Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

After its first Offer was rejected by <a href="https://www.smartkarma.com/entities/asaleo-care-ltd" target="_blank" data-smartkarma-citation="entities:19923:1" rel="noopener">Asaleo Care Ltd (AHY AU)</a> board, Swedish outfit <a href="https://www.smartkarma.com/entities/essity-ab" target="_blank" data-smartkarma-citation="entities:28203:1" rel="noopener">Essity AB (ESSITYB SS)</a> returned on the 17 February with an improved <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02342161-3A561375?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">A$1.45/share proposal</a> - up from $1.26/share - comprising $1.40/share in cash plus A$0.05/share of permitted dividends, which are expected to be fully franked.
The record date for the ordinary dividend of A$0.03/share was the 16 March.
The Scheme Doc was <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02366574-3A565799?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">released</a> on the 23 April, and yesterday Asaleo shareholders overwhelmingly (99%+) <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02380616-3A568149?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">voted</a> for the Scheme. 
Done &amp; dusted. The implementation date is expected to be on the 1 July. The special dividend of A$0.02/share will be paid on the 21 June, with a record date of the 15 June.
More below the fold.

After its first Offer was rejected by Asaleo Care Ltd (AHY AU) board, Swedish outfit Essity AB (ESSITYB SS) returned on the 17 February with an improved A$1.45/share proposal - up from $1.26/share - comprising $1.40/share in cash plus A$0.05/share of permitted dividends, which are expected to be fully franked.
The record date for the ordinary dividend of A$0.03/share was the 16 March.
The Scheme Doc was released on the 23 April, and yesterday Asaleo shareholders overwhelmingly (99%+) voted for the Scheme. 
Done &amp; dusted. The implementation date is expected to be on the 1 July. The special dividend of A$0.02/share will be paid on the 21 June, with a record date of the 15 June.
More below the fold.

Asaleo (ASX: AHY): Essity’s Offer Gets Up


For the month of May, 11 new deals were discussed on Smartkarma with an overall announced deal size of ~US$7.3bn.



Clicking on the company name in the table below will take you to the entity page where you can read the initial insight(s) written by Smartkarma contributors on these new deals and follow-up discussions, or simply click on the insight link(s) below the name.







New Deals


Industry


Size (US$bn)


Type


Premium




Australia




APN Property Group (APD AU) 
Property
0.2
Scheme
50%


APN Prop (APD AU): Dexus' Done Deal



Boral Ltd (BLD AU) 
Construction
4.8
Off-market
Nil


Boral Ltd (BLD AU): Seven's Nil Premium



Japara Healthcare (JHC AU) 
Healthcare
0.2
Scheme
30%


Japara Healthcare (JHC AU): Here Comes The Calvary


 



Hong Kong




Chong Hing Bank (1111 HK) 
Banking
0.2
Scheme
51.2%



Chong Hing Bank (1111 HK): Takeover Talk As Shares Pop
Chong Hing Bank (1111 HK): Yue Xiu's Offer Is Light



 



Japan




Aomori Bank (8342 JP) / Michinoku Bank (8350 JP) 
Bank
0.6
Merger



Aomori Bank &amp; Michinoku Bank Merger - Nothing To Write Home About Yet



EPS Holdings (4282 JP) 
Data/software
0.1
Tender Offer
35.5%


Another Too-Cheap MBO as Founder Takes Out EPS


 Locoguide (4497 JP) / Kufu (4399 JP)

Real estate
0.4
Merger



Locoguide (4497 JP) - Kufu (4399 JP): Merger Is a Done Deal



Maruka Machinery (7594 JP) / Furusato Industries (8087 JP) 
Trading
0.4
Merger



A Complex SmallCap Merger in Japan: Maruka (7594) And Furusato (8087)



Secom Joshinetsu (4342 JP) 
Security
0.3
Tender Offer
66.2%


Secom To Finally Buy Out Affiliate Secom Joshinetsu (4342)








Malaysia




Can-One Bhd (CAN MK) 
Manufacturing
0.1
MTO
15.8%


Can-One (CAN MK)? Yeoh Can Lah!



IHH Healthcare (IHH MK) 
Healthcare
N/A
N/A
N/A


IHH Healthcare (IHH MK): More Medicine For Mitsui?


Source: Smartkarma Insights






The above does not include BetMakers Technology Group (BET AU) lobbing a non-binding offer of A$4bn (A$1bn cash, $3bn scrip into BET) for Tabcorp Ltd (TAH AU)'s wagering and media division, and Apollo's prior tilt - Tabcorp (TAH AU): Apollo Shows Its Hand.

Nor does the table include the rumoured merger between  Angang Steel Co Ltd (H) (347 HK) and Bengang Steel (000761 CH) - Amalgamated Steel: Merging Angang &amp; Bengang As, Bs, and Hs.



The average premium for the new deals announced (or first discussed) in May was ~41%, with a year-to-date average of ~31% (78 deals). This compares to the average premium for all deals in 2020 (158 deals) and 2019 (145 deals) of 31% and 31.5% respectively. 




Summary of News in May of Arb Situations On Smartkarma's Radar



(Again, click on the company names to take to you to the insights and/or discussion posts for a more comprehensive read-through on each situation)






Australia


Comments (with links to announcements &amp; insights)




3P Learning (3PL AU) 

No May update




Bingo Industries (BIN AU) 

1-May: Capital Group announced it has sold its entire 9.7% stake in Bingo Industries (BIN AU).




Crown Resorts (CWN AU) 

10-May: Crown Resorts: Blackstone &amp; Star Place Their Bets
17-May: Crown Says Blackstone's Bid Is Light. Undecided On Star
20-May: Crown Resorts Ltd: Blackstone Offer Rejected, Star Offer May Still Not Reflect True Forward Value




Galaxy Resources (GXY AU) 

No May update




Link Administration Holdings (LNK AU) 

27-May: Link Group (LNK AU): KKR Opens The Bidding For PEXA
31-May: Link Admin (LNK AU) Goes IPO Route For PEXA Afterall




Mainstream Group Holdings Ltd (MAI AU) 

2-May: Mainstream (MAI AU): More-Than-Double in Less than 2 Months After Apex Bump
6-May: Mainstream (MAI AU): Bidding War Continues as SS&amp;C Overbids for the 4th Time
14-May: Mainstream (MAI AU): +120% in ~2 Months but Bidding War Continues....




McPherson's Ltd (MCP AU) 

No May update




Mortgage Choice (MOC AU) 

26-Mau FIRB gives its approval



Primewest Group Ltd (PWG AU)

14-May: Target's Statement and Bidder's Statements were published. Primewest Group Ltd (PWG AU)'s Board has unanimously recommended shareholders to accept the Offer. 




Think Childcare (TNK AU) 

12-May: Think Childcare (TNK AU) has agreed to extend the Exclusivity Period with Busy Bees to 31st May 2021 (vs. original deadline of 14th May). This is still a non-binding deal with an expected completion date to be in 1Q CY22. 




Vitalharvest Freehold Trust (VTH AU) 

1-May: And so it goes - MAFM bumps its Offer for Vitalharvest Freehold Trust (VTH AU) to $1.26.
7-May: MAFM exercises a call option and acquires 16.2% of Vitalharvest Freehold Trust (VTH AU).
28-May Roc bumps its Offer for Vitalharvest Freehold Trust (VTH AU) to $1.29/share.  And says it will overbid any MAFM counter! 




Vocus Communications (VOC AU) 

10-May: Vocus Comms (VOC AU): MIRA/Aware's Done Deal
19-May: Vocus Comms (VOC AU): MIRA/​Aware’s Scheme Doc Despatched. EGM On 22 June










Hong Kong


Comments (with links to announcements &amp; insights)




Beijing Digital Telecom (6188 HK) 

1-May: Beijing Digital (6188 HK): Offer Now Open. IFA Says Fair
20-May: Beijing Digital Telecom (6188 HK)'s MGO is now unconditional in all respects. 




China Machinery Engineering (1829 HK) 

28-May: China Machinery Engineering (1829 HK): Movement In The Works?




China Traditional Chinese Medicine (570 HK) 

7-May: In its monthly update regarding a potential Offer, China Traditional Chinese Medicine (570 HK) says there is no update.




China Youzan Limited (8083 HK) 

10-May: China Youzan (8083 HK): Reality Check As Shares Rollover




Kerry Logistics Network (636 HK) 

4-May: Kerry Logistics Network (636 HK) will hold an EGM on the 26 May for shareholders to vote on the sale of the Hong Kong and Taiwan warehouse businesses to Kerry Holdings. 
26-May: At its SGM, Kerry Logistics Network (636 HK) shareholders overwhelmingly approved the sale of its Hong Kong, Taiwan warehouse business to Kerry Holdings.




New Century REIT (1275 HK) 

No May update




Rivera Holdings (281 HK) 

No April update




Sichuan Languang Justbon Service Group (2606 HK) 

3-May: Languang Justbon (2606 HK): Offer Now Open - For Up To Four Months










India


Comments (with links to insights)




Mphasis Ltd (MPHL IN) 

4-May: The Detailed Public Statement on Mphasis Ltd (MPHL IN) has been released. The Open Offer is scheduled tentatively to run from 18 June to 1 July, which means it is running Very Tight and the option is worth a bit less than I expected. But that just means there is more gamma. One could get big at the high Rs 1600s area. 




Vedanta Ltd (VEDL IN) 

4-May: Vedanta Now Caught Up With Peers - A Different Skew Ahead










Japan


Comments (with links to announcements &amp; insights)




BeNEXT Group (2154 JP) 
No May update



Cocokara Fine (3098 JP) 
No May update



Fuji Kosan Company (5009 JP) 
17-May:  Fuji Kosan Company (5009 JP) has responded to Aslead Strategic Value Fund's Tender Offer with its initial Target Opinion Statement which is "Opinion Withheld." This is because Fuji Kosan hasn't actually done anything yet - two weeks in. They have sent questions to Aslead, and Aslead has five business days to respond. This is slow-walking it. This tender offer is likely to be extended because of that.



Hitachi Metals (5486 JP) 

5-May: Hitachi Metals - Should I Stay or Should I Go Now?




Honshu Chemical Industry (4115 JP) 

13-May: Honshu Chemical (4115) Shareholders Perhaps One Day From a Wrong Price Takeover
16-May:: Honshu Chemical Shareholders Get the Short End of the Stick As The Board Is Ex-Gourd




Invesco Office J Reit (3298 JP) 

6-May:  Invesco Office OPPOSES Starwood Hostile Offer and Gets a Distinctly Beige Knight
11-May:  Starwood Bumps Terms, Lowers Threshold on Invesco Office
13-May:  Invesco Office's Terrible, Horrible, No Good Very Bad Day... Changes Things
20-May:  Invesco Office's Beige Knight (Deemed Dirty Gray By Markets) Suddenly Looks Brighter and Whiter
23-May:  Starwood Responds to Invesco Office's White Knight Proposal
24-May: Starwood has extended their Tender Offer on Invesco Office J Reit (3298 JP) from the 24th of May to 15th of June after the close of the 24th. They did not raise the price. This is basically the equivalent of Starwood calling Invesco's bluff. They can extend again if they want but they are going to make Invesco come out. They can change price later if they think it necessary.



Japan Asia (3751 JP)
No May update



Sawada Holdings (8699 JP) 

9-May:  Sawada Selldown Was NOT Done - Shareholder Structure Looks Different Now
23-May: Sawada Is A Different Stock Now
31-May:  Be Careful of Expectations on Sawada (8699)




Toshiba Corp (6502 JP) 

14-May: Toshiba – Shareholder Returns Trump Weak Guidance
17-May: Toshiba Results &amp; Shareholder Return - Possibly Big Impact Buyback Coming











New Zealand


Comments 




Tilt Renewables Ltd (TLT NZ) 

No May update











Singapore


Comments (with links to announcements)




Procurri Corporation (PROC SP) 

3-May: The Partial Offer has not become unconditional in all respects on the Closing Date and has therefore lapsed










Thailand


Comments




Intouch Holdings (INTUCH TB) 

No May update




Vinythai Public Co (VNT TB) 

No May update






<div>
On the 10 December, Swedish outfit <a href="https://www.smartkarma.com/entities/essity-ab" target="_blank" data-smartkarma-citation="entities:28203:1" rel="noopener">Essity AB (ESSITYB SS)</a> made a conditional, non-binding <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02320914-3A557776?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">A$1.26/share Offer</a> for the remaining 63.8% of <a href="https://www.smartkarma.com/entities/asaleo-care-ltd" target="_blank" data-smartkarma-citation="entities:19923:1" rel="noopener">Asaleo Care Ltd (AHY AU)</a> it did not already own, either by way of a Scheme or an off-market takeover.
Concurrent with a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02333643-3A559971?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">trading update on the 27 January</a>, AHY's independent board committee concluded the proposal fundamentally undervalued Asaelo and was materially inadequate.
Essity has now returned with an improved <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02342161-3A561375?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">A$1.45/share proposal</a>, comprising $1.40/share in cash plus A$0.05/share of permitted dividends, which are expected to be fully franked. A$1.45 represents a premium of 43.6% to the undisturbed price. The Scheme is not subject to financing or due diligence. 
Independent non-Essity directors and AHY's CEO recommend the Offer.
The parties have entered into a Scheme implementation agreement. Provided the Scheme is approved, implementation is expected late-June of this year.
</div>
<div>
More below the fold.
</div>


On the 10 December, Swedish outfit Essity AB (ESSITYB SS) made a conditional, non-binding A$1.26/share Offer for the remaining 63.8% of Asaleo Care Ltd (AHY AU) it did not already own, either by way of a Scheme or an off-market takeover.
Concurrent with a trading update on the 27 January, AHY's independent board committee concluded the proposal fundamentally undervalued Asaelo and was materially inadequate.
Essity has now returned with an improved A$1.45/share proposal, comprising $1.40/share in cash plus A$0.05/share of permitted dividends, which are expected to be fully franked. A$1.45 represents a premium of 43.6% to the undisturbed price. The Scheme is not subject to financing or due diligence. 
Independent non-Essity directors and AHY's CEO recommend the Offer.
The parties have entered into a Scheme implementation agreement. Provided the Scheme is approved, implementation is expected late-June of this year.


More below the fold.


Asaleo (ASX: AHY): Essity's Revised Offer

Swedish outfit <a href="https://www.smartkarma.com/entities/essity-ab" target="_blank" data-smartkarma-citation="entities:28203:1" rel="noopener">Essity AB (ESSITYB SS)</a> has made a conditional, non-binding A$1.26/share offer for the remaining 63.8% of <a href="https://www.smartkarma.com/entities/asaleo-care-ltd" target="_blank" data-smartkarma-citation="entities:19923:1" rel="noopener">Asaleo Care Ltd (AHY AU)</a> it does not already own, either by way of a Scheme or an off-market takeover.
Hygiene, personal care, and consumer tissue products producer Asaleo <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02320914-3A557776?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">said</a> the Offer price, a 24.7% premium to last close, reflected a low takeover premium to recent market prices and was highly opportunistic in timing.
However, Asaleo added it was still in the early stages of assessing the proposal.
It is understood this is Essity's initial Offer, suggesting there is scope for a bump.
More below the fold.

Swedish outfit Essity AB (ESSITYB SS) has made a conditional, non-binding A$1.26/share offer for the remaining 63.8% of Asaleo Care Ltd (AHY AU) it does not already own, either by way of a Scheme or an off-market takeover.
Hygiene, personal care, and consumer tissue products producer Asaleo said the Offer price, a 24.7% premium to last close, reflected a low takeover premium to recent market prices and was highly opportunistic in timing.
However, Asaleo added it was still in the early stages of assessing the proposal.
It is understood this is Essity's initial Offer, suggesting there is scope for a bump.
More below the fold.

Macro and Australian equity strategist, Macro Strategy Advisors

Shane Lee

Macro and Australian equity strategist

Macro Strategy Advisors

Thematic (Sector/Industry)

<ul>
<li>
Solid Earnings Momentum Hits a Brick Wall. It’s still early days, with only 40% of stocks reporting during the first 2 weeks of reporting season, but cracks are beginning to appear in the earnings outlook.  FY18 expectations have been mostly met with a slight skew towards upside surprise in results.  However, FY19 earnings are under downward pressure led by the Resources, Financials and Consumer Discretionary.  </li>
<li>
Downgrades following Reporting: WES, TLS, RIO, ORG, SUN, AGL, QBE, AZJ, CWN, DXS, SHL, TAH, VCX, DMP, SEK, IOF, LNK, MFG, NXT, ORA, NVT, PGH, SKC have all seen analysts cut 12-month forward earning growth by more than 3% during reporting season even though the market has responded reasonably positive to these stocks. COH guided to lower FY earnings growth than the market expected and ECX downgraded FY18 earnings during the first week of reporting season.</li>
<li>
Front Running Reporting: ABP, FMG, SAR, NCM, TGR, BPT, AAD are all due to report during the next few weeks and have seen 12-month forward earnings downgraded by analysts.  These stocks are at risk of seeing a drop in FY19 guidance when they report even if there is a surprise in FY18. </li>
<li>
Downgrades for stocks not reporting: AWC, ILU, RWC, SFR, SIG, SIQ, SDA, XRO, WSA, FBU, XRO, DOW, IGO, RRL, BAL, AHY, DHG, GXY, ORE, IFN, NAN have all seen 12-month forward EPS growth downgraded in the past 2 weeks.</li>
<li>
Cost management Rather than Revenue Growth Driving Earnings: Cost pressures are well contained limited to stocks exposed to higher electricity costs and those in the aged care industry (labour).  Indeed, the beats on EPS (63%) are exceeding the beats on revenue.  The Banks are managing cost pressures in short-term funding markets by raising mortgage rates on interest-only and investor mortgages to satisfy the regulator.  Savers are also covering cost increases after seeing deposit rates trimmed.</li>
<li>
Capex for Offence and Defence. Growth stocks such as CSL, TWE and RMD are investing to deliver in long-term growth and the market is giving it a tick of approval to this strategy.  We hold CSL, TWE and COH in our portfolio and will stay for the ride even though valuation pressures are rising.  TLS and CBA are investing to shore-up earnings, leaving little room for near-to-medium-term earnings surprise; but valuations seem cheap. </li>
<li>
Holding Steady with our View. Despite the lift in downgrades, we will not make changes to our portfolio until reporting season is complete.  We’re disappointed in the downgrades to Materials, given our overweight position in Resources.  The strength in key commodities and weakness in the Australian dollar are diving strong FY18 results, but analysts seem to think the cycle has peaked.  </li>
</ul>



Solid Earnings Momentum Hits a Brick Wall. It’s still early days, with only 40% of stocks reporting during the first 2 weeks of reporting season, but cracks are beginning to appear in the earnings outlook.  FY18 expectations have been mostly met with a slight skew towards upside surprise in results.  However, FY19 earnings are under downward pressure led by the Resources, Financials and Consumer Discretionary.  

Downgrades following Reporting: WES, TLS, RIO, ORG, SUN, AGL, QBE, AZJ, CWN, DXS, SHL, TAH, VCX, DMP, SEK, IOF, LNK, MFG, NXT, ORA, NVT, PGH, SKC have all seen analysts cut 12-month forward earning growth by more than 3% during reporting season even though the market has responded reasonably positive to these stocks. COH guided to lower FY earnings growth than the market expected and ECX downgraded FY18 earnings during the first week of reporting season.

Front Running Reporting: ABP, FMG, SAR, NCM, TGR, BPT, AAD are all due to report during the next few weeks and have seen 12-month forward earnings downgraded by analysts.  These stocks are at risk of seeing a drop in FY19 guidance when they report even if there is a surprise in FY18. 

Downgrades for stocks not reporting: AWC, ILU, RWC, SFR, SIG, SIQ, SDA, XRO, WSA, FBU, XRO, DOW, IGO, RRL, BAL, AHY, DHG, GXY, ORE, IFN, NAN have all seen 12-month forward EPS growth downgraded in the past 2 weeks.

Cost management Rather than Revenue Growth Driving Earnings: Cost pressures are well contained limited to stocks exposed to higher electricity costs and those in the aged care industry (labour).  Indeed, the beats on EPS (63%) are exceeding the beats on revenue.  The Banks are managing cost pressures in short-term funding markets by raising mortgage rates on interest-only and investor mortgages to satisfy the regulator.  Savers are also covering cost increases after seeing deposit rates trimmed.

Capex for Offence and Defence. Growth stocks such as CSL, TWE and RMD are investing to deliver in long-term growth and the market is giving it a tick of approval to this strategy.  We hold CSL, TWE and COH in our portfolio and will stay for the ride even though valuation pressures are rising.  TLS and CBA are investing to shore-up earnings, leaving little room for near-to-medium-term earnings surprise; but valuations seem cheap. 

Holding Steady with our View. Despite the lift in downgrades, we will not make changes to our portfolio until reporting season is complete.  We’re disappointed in the downgrades to Materials, given our overweight position in Resources.  The strength in key commodities and weakness in the Australian dollar are diving strong FY18 results, but analysts seem to think the cycle has peaked.  


Aussie Reporting Season Update: Cracks in the Mirror

Australia

Asaleo Care Ltd is a personal care and hygiene company that manufactures, markets and distributes Personal Care and Tissue products under market leading brands.

Asaleo Care Ltd (AHY AU)

Asaleo (ASX: AHY): Essity’s Offer Gets Up

This has and will continue to trade tight to terms. Depending on their individual tax circumstances, some shareholders can take advantage of the...

David Blennerhassett

(Mostly) Asia M&A: May 2021 Roundup

The average premium for the new deals announced (or first discussed) in May was ~41%, with a year-to-date average of ~31% (78 deals).

David Blennerhassett

Asaleo (ASX: AHY): Essity's Revised Offer

Trading at a spread of 1.4%/3.9% gross/annualised. Depending on their individual tax circumstances, some shareholders can take advantage of the...

David Blennerhassett

Asaleo (ASX: AHY)/Essity: Bottom Feeders

Essity can easily pony up another A$0.15-A$0.20/share, or ~10% upside from here. I would expect Essity to return with a higher Offer. However, this...

David Blennerhassett

Aussie Reporting Season Update: Cracks in the Mirror

Solid Earnings Momentum Hits a Brick Wall. It’s still early days, with only 40% of stocks reporting during the first 2 weeks of reporting season,...

Shane Lee