IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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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.

Event-Driven

<a href="https://www.smartkarma.com/entities/soho-china-ltd" target="_blank" data-smartkarma-citation="entities:4123:1" rel="noopener">Soho China Ltd (410 HK)</a> is a real estate company controlled by power couple Pan Shiyi and Zhang Xin. Today, SOHO China has announced a pre-conditional voluntary conditional cash offer from <a href="https://www.smartkarma.com/entities/blackstone-group-inc" target="_blank" data-smartkarma-citation="entities:27166:1" rel="noopener">Blackstone Group (BX US)</a>. The offer of HK$5.00 in cash per share is a 31.6% premium over the closing price of HK$3.80 per share on the last trading day (11 June prior to the trading halt).As a reminder on 15 June, SOHO China entered a trading halt pending the release of an announcement pursuant to the Hong Kong Code on Takeovers and Mergers which we discussed in <a href="https://www.smartkarma.com/insights/soho-china-after-many-false-starts-finally-an-offer" target="_blank" data-smartkarma-citation="insights:53114" rel="noopener">SOHO China: After Many False Starts, Finally an Offer?</a>. The key pre-condition is approval by SAMR under the PRC anti-monopoly law, which we think should be forthcoming as this is not a privatisation bid. The offer is conditional on the offeror holding more than 50% of the voting rights. The offeror has secured irrevocables from Pan Shiyi and Zhang Xin representing 54.93% of the outstanding shares. Consequently, the offer has met the 50+% acceptance threshold. Pan Shiyi and Zhang Xin will retain shares representing 9.00% of the outstanding shares. Blackstone aims to maintain SOHO China’s listing. <div class="content-highlight">Blackstone has driven a hard bargain and secured the irrecovables from Pan Shiyi and Zhang Xin at a relatively good price. Notably, Blackstone’s offer price of HK$5.00 per share is 17% below last year’s rumoured privatisation price of HK$6.00 per share. The lower price likely explains Blackstone’s move to pursue a conditional voluntary offer rather than privatisation via a scheme. While not a knockout offer, we think that the offer which has met the acceptance threshold, will also resonate with some shareholders. </div>

Soho China Ltd (410 HK) is a real estate company controlled by power couple Pan Shiyi and Zhang Xin. Today, SOHO China has announced a pre-conditional voluntary conditional cash offer from Blackstone Group (BX US). The offer of HK$5.00 in cash per share is a 31.6% premium over the closing price of HK$3.80 per share on the last trading day (11 June prior to the trading halt).As a reminder on 15 June, SOHO China entered a trading halt pending the release of an announcement pursuant to the Hong Kong Code on Takeovers and Mergers which we discussed in SOHO China: After Many False Starts, Finally an Offer?. The key pre-condition is approval by SAMR under the PRC anti-monopoly law, which we think should be forthcoming as this is not a privatisation bid. The offer is conditional on the offeror holding more than 50% of the voting rights. The offeror has secured irrevocables from Pan Shiyi and Zhang Xin representing 54.93% of the outstanding shares. Consequently, the offer has met the 50+% acceptance threshold. Pan Shiyi and Zhang Xin will retain shares representing 9.00% of the outstanding shares. Blackstone aims to maintain SOHO China’s listing. Blackstone has driven a hard bargain and secured the irrecovables from Pan Shiyi and Zhang Xin at a relatively good price. Notably, Blackstone’s offer price of HK$5.00 per share is 17% below last year’s rumoured privatisation price of HK$6.00 per share. The lower price likely explains Blackstone’s move to pursue a conditional voluntary offer rather than privatisation via a scheme. While not a knockout offer, we think that the offer which has met the acceptance threshold, will also resonate with some shareholders. 

<a href="https://www.smartkarma.com/entities/soho-china-ltd" target="_blank" data-smartkarma-citation="entities:4123:1" rel="noopener">Soho China Ltd (410 HK)</a> is a real estate company controlled by power couple Pan Shiyi and Zhang Xin. Today, SOHO China entered a trading halt pending the release of an announcement pursuant to the Hong Kong Code on Takeovers and Mergers. Since 3 June, SOHO China’ shares have risen 55%. SOHO China has been subject to bid rumours in the recent past. On 11 March 2020, SOHO China confirmed that it is in discussions with overseas financial investors to explore the possibility of a strategic partnership, which may lead to a general offer. The announcement was a reaction to a Reuters report the previous day which claimed that <a href="https://www.smartkarma.com/entities/blackstone-group-inc" target="_blank" data-smartkarma-citation="entities:27166:1" rel="noopener">Blackstone Group (BX US)</a> was looking to privatise SOHO China at HK$6.00 per share. The controlling shareholders (Chairman Pan Shiyi and Chief Executive Zhang Xin) who have a 63.93% stake, planned to retain a small stake in the deal with Blackstone. On 13 August 2020, SOHO China announced that "previous discussions with various investors have now been terminated." A potential deal with Blackstone was derailed as the COVID-19 pandemic made it difficult to assess the business outlook, according to press reports. Subsequently, on 13 November 2020, Hillhouse Capital responded to media rumours by stating it had no interest in taking SOHO China private.As SOHO China is incorporated in the Cayman Islands, we think that a potential offer will be likely structured as a scheme of arrangement. The key conditions precedent are the headcount test and the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection).<div class="content-highlight">SOHO China has weathered the COVID-19 pandemic creditably which supports a potential offer. We think that Blackstone is the most likely bidder and the last year’s rumoured offer of HK$6.00 per share remains justifiable.    </div>

Soho China Ltd (410 HK) is a real estate company controlled by power couple Pan Shiyi and Zhang Xin. Today, SOHO China entered a trading halt pending the release of an announcement pursuant to the Hong Kong Code on Takeovers and Mergers. Since 3 June, SOHO China’ shares have risen 55%. SOHO China has been subject to bid rumours in the recent past. On 11 March 2020, SOHO China confirmed that it is in discussions with overseas financial investors to explore the possibility of a strategic partnership, which may lead to a general offer. The announcement was a reaction to a Reuters report the previous day which claimed that Blackstone Group (BX US) was looking to privatise SOHO China at HK$6.00 per share. The controlling shareholders (Chairman Pan Shiyi and Chief Executive Zhang Xin) who have a 63.93% stake, planned to retain a small stake in the deal with Blackstone. On 13 August 2020, SOHO China announced that "previous discussions with various investors have now been terminated." A potential deal with Blackstone was derailed as the COVID-19 pandemic made it difficult to assess the business outlook, according to press reports. Subsequently, on 13 November 2020, Hillhouse Capital responded to media rumours by stating it had no interest in taking SOHO China private.As SOHO China is incorporated in the Cayman Islands, we think that a potential offer will be likely structured as a scheme of arrangement. The key conditions precedent are the headcount test and the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection).SOHO China has weathered the COVID-19 pandemic creditably which supports a potential offer. We think that Blackstone is the most likely bidder and the last year’s rumoured offer of HK$6.00 per share remains justifiable.    

SOHO China: After Many False Starts, Finally an Offer?

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

Sona Blw Precision Forgings Lt / Equity Capital Markets

Sona Comstar (Sona) aims to raise around US$761m in its Indian IPO. The company is backed by Blackstone, which held a 66.2% stake prior to listing.Sona is an automotive technology company, designing, manufacturing and supplying highly engineered, mission critical automotive systems and components to automotive OEMs across US, Europe, India and China, for both electrified and non-electrified powertrain segments.Sona delivered a steady performance in 2019 with revenue up 16.6% and PAT up 24.1%. However, its revenue fell by 14.5% in FY20, although it still managed to grow its PAT by 4%. It registered a strong bounce bank in FY21 with 28.4% revenue growth but PAT was flat.While the company enjoys a long customer relationship, its largest customers haven’t consistently grown their contribution to revenue over the past few years.We have covered the deal background in our earlier note, <a href="https://www.smartkarma.com/insights/sona-comstar-pre-ipo-inconsistent-growth-patchy-disclosures" target="_blank" rel="noopener">Sona Comstar Pre-IPO - Inconsistent growth, patchy disclosures. </a>In this note, we will talk about the recent updates and run the deal through our ECM framework.

Sona Comstar (Sona) aims to raise around US$761m in its Indian IPO. The company is backed by Blackstone, which held a 66.2% stake prior to listing.Sona is an automotive technology company, designing, manufacturing and supplying highly engineered, mission critical automotive systems and components to automotive OEMs across US, Europe, India and China, for both electrified and non-electrified powertrain segments.Sona delivered a steady performance in 2019 with revenue up 16.6% and PAT up 24.1%. However, its revenue fell by 14.5% in FY20, although it still managed to grow its PAT by 4%. It registered a strong bounce bank in FY21 with 28.4% revenue growth but PAT was flat.While the company enjoys a long customer relationship, its largest customers haven’t consistently grown their contribution to revenue over the past few years.We have covered the deal background in our earlier note, Sona Comstar Pre-IPO - Inconsistent growth, patchy disclosures. In this note, we will talk about the recent updates and run the deal through our ECM framework.

Sona Comstar - Has Its Positives, but We Remain Unconvinced

<a href="https://www.smartkarma.com/entities/sona-blw-precision-forgings" target="_blank" data-smartkarma-citation="entities:32993:1" rel="noopener">Sona BLW Precision Forgings (SPF IN)</a>/Sona Comstar is one of India’s leading auto technology companies that designs, manufactures, and supplies highly engineered, mission-critical systems and components. Sona Comstar is looking to raise Rs60 billion ($820 million) through an IPO in India as soon as April, according to press reports. The offer comprises a primary raise of Rs3 billion ($41 million) and a secondary raise of Rs57 billion ($777 million). The selling shareholder is <a href="https://www.smartkarma.com/entities/blackstone-group-inc" target="_blank" data-smartkarma-citation="entities:27166:1" rel="noopener">Blackstone Group LP (BX US)</a>.  <div class="content-highlight">Sona Comstar’s broad product portfolio which spans both conventional and electrified powertrains position it to gain from high growth auto industry trends (rising penetration of mild hybrids/full hybrids and battery electric vehicles) as well as various Government of India initiatives to spur the growth of the auto industry (such as recently announced Rs570 billion production-linked incentive scheme). Overall, we think that Sona Comstar is an attractive and alternative play on the electric vehicle market.</div>

Sona BLW Precision Forgings (SPF IN)/Sona Comstar is one of India’s leading auto technology companies that designs, manufactures, and supplies highly engineered, mission-critical systems and components. Sona Comstar is looking to raise Rs60 billion ($820 million) through an IPO in India as soon as April, according to press reports. The offer comprises a primary raise of Rs3 billion ($41 million) and a secondary raise of Rs57 billion ($777 million). The selling shareholder is Blackstone Group LP (BX US).  Sona Comstar’s broad product portfolio which spans both conventional and electrified powertrains position it to gain from high growth auto industry trends (rising penetration of mild hybrids/full hybrids and battery electric vehicles) as well as various Government of India initiatives to spur the growth of the auto industry (such as recently announced Rs570 billion production-linked incentive scheme). Overall, we think that Sona Comstar is an attractive and alternative play on the electric vehicle market.

Sona Comstar IPO Initiation: Shifting Gears

European Event-Driven Analyst

Jesus Rodriguez Aguilar

On 5 February, Brown Bidco Ltd., owned by joint offerors Blackstone, GIP and Cascade, announced a $5.62 recommended cash acquisition for <a href="https://www.smartkarma.com/entities/signature-aviation-plc" target="_blank" data-smartkarma-citation="entities:21829:1" rel="noopener">Signature Aviation (SIG LN)</a>, intended to be  implemented by a scheme of arrangement.
<ul>
<li>
equivalent to 411.33p at the time of the announcement (FX 1.3663 USD/GBP).
</li>
<li>Shareholders may elect to receive the consideration in Sterling at the applicable market exchange rate on the latest practicable date for fixing such rate prior to the relevant payment date.</li>
<li data-bind="visible: !isCollapsed(), html: content">The consideration represents 4.1x EV/Fwd Revenue, 17.4x EV/Fwd EBITDA and 73.9x P/Fwd E.</li>
</ul>
Blackstone and GIP wisely agreed to sign a ceasefire in their contest for Signature.
<ul>
<li>The recommended 411p offer is a 53% premium to the Signature at the time the fight broke out in public. This premium is a good outcome for the auction, considering that Rudd argued that the company was "desperately undervalued".</li>
<li data-bind="visible: !isCollapsed(), html: content">On a comps base the offer seems generous, which is not surprising given  Sir Nigel Rudd's track record in selling British companies (Pilkington, Boots and Invensys). We are looking at an IRR c. 12%.</li>
<li data-bind="visible: !isCollapsed(), html: content">
Interloper risk is low, given Cascade and BMGFT's 19% stake.
</li>
</ul>
As of Monday 15 February intra-day trading, gross USD adjusted spread was -0.48%, therefore it would be wise to stay clear of this trade until the gross adjusted spread reaches a positive value above 2%.

On 5 February, Brown Bidco Ltd., owned by joint offerors Blackstone, GIP and Cascade, announced a $5.62 recommended cash acquisition for Signature Aviation (SIG LN), intended to be  implemented by a scheme of arrangement.


equivalent to 411.33p at the time of the announcement (FX 1.3663 USD/GBP).

Shareholders may elect to receive the consideration in Sterling at the applicable market exchange rate on the latest practicable date for fixing such rate prior to the relevant payment date.
The consideration represents 4.1x EV/Fwd Revenue, 17.4x EV/Fwd EBITDA and 73.9x P/Fwd E.

Blackstone and GIP wisely agreed to sign a ceasefire in their contest for Signature.

The recommended 411p offer is a 53% premium to the Signature at the time the fight broke out in public. This premium is a good outcome for the auction, considering that Rudd argued that the company was "desperately undervalued".
On a comps base the offer seems generous, which is not surprising given  Sir Nigel Rudd's track record in selling British companies (Pilkington, Boots and Invensys). We are looking at an IRR c. 12%.

Interloper risk is low, given Cascade and BMGFT's 19% stake.


As of Monday 15 February intra-day trading, gross USD adjusted spread was -0.48%, therefore it would be wise to stay clear of this trade until the gross adjusted spread reaches a positive value above 2%.

Signature Aviation - PE Consortium Agreed Offer

United States

Blackstone Inc. operates as an investment company. The Company focuses on real estate, hedge funds, private equity, leveraged lending, senior debts, and rescue financing. Blackstone serves customers worldwide.

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Blackstone (BX US)

SOHO China: Blackstone Makes Its Offer

SOHO China has announced a pre-conditional voluntary conditional cash offer from Blackstone at HK$5.00 in cash per share. Due to irrevocables the...

Arun George

SOHO China: After Many False Starts, Finally an Offer?

SOHO China entered a trading halt pursuant to the HK Code on Takeovers & Mergers. We think that Blackstone is the most likely bidder and the last...

Arun George

Sona Comstar - Has Its Positives, but We Remain Unconvinced

Sona Comstar aims to raise around US$761m in its Indian IPO. The company is backed by Blackstone, which held a 66.2% stake prior to listing.

Sumeet Singh

Sona Comstar IPO Initiation: Shifting Gears

Sona Comstar is looking to raise Rs60 bn ($820 m) through an IPO in India. Overall, we think that Sona Comstar is an attractive and alternative...

Arun George

Signature Aviation - PE Consortium Agreed Offer

The deal is highly likely to close. As of 15 February intra-day trading, gross USD adjusted spread was -0.48%, therefore it would be wise to stay...

Jesus Rodriguez Aguilar

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