (SOHU US)</a> at US$5.40/share, or US$10.80/ADS in cash. On the 14 April,  Sohu <a href="http://investors.sohu.com/static-files/4f6c805d-a81c-4799-a043-3d163d5702e7" target="_blank" rel="noopener">announced</a> the filing of the definitive plan of merger.
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Sohu held 67.4% of shares out in Changyou via its A and B shares and 95.3% of the voting rights given the disproportionate voting power of the B shares. As Sohu held &gt;90% of the votes, the Offer was in the form of a short-form statutory merger under Cayman Law - i.e. approval from Changyou's shareholders was not required. No vote, no dissent. Done deal.
But wait ...
In a ruling handed down on the 28 January, the Grand Court of the Cayman Islands concluded that shareholders of companies that undertake a 'short-form' merger are entitled to dissent. 
<blockquote>
It would be absurd to exclude a dissentient member of a company subject to short-form merger from the protection of section 238 simply because, unlike in the case of a long-form merger, that member is not allowed to vote.
</blockquote>
The ruling has wide-ranging implications.
More below the fold.
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On the 24 January last year, Changyou.com (CYOU US) entered into a definitive agreement with Sohu.com Inc (SOHU US) at US$5.40/share, or US$10.80/ADS in cash. On the 14 April,  Sohu announced the filing of the definitive plan of merger.

Sohu held 67.4% of shares out in Changyou via its A and B shares and 95.3% of the voting rights given the disproportionate voting power of the B shares. As Sohu held &gt;90% of the votes, the Offer was in the form of a short-form statutory merger under Cayman Law - i.e. approval from Changyou's shareholders was not required. No vote, no dissent. Done deal.
But wait ...
In a ruling handed down on the 28 January, the Grand Court of the Cayman Islands concluded that shareholders of companies that undertake a 'short-form' merger are entitled to dissent. 

It would be absurd to exclude a dissentient member of a company subject to short-form merger from the protection of section 238 simply because, unlike in the case of a long-form merger, that member is not allowed to vote.

The ruling has wide-ranging implications.
More below the fold.


Changyou (CYOU US): Short-Form Merger Dissent Now Permitted

Equity Bottom-Up

<ul class="">
<li>Property Developers’ advertising budgets surged in December 2020.</li>
<li>BEKE’s active users increased by 147% YoY in December 2020, compared to 61% YoY for Anjuke.</li>
<li>We believe revenue will rise by 29% in 2021.</li>
<li>We set the upside between 24% and 33% for the end of 2021.</li>
</ul>


Property Developers’ advertising budgets surged in December 2020.
BEKE’s active users increased by 147% YoY in December 2020, compared to 61% YoY for Anjuke.
We believe revenue will rise by 29% in 2021.
We set the upside between 24% and 33% for the end of 2021.


KE (BEKE): Outperform Competitors in Booming Property Market

China

58.Com, Inc. operates as a local life service platform. The Company transfers products and services between purchasers and sellers. 58.Com offers housing rental, recruitment, second-hand product, travel, catering, entertainment, and group-buying information and services.

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58.Com Inc Adr (WUBA US)

KE (BEKE): Pre-IPO Anjuke Asks Authorities to Fine KE Following Alibaba Case

Anjuke said, authorities should fine KE for exclusive contracts. We believe KE’s database of real apartments for sale angers Anjuke. We also...

Ming Lu

CBPO's Vote Gets Up But Dissenters Lurk

Currently trading at a gross/annualsed spread of 1.5%/7.5%. This assumes payment mid-May if assuming the negotiation process drags out to its full...

David Blennerhassett

What's Going On With Sina Corp?

Currently trading to terms. This is an avoid. The Offer is being done too cheaply, But unless you have already dissented, you are effectively...

David Blennerhassett

Changyou (CYOU US): Short-Form Merger Dissent Now Permitted

The Court rightfully concluded s.238 provides the right of dissent in a short-form merger. Offerors will now face the prospect of dissension from...

David Blennerhassett

KE (BEKE): Outperform Competitors in Booming Property Market

Property Developers’ advertising budgets surged in December 2020. BEKE’s active users increased by 147% YoY in December 2020. We set the upside...

Ming Lu

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