Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Vedanta, Cardinal Res., Japan Retail Fund, HSBC, Opticomm, Tiffany/LVMH

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<p>Back on the 2 April, China's <a href="https://www.smartkarma.com/entities/58-com-inc-adr" target="_blank" data-smartkarma-citation="entities:2563:1" rel="noopener">58.Com Inc (WUBA US)</a> received a preliminary, nonbinding <a href="https://sec.report/Document/0001104659-20-042699/" target="_blank" rel="noopener">proposal</a> from Ocean Link Partners, at $27.50 per Class A or Class B ordinary share, or $55/ADS, a 17.88% premium to last close. This was followed on the 20 April with 58.com <a href="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=114974426&amp;type=PDF&amp;symbol=WUBA&amp;companyName=58.com+Inc.+American+Depositary+Shares+each+representing+2+Class+A&amp;formType=6-K&amp;dateFiled=2020-04-30&amp;CK=1525494" target="_blank" rel="noopener">announcing</a> it had received a preliminary &amp; non-binding Offer from the Buyer Group, comprising Ocean Link Partners and Warburg Pincus Asia LLC, General Atlantic Singapore Fund, and Jinbo Yao, 58.com's chairman and chief executive officer. The indicative Offer Price remained at $55/ADS. A definitive Agreement and Plan of Merger was <a href="http://58.investorroom.com/2020-06-15-58-com-Enters-into-a-Definitive-Agreement-for-Going-Private-Transaction" target="_blank" rel="noopener">announced</a> on the 15 June, with the consideration price marginally sweetened to $56/ADS, a 19.9% premium to the undisturbed price.</p>
<p>Under the merger agreement, the Buyer Group has formed a new holding entity, Quantum Bloom Group Ltd (Parent).</p>
<p>Yao entered into a support agreement with the Parent such that Yao will roll over his stake in 58.com (42% of the voting power) into newly-issued shares of Parent. General Atlantic <a href="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=115087118&amp;type=PDF&amp;symbol=WUBA&amp;companyName=58.com+Inc.+American+Depositary+Shares+each+representing+2+Class+A&amp;formType=SC+13D%2FA&amp;dateFiled=2020-06-22&amp;CK=1525494" target="_blank" rel="noopener">elected</a> on June 21, 2020 <em>not</em> to roll over its stake (2% of the voting power), electing its shares be cancelled in exchange for the merger consideration. That bumped the financing for the merger by US$400.4mn.</p>
<p>Additionally, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> entered into a rollover agreement with the parent on the <a href="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=115079126&amp;type=PDF&amp;symbol=WUBA&amp;companyName=58.com+Inc.+American+Depositary+Shares+each+representing+2+Class+A&amp;formType=SC+13D%2FA&amp;dateFiled=2020-06-17&amp;CK=1525494" target="_blank" rel="noopener">15 June</a>, such that Tencent will roll over its existing stake (28.3% of the voting power) into newly-issued ordinary shares of Parent.</p>
<p>The Merger requires the affirmative vote of two-thirds of 58.com's total voting power (present and via proxy) at an EGM. This will be held on the 7 September - this coming Monday. Yao and General Atlantic will vote their collective 44.02% voting power in favour of the merger. Tencent is not obligated to vote in a specific way under its rollover Agreement. But assuming Tencent does, its 28.3% voting power takes the total to 72.3% - exceeding the two-thirds threshold.</p>
<p>The low-ball offer was not lost on investors. Lawyers Halper Sadeh set up a site for assist investors to "<em>obtain the best possible consideration</em>".</p>
<p>This was followed by proxy advisors reports from both Glass Lewis and ISS recommending shareholder vote AGAINST the proposal. </p>
<p>But this is a done deal. The alternative avenue is the long-dated appraisal rights route.</p>
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<p>As always, more below the fold.</p>
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Back on the 2 April, China's 58.Com Inc (WUBA US) received a preliminary, nonbinding proposal from Ocean Link Partners, at $27.50 per Class A or Class B ordinary share, or $55/ADS, a 17.88% premium to last close. This was followed on the 20 April with 58.com announcing it had received a preliminary &amp; non-binding Offer from the Buyer Group, comprising Ocean Link Partners and Warburg Pincus Asia LLC, General Atlantic Singapore Fund, and Jinbo Yao, 58.com's chairman and chief executive officer. The indicative Offer Price remained at $55/ADS. A definitive Agreement and Plan of Merger was announced on the 15 June, with the consideration price marginally sweetened to $56/ADS, a 19.9% premium to the undisturbed price.
Under the merger agreement, the Buyer Group has formed a new holding entity, Quantum Bloom Group Ltd (Parent).
Yao entered into a support agreement with the Parent such that Yao will roll over his stake in 58.com (42% of the voting power) into newly-issued shares of Parent. General Atlantic elected on June 21, 2020 not to roll over its stake (2% of the voting power), electing its shares be cancelled in exchange for the merger consideration. That bumped the financing for the merger by US$400.4mn.
Additionally, Tencent Holdings (700 HK) entered into a rollover agreement with the parent on the 15 June, such that Tencent will roll over its existing stake (28.3% of the voting power) into newly-issued ordinary shares of Parent.
The Merger requires the affirmative vote of two-thirds of 58.com's total voting power (present and via proxy) at an EGM. This will be held on the 7 September - this coming Monday. Yao and General Atlantic will vote their collective 44.02% voting power in favour of the merger. Tencent is not obligated to vote in a specific way under its rollover Agreement. But assuming Tencent does, its 28.3% voting power takes the total to 72.3% - exceeding the two-thirds threshold.
The low-ball offer was not lost on investors. Lawyers Halper Sadeh set up a site for assist investors to "obtain the best possible consideration".
This was followed by proxy advisors reports from both Glass Lewis and ISS recommending shareholder vote AGAINST the proposal. 
But this is a done deal. The alternative avenue is the long-dated appraisal rights route.


As always, more below the fold.


58.com: Foregone Conclusion Amidst Proxy Advisor Pushback

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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

<div><p><a href="https://www.smartkarma.com/entities/ke-holdings-inc" target="_blank" data-smartkarma-citation="entities:29213:1" rel="noopener">KE Holdings Inc (BEKE US)</a> (BEKE), a company backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> and Hillhouse, aims to raise around US$2bn in its US listing.</p></div><div><p>BEKE combines Lianjia, China's leading real estate brokerage brand with more than 18 years of history, and Beike, China's leading integrated online and offline platform for housing transactions and services with two years of history.</p></div><div><p>In my previous insight, <a href="https://www.smartkarma.com/insights/ke-holdings-beike-pre-ipo-the-positives-fast-growth-high-market-share" target="_blank" rel="noopener">KE Holdings/​Beike Pre-IPO - The Positives - Fast Growth, High Market Share</a>, I spoke about the positive aspects of the deal. In this insight, I'll talk about the not so flattering aspects of the deal.</p></div>

KE Holdings Inc (BEKE US) (BEKE), a company backed by Tencent Holdings (700 HK), Softbank Group (9984 JP) and Hillhouse, aims to raise around US$2bn in its US listing.BEKE combines Lianjia, China's leading real estate brokerage brand with more than 18 years of history, and Beike, China's leading integrated online and offline platform for housing transactions and services with two years of history.In my previous insight, KE Holdings/​Beike Pre-IPO - The Positives - Fast Growth, High Market Share, I spoke about the positive aspects of the deal. In this insight, I'll talk about the not so flattering aspects of the deal.

KE Holdings/​Beike Pre-IPO - The Negatives - Questions, Margins, P2P

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.

<p>On 27 July, <a href="https://www.smartkarma.com/entities/sogou-inc" target="_blank" data-smartkarma-citation="entities:25996:1" rel="noopener">Sogou Inc (SOGO US)</a> announced a non-binding privatisation proposal from <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>. The bid of $9.00 per ADS values Sogou at a market cap of $3.5 billion. The proposal represents a premium of 56.5% to the closing trading price of the ADSs on the last trading day (24 July 2020) and a premium of 84.9% to the VWAP during the last 30 trading days. Tencent will finance the proposed acquisition with cash on hand. On the back of the bid, Sogou rose 48% to close at $8.51 per ADS. The potential privatisation comes hot on the heels of China internet privatisation bids of <a href="https://www.smartkarma.com/entities/bitauto-holdings-ltd-adr" target="_blank" data-smartkarma-citation="entities:12004:1" rel="noopener">Bitauto Holdings (BITA US)</a>, <a href="https://www.smartkarma.com/entities/58-com-inc-adr" target="_blank" data-smartkarma-citation="entities:2563:1" rel="noopener">58.Com Inc Adr (WUBA US)</a> and <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>. </p><div class="content-highlight"><p>Tencent currently owns 52.3% of the aggregate voting power. The supporting shareholder, Mr Charles Zhang, owns 0.9% of the total voting power. To reach the two-thirds voting thresholds, Tencent would need the support of <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>, which owns 44.1% of the aggregate voting power. Sohu has stated that its board has not yet had an opportunity to review and evaluate the proposal in detail. Overall, we believe that Sohu will be supportive of the bid and the privatisation is a done deal. </p></div>

On 27 July, Sogou Inc (SOGO US) announced a non-binding privatisation proposal from Tencent Holdings (700 HK). The bid of $9.00 per ADS values Sogou at a market cap of $3.5 billion. The proposal represents a premium of 56.5% to the closing trading price of the ADSs on the last trading day (24 July 2020) and a premium of 84.9% to the VWAP during the last 30 trading days. Tencent will finance the proposed acquisition with cash on hand. On the back of the bid, Sogou rose 48% to close at $8.51 per ADS. The potential privatisation comes hot on the heels of China internet privatisation bids of Bitauto Holdings (BITA US), 58.Com Inc Adr (WUBA US) and Sina Corp (Class A) (SINA US). Tencent currently owns 52.3% of the aggregate voting power. The supporting shareholder, Mr Charles Zhang, owns 0.9% of the total voting power. To reach the two-thirds voting thresholds, Tencent would need the support of Sohu.com Inc (SOHU US), which owns 44.1% of the aggregate voting power. Sohu has stated that its board has not yet had an opportunity to review and evaluate the proposal in detail. Overall, we believe that Sohu will be supportive of the bid and the privatisation is a done deal. 

<p>Chinese search-engine <a href="https://www.smartkarma.com/entities/sogou-inc" target="_blank" data-smartkarma-citation="entities:25996:1" rel="noopener">Sogou Inc (SOGO US)</a>, majority-owned by <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>  and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, has <a href="http://ir.sogou.com/2020-07-27-Sogou-Announces-Receipt-of-a-Preliminary-Non-Binding-Proposal-to-Acquire-the-Company" target="_blank" rel="noopener">announced</a> it has received a preliminary non-binding proposal from Tencent to acquire all of its outstanding ordinary shares that are not already owned by Tencent, for US$9.00 in cash per ordinary share or ADS.</p>
<p>The Offer price is a 57% premium to the undisturbed price and a two-year high.</p>
<p>Tencent owns ~39% of the total shares out in Sogou and 52.3% of the total voting power (on account of the super-voting rights of the Class B shares). Sohu holds 33.7%/43.9% respectively. Together, they control 96.4% of Sogou's vote. </p>
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<div>Sogou closed at $8.49/share, up 48%. Sohu closed up 40%.</div>
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<div>As Sogou is Cayman incorporated, this Offer only needs a two-thirds majority to get up. Provided Sohu is on board, this deal is rubber-stamped.</div>
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<div>The only apparent risk is on timing. </div>
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<div>More below the fold.</div>

Chinese search-engine Sogou Inc (SOGO US), majority-owned by Sohu.com Inc (SOHU US)  and Tencent Holdings (700 HK), has announced it has received a preliminary non-binding proposal from Tencent to acquire all of its outstanding ordinary shares that are not already owned by Tencent, for US$9.00 in cash per ordinary share or ADS.
The Offer price is a 57% premium to the undisturbed price and a two-year high.
Tencent owns ~39% of the total shares out in Sogou and 52.3% of the total voting power (on account of the super-voting rights of the Class B shares). Sohu holds 33.7%/43.9% respectively. Together, they control 96.4% of Sogou's vote. 

Sogou closed at $8.49/share, up 48%. Sohu closed up 40%.


As Sogou is Cayman incorporated, this Offer only needs a two-thirds majority to get up. Provided Sohu is on board, this deal is rubber-stamped.

The only apparent risk is on timing. 

More below the fold.

Sogou/Tencent: The Latest Chinese Internet Privatisation

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)

Last Week in Event SPACE: Vedanta, Cardinal Res., Japan Retail Fund, HSBC, Opticomm, Tiffany/LVMH

Last Week in Event SPACE ... Plus, other events, CCASS movements and Mood Spins. (This insight covers specific insights & comments...

David Blennerhassett

58.com: Foregone Conclusion Amidst Proxy Advisor Pushback

On the 2 April, China's 58.Com Inc (WUBA US) received a preliminary, nonbinding proposal from Ocean Link Partners, at $27.50 per Class A or Class...

David Blennerhassett

KE Holdings/Beike Pre-IPO - The Negatives - Questions, Margins, P2P

KE Holdings Inc (BEKE US) (BEKE), a company backed by Tencent Holdings (700 HK), Softbank Group (9984 JP) and Hillhouse, aims to raise around...

Sumeet Singh

Sogou’s Privatisation Bid from Tencent

On 27 July, Sogou Inc (SOGO US) announced a non-binding privatisation proposal from Tencent Holdings (700 HK). The bid of $9.00 per ADS values...

Arun George

Sogou/Tencent: The Latest Chinese Internet Privatisation

Chinese search-engine Sogou Inc (SOGO US), majority-owned by Sohu.com Inc (SOHU US) and Tencent Holdings (700 HK), has announced it has received a...

David Blennerhassett

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Last Week in Event SPACE: Vedanta, Cardinal Res., Japan Retail Fund, HSBC, Opticomm, Tiffany/LVMH

Last Week in Event SPACE ... Plus, other events, CCASS movements and Mood Spins. (This insight covers specific insights & comments...

David Blennerhassett

58.com: Foregone Conclusion Amidst Proxy Advisor Pushback

On the 2 April, China's 58.Com Inc (WUBA US) received a preliminary, nonbinding proposal from Ocean Link Partners, at $27.50 per Class A or Class...

David Blennerhassett

KE Holdings/​Beike Pre-IPO - The Negatives - Questions, Margins, P2P

KE Holdings Inc (BEKE US) (BEKE), a company backed by Tencent Holdings (700 HK), Softbank Group (9984 JP) and Hillhouse, aims to raise around...

Sumeet Singh

Sogou’s Privatisation Bid from Tencent

On 27 July, Sogou Inc (SOGO US) announced a non-binding privatisation proposal from Tencent Holdings (700 HK). The bid of $9.00 per ADS values...

Arun George

Sogou/Tencent: The Latest Chinese Internet Privatisation

Chinese search-engine Sogou Inc (SOGO US), majority-owned by Sohu.com Inc (SOHU US) and Tencent Holdings (700 HK), has announced it has received a...

David Blennerhassett

KE Holdings/Beike Pre-IPO - The Negatives - Questions, Margins, P2P