Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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Back on the 2 August, <a href="https://www.smartkarma.com/entities/square-inc" target="_blank" data-smartkarma-citation="entities:23755:1" rel="noopener">Square Inc (SQ US)</a> and <a href="https://www.smartkarma.com/entities/afterpay-limited" target="_blank" data-smartkarma-citation="entities:26940:1" rel="noopener">Afterpay (APT AU)</a> <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02402191-3A571915?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> a firm merger, the completion of which will create Australia's largest-ever buyout. Under the terms of the Offer, by way of a Scheme, Afterpay shareholders will receive a fixed exchange ratio of 0.375 shares of Square Class A common stock for each Afterpay ordinary share. Based on Square’s closing price of US$247.26 on July 30, 2021, this represented an implied transaction price of ~A$126.21 per Afterpay share, or a premium of ~30.6%.
Yesterday Square's shareholders <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02447292-3A580232?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">approved</a> the issuance of Square shares for the acquisition of Afterpay.  This was shortly followed by the dispatch of the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02448085-3A580361?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">Scheme Booklet</a>.
The Scheme Meeting will be held on the 6 December with expected implementation on the 18 January. The Independent Expert reckons the Offer is fair and reasonable. 
More below the fold.
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Back on the 2 August, Square Inc (SQ US) and Afterpay (APT AU) announced a firm merger, the completion of which will create Australia's largest-ever buyout. Under the terms of the Offer, by way of a Scheme, Afterpay shareholders will receive a fixed exchange ratio of 0.375 shares of Square Class A common stock for each Afterpay ordinary share. Based on Square’s closing price of US$247.26 on July 30, 2021, this represented an implied transaction price of ~A$126.21 per Afterpay share, or a premium of ~30.6%.
Yesterday Square's shareholders approved the issuance of Square shares for the acquisition of Afterpay.  This was shortly followed by the dispatch of the Scheme Booklet.
The Scheme Meeting will be held on the 6 December with expected implementation on the 18 January. The Independent Expert reckons the Offer is fair and reasonable. 
More below the fold.


Afterpay Ltd (APT AU)/Square (SQ US) Merger: Scheme Meeting Convened

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Fintech Hits Are Coming: Regulators have forced the capitulation of internet anti-competitive behavior. Most recently, both Alibaba (BABA.US) [Alibaba} and Tencent (700.HK) [Tencent] have stopped blocking rivals’ links which prevented users to purchase goods using competitor payment apps. This is a big deal, given that FinTech represented a growing 30.3% of revenue for Tencent at 2Q21. The more Tencent relies on Fintech to support growth, the more alarming the moves by Alibaba and other competitors are; and*Prior To The War On Gaming, Tencent’s Results Have Already Deteriorated: Tencent’s 2Q21 GAAP net income declined CNY 5.2 bn (10.8%) linked quarter – and were of poor quality. Results were challenged by: cost of revenue increase; operating expense increase; losses in associates; higher impairment charges; and weaker online games. Were it not for the artificially lower tax rate, results would have been even more challenged. We can't wait to see what the impact of mainland China’s latest regulatory maneuvers will have on Tencent’s 3Q21 results out on November 10th.

*Fintech Hits Are Coming: Regulators have forced the capitulation of internet anti-competitive behavior. Most recently, both Alibaba (BABA.US) [Alibaba} and Tencent (700.HK) [Tencent] have stopped blocking rivals’ links which prevented users to purchase goods using competitor payment apps. This is a big deal, given that FinTech represented a growing 30.3% of revenue for Tencent at 2Q21. The more Tencent relies on Fintech to support growth, the more alarming the moves by Alibaba and other competitors are; and*Prior To The War On Gaming, Tencent’s Results Have Already Deteriorated: Tencent’s 2Q21 GAAP net income declined CNY 5.2 bn (10.8%) linked quarter – and were of poor quality. Results were challenged by: cost of revenue increase; operating expense increase; losses in associates; higher impairment charges; and weaker online games. Were it not for the artificially lower tax rate, results would have been even more challenged. We can't wait to see what the impact of mainland China’s latest regulatory maneuvers will have on Tencent’s 3Q21 results out on November 10th.  

Tencent Holdings – Under Severe Pressure

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Sandfire Resources Limited / Event-Driven

On 23 September pre-market open, <a href="https://www.smartkarma.com/entities/sandfire-resources-limited" target="_blank" data-smartkarma-citation="entities:1259:1" rel="noopener">Sandfire Resources Limited (SFR AU)</a> requested for a trading halt. A short time later, the company announced the acquisition of the MATSA mining complex from Mubadala and Trafigura for US$1.865bn (A$2.572bn).The acquisition is expected to be completed in the March 2022 quarter and is subject to Spanish Foreign Direct Investment Approval and anti-trust merger control approval.The acquisition will be funded by an A$120m strategic placement to AustralianSuper, a A$165m institutional placement, a A$963m fully underwritten 1 for 1 accelerated non-renounceable entitlement offer (ANREO), debt and cash on hand.Just over 231m shares will be issued at A$5.40/share, a 13.2% discount to the last close of A$6.22/share, and a 6.2% discount to TERP.The increase in market cap as a result of the placement and entitlement offer will result in <a href="https://www.smartkarma.com/entities/sandfire-resources-limited" target="_blank" data-smartkarma-citation="entities:1259:1" rel="noopener">Sandfire Resources Limited (SFR AU)</a> becoming a high probability inclusion to the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> at the December rebalance.With a number of M&amp;A deals targeting <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> constituents, there will be more changes to the index over the next couple of regular rebalances (and in the interim as well).

On 23 September pre-market open, Sandfire Resources Limited (SFR AU) requested for a trading halt. A short time later, the company announced the acquisition of the MATSA mining complex from Mubadala and Trafigura for US$1.865bn (A$2.572bn).The acquisition is expected to be completed in the March 2022 quarter and is subject to Spanish Foreign Direct Investment Approval and anti-trust merger control approval.The acquisition will be funded by an A$120m strategic placement to AustralianSuper, a A$165m institutional placement, a A$963m fully underwritten 1 for 1 accelerated non-renounceable entitlement offer (ANREO), debt and cash on hand.Just over 231m shares will be issued at A$5.40/share, a 13.2% discount to the last close of A$6.22/share, and a 6.2% discount to TERP.The increase in market cap as a result of the placement and entitlement offer will result in Sandfire Resources Limited (SFR AU) becoming a high probability inclusion to the S&amp;P/ASX 200 (AS51 INDEX) at the December rebalance.With a number of M&amp;A deals targeting S&amp;P/ASX 200 (AS51 INDEX) constituents, there will be more changes to the index over the next couple of regular rebalances (and in the interim as well).

Sandfire Resources (SFR AU): Acquisition, ANREO and ASX200 Inclusion

On 20 September, <a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">Ausnet Services (AST AU)</a> announced that it had received an unsolicited, indicative, non-binding and conditional proposal from the infrastructure affiliate of <a href="https://www.smartkarma.com/entities/brookfield-asset-manage-cl-a-0483cfb5-71a5-4931-af80-901e5f30aace" target="_blank" data-smartkarma-citation="entities:23741:1" rel="noopener">Brookfield Asset Management (BAM US)</a> to acquire all the shares in <a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">Ausnet Services (AST AU)</a> via a Scheme of Arrangement at an indicative price of A$2.50/share in cash.<a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">Ausnet Services (AST AU)</a> finished the day 19.2% higher at A$2.36 on volumes that were nearly 3 times the ADV.In a surprising development, earlier today, <a href="https://www.smartkarma.com/entities/apa-group" target="_blank" data-smartkarma-citation="entities:18658:1" rel="noopener">APA Group (APA AU)</a> announced that it has made a non-binding indicative proposal to acquire all the shares in <a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">Ausnet Services (AST AU)</a> via a Scheme of Arrangement at an indicative price of A$2.60/share in cash and scrip.What makes this even more surprising is that <a href="https://www.smartkarma.com/entities/apa-group" target="_blank" data-smartkarma-citation="entities:18658:1" rel="noopener">APA Group (APA AU)</a> and <a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">Ausnet Services (AST AU)</a> were in discussions earlier. <a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">Ausnet Services (AST AU)</a> knew that a revised offer from <a href="https://www.smartkarma.com/entities/apa-group" target="_blank" data-smartkarma-citation="entities:18658:1" rel="noopener">APA Group (APA AU)</a> was forthcoming, yet went ahead and gave Brookfield an 8 week period of exclusivity for due diligence.<a href="https://www.smartkarma.com/entities/apa-group" target="_blank" data-smartkarma-citation="entities:18658:1" rel="noopener">APA Group (APA AU)</a> has clearly laid out why its proposal is superior to the proposal from <a href="https://www.smartkarma.com/entities/brookfield-asset-manage-cl-a-0483cfb5-71a5-4931-af80-901e5f30aace" target="_blank" data-smartkarma-citation="entities:23741:1" rel="noopener">Brookfield Asset Management (BAM US)</a> and this could get interesting with a possibility of even higher bids coming in for <a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">Ausnet Services (AST AU)</a>.<a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">Ausnet Services (AST AU)</a> is a member of the S&amp;P/ASX 100, <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> and S&amp;P/ASX 300 Indices. Once the stock is delisted, it will be replaced in the indices with the highest ranking stocks that are not part of the index. With the wave of ongoing M&amp;A activity, there will be a lot of additions to the indices in the next few months.

On 20 September, Ausnet Services (AST AU) announced that it had received an unsolicited, indicative, non-binding and conditional proposal from the infrastructure affiliate of Brookfield Asset Management (BAM US) to acquire all the shares in Ausnet Services (AST AU) via a Scheme of Arrangement at an indicative price of A$2.50/share in cash.Ausnet Services (AST AU) finished the day 19.2% higher at A$2.36 on volumes that were nearly 3 times the ADV.In a surprising development, earlier today, APA Group (APA AU) announced that it has made a non-binding indicative proposal to acquire all the shares in Ausnet Services (AST AU) via a Scheme of Arrangement at an indicative price of A$2.60/share in cash and scrip.What makes this even more surprising is that APA Group (APA AU) and Ausnet Services (AST AU) were in discussions earlier. Ausnet Services (AST AU) knew that a revised offer from APA Group (APA AU) was forthcoming, yet went ahead and gave Brookfield an 8 week period of exclusivity for due diligence.APA Group (APA AU) has clearly laid out why its proposal is superior to the proposal from Brookfield Asset Management (BAM US) and this could get interesting with a possibility of even higher bids coming in for Ausnet Services (AST AU).Ausnet Services (AST AU) is a member of the S&amp;P/ASX 100, S&amp;P/ASX 200 (AS51 INDEX) and S&amp;P/ASX 300 Indices. Once the stock is delisted, it will be replaced in the indices with the highest ranking stocks that are not part of the index. With the wave of ongoing M&amp;A activity, there will be a lot of additions to the indices in the next few months.

AusNet (AST AU): Bidding War Between Brookfield & APA Brewing?

Index Rebalance

S&amp;P Dow Jones Indices will announce changes to the S&amp;P/ASX 100 and <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> as part of the December index review on 3 December and the changes will be effective after the close of trading on 17 December.The review period for the rebalance ends on 19 November, so we are exactly two-thirds of the way through the review period.As of the close on 20 September, we see <a href="https://www.smartkarma.com/entities/pilbara-minerals-ltd" target="_blank" data-smartkarma-citation="entities:7460:1" rel="noopener">Pilbara Minerals (PLS AU)</a> as a potential inclusion to the S&amp;P/ASX100 and <a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Administration Holdings (LNK AU)</a> as a potential deletion.For the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a>, potential inclusions are <a href="https://www.smartkarma.com/entities/imugene-ltd" target="_blank" data-smartkarma-citation="entities:20276:1" rel="noopener">Imugene Ltd (IMU AU)</a>, <a href="https://www.smartkarma.com/entities/paladin-energy-ltd" target="_blank" data-smartkarma-citation="entities:10117:1" rel="noopener">Paladin Energy (PDN AU)</a>, <a href="https://www.smartkarma.com/entities/amalgamated-holdings-ltd" target="_blank" data-smartkarma-citation="entities:20978:1" rel="noopener">Event Hospitality and Entertainment (EVT AU)</a>, <a href="https://www.smartkarma.com/entities/liontown-resources-ltd" target="_blank" data-smartkarma-citation="entities:20488:1" rel="noopener">Liontown Resources (LTR AU)</a> and <a href="https://www.smartkarma.com/entities/arena-reit" target="_blank" data-smartkarma-citation="entities:12209:1" rel="noopener">Arena Reit (ARF AU)</a>, while potential deletions are <a href="https://www.smartkarma.com/entities/kogan-com-ltd" target="_blank" data-smartkarma-citation="entities:23575:1" rel="noopener">Kogan.com (KGN AU)</a>, <a href="https://www.smartkarma.com/entities/redbubble-ltd" target="_blank" data-smartkarma-citation="entities:24321:1" rel="noopener">Redbubble Ltd (RBL AU)</a>, <a href="https://www.smartkarma.com/entities/monadelphous-group-ltd" target="_blank" data-smartkarma-citation="entities:553:1" rel="noopener">Monadelphous (MND AU)</a>, <a href="https://www.smartkarma.com/entities/omni-bridgeway-ltd" target="_blank" data-smartkarma-citation="entities:8840:1" rel="noopener">Imf Bentham Ltd (OBL AU)</a> and <a href="https://www.smartkarma.com/entities/spark-new-zealand-ltd-3dcc706a-f086-4dd4-882b-2a42a36ccf8d" target="_blank" data-smartkarma-citation="entities:26915:1" rel="noopener">Spark New Zealand (SPK AU)</a>.With multiple M&amp;A deal pending, including <a href="https://www.smartkarma.com/entities/afterpay-limited" target="_blank" data-smartkarma-citation="entities:26940:1" rel="noopener">Afterpay Touch (APT AU)</a>, <a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a>, <a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">Ausnet Services (AST AU)</a>, <a href="https://www.smartkarma.com/entities/oil-search-ltd" target="_blank" data-smartkarma-citation="entities:773:1" rel="noopener">Oil Search Ltd (OSH AU)</a> and <a href="https://www.smartkarma.com/entities/spark-infrastructure-group" target="_blank" data-smartkarma-citation="entities:595:1" rel="noopener">Spark Infrastructure (SKI AU)</a>, there could be more additions to the index if deals are completed or highly likely to be completed by end November.Short interest on most potential inclusions is quite low, while the short interest on many potential exclusions is quite high.

S&amp;P Dow Jones Indices will announce changes to the S&amp;P/ASX 100 and S&amp;P/ASX 200 (AS51 INDEX) as part of the December index review on 3 December and the changes will be effective after the close of trading on 17 December.The review period for the rebalance ends on 19 November, so we are exactly two-thirds of the way through the review period.As of the close on 20 September, we see Pilbara Minerals (PLS AU) as a potential inclusion to the S&amp;P/ASX100 and Link Administration Holdings (LNK AU) as a potential deletion.For the S&amp;P/ASX 200 (AS51 INDEX), potential inclusions are Imugene Ltd (IMU AU), Paladin Energy (PDN AU), Event Hospitality and Entertainment (EVT AU), Liontown Resources (LTR AU) and Arena Reit (ARF AU), while potential deletions are Kogan.com (KGN AU), Redbubble Ltd (RBL AU), Monadelphous (MND AU), Imf Bentham Ltd (OBL AU) and Spark New Zealand (SPK AU).With multiple M&amp;A deal pending, including Afterpay Touch (APT AU), Sydney Airport (SYD AU), Ausnet Services (AST AU), Oil Search Ltd (OSH AU) and Spark Infrastructure (SKI AU), there could be more additions to the index if deals are completed or highly likely to be completed by end November.Short interest on most potential inclusions is quite low, while the short interest on many potential exclusions is quite high.

ASX100/​200 Index Rebalance Preview: Potential December Changes With Large Impact

Australia

Afterpay Limited provides financial solutions. The Company offers payment platform that allow users to maintain financial wellness and control, by splitting payments in four, for both online and in-store purchases. Afterpay serves customers globally.

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Afterpay (APT AU)

Afterpay Ltd (APT AU)/Square (SQ US) Merger: Scheme Meeting Convened

Trading at a gross/annualised spread of 4.1%/22%. Get involved. The key competitor, Affirm, is up 160% since the transaction was announced. I still...

David Blennerhassett

Tencent Holdings – Under Severe Pressure

TENCENT: Alibaba and Tencent have begun unblocking rivals’ app links. Prior to impact of the new regulations, Tencent’s results were already stressed.

Thomas J. Monaco

Sandfire Resources (SFR AU): Acquisition, ANREO and ASX200 Inclusion

Sandfire Resources is buying the MATSA mine in Spain and conducting a placement and entitlement offer to raise funds. This will lead to a big jump...

Brian Freitas

AusNet (AST AU): Bidding War Between Brookfield & APA Brewing?

Yesterday, Brookfield made an offer for AusNet at A$2.5/share in cash. Today, APA Group made an offer at A$2.6/share in cash + scrip. This could go...

Brian Freitas

ASX100/200 Index Rebalance Preview: Potential December Changes With Large Impact

There could be 1 change to the ASX100 and 5 changes to the ASX200 at the December rebalance. With a long M&A pipeline, there could be additional...

Brian Freitas

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Afterpay Ltd (APT AU)/Square (SQ US) Merger: Scheme Meeting Convened

Trading at a gross/annualised spread of 4.1%/22%. Get involved. The key competitor, Affirm, is up 160% since the transaction was announced. I still...

David Blennerhassett

Tencent Holdings – Under Severe Pressure

TENCENT: Alibaba and Tencent have begun unblocking rivals’ app links. Prior to impact of the new regulations, Tencent’s results were already stressed.

Thomas J. Monaco

Sandfire Resources (SFR AU): Acquisition, ANREO and ASX200 Inclusion

Sandfire Resources is buying the MATSA mine in Spain and conducting a placement and entitlement offer to raise funds. This will lead to a big jump...

Brian Freitas

AusNet (AST AU): Bidding War Between Brookfield & APA Brewing?

Yesterday, Brookfield made an offer for AusNet at A$2.5/share in cash. Today, APA Group made an offer at A$2.6/share in cash + scrip. This could go...

Brian Freitas

ASX100/​200 Index Rebalance Preview: Potential December Changes With Large Impact

There could be 1 change to the ASX100 and 5 changes to the ASX200 at the December rebalance. With a long M&A pipeline, there could be additional...

Brian Freitas

ASX100/200 Index Rebalance Preview: Potential December Changes With Large Impact