Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/ausnutria-dairy-corp-ltd" target="_blank" data-smartkarma-citation="entities:13799:1" rel="noopener">Ausnutria Dairy Corp (1717 HK)</a>'s Composite Document has now been despatched. <a href="https://www.smartkarma.com/entities/inner-mongolia-yili-indus-a" target="_blank" data-smartkarma-citation="entities:3220:1" rel="noopener">Inner Mongolia Yili Industrial (600887 CH)</a>'s Offer is open for acceptances with a first close on the 3 March.</li>
<li>The Offer is conditional on 50% acceptances, with Yili holding 34.33%. </li>
<li>This transaction should get up. The IFA considers the Offer is fair and reasonable. </li>
</ul>



Ausnutria Dairy Corp (1717 HK)'s Composite Document has now been despatched. Inner Mongolia Yili Industrial (600887 CH)'s Offer is open for acceptances with a first close on the 3 March.
The Offer is conditional on 50% acceptances, with Yili holding 34.33%. 
This transaction should get up. The IFA considers the Offer is fair and reasonable. 


Ausnutria (1717 HK): Composite Doc Out. Offer Now Open

<ul>
<li>530.8mn shares of <a href="https://www.smartkarma.com/entities/ausnutria-dairy-corp-ltd" target="_blank" data-smartkarma-citation="entities:13799:1" rel="noopener">Ausnutria (1717 HK)</a> crossed at the close yesterday at HK$10.06/share. That is the exact number of shares under the SPAs and the stated price under the agreements.</li>
<li>China's NDRC approval,  a condition to the SPAs, was obtained earlier this month, leaving MoC and SAFE approvals outstanding. They appear to have been received. </li>
<li>Expect confirmation shortly. The completion of the SPAs triggers an MGO, which is conditional on <a href="https://www.smartkarma.com/entities/inner-mongolia-yili-indus-a" target="_blank" data-smartkarma-citation="entities:3220:1" rel="noopener">Inner Mongolia Yili Industrial Group (600887 CH)</a> holding 50% of the voting rights.  </li>
</ul>


530.8mn shares of Ausnutria (1717 HK) crossed at the close yesterday at HK$10.06/share. That is the exact number of shares under the SPAs and the stated price under the agreements.
China's NDRC approval,  a condition to the SPAs, was obtained earlier this month, leaving MoC and SAFE approvals outstanding. They appear to have been received. 
Expect confirmation shortly. The completion of the SPAs triggers an MGO, which is conditional on Inner Mongolia Yili Industrial Group (600887 CH) holding 50% of the voting rights.  


Ausnutria (1717 HK): SPAs Done (Just Not Officially)

<ul>
<li>China's NDRC approval, a key condition to the Share Purchase Agreement, has been obtained.  SAMR clearance had previously been fulfilled, leaving MoC and SAFE approvals yet to be secured.</li>
<li>The turnout at <a href="https://www.smartkarma.com/entities/ausnutria-dairy-corp-ltd" target="_blank" data-smartkarma-citation="entities:13799:1" rel="noopener">Ausnutria Dairy Corp (1717 HK)</a>'s recent EGM would suggest there is a sufficient number of shares for the MGO to turn unconditional. </li>
<li>Provided the Offer becomes unconditional, trading at a gross/annualised spread of 4.4%/22.1%, assuming late 1Q22 completion.</li>
</ul>


China's NDRC approval, a key condition to the Share Purchase Agreement, has been obtained.  SAMR clearance had previously been fulfilled, leaving MoC and SAFE approvals yet to be secured.
The turnout at Ausnutria Dairy Corp (1717 HK)'s recent EGM would suggest there is a sufficient number of shares for the MGO to turn unconditional. 
Provided the Offer becomes unconditional, trading at a gross/annualised spread of 4.4%/22.1%, assuming late 1Q22 completion.


Ausnutria (1717 HK): MGO Imminent As NDRC Approval Obtained

<ul>
<li>
<a href="https://www.smartkarma.com/entities/ausnutria-dairy-corp-ltd" target="_blank" data-smartkarma-citation="entities:13799:1" rel="noopener">Ausnutria Dairy Corp (1717 HK)</a> is trading at HK$8.78/share, compared to the undisturbed price of $8.85/share.</li>
<li>The Composite Doc's dispatch has been pushed out to 4 March 2022, or within 7 days of completion of the pre-conditions. Timing is the main risk for the pre-cons.</li>
<li>Given the light premium, this MGO turning unconditional is not a sure thing. Yet at the current level, and mindful of at least a back-end re-rate, this looks attractive here.</li>
</ul>



Ausnutria Dairy Corp (1717 HK) is trading at HK$8.78/share, compared to the undisturbed price of $8.85/share.
The Composite Doc's dispatch has been pushed out to 4 March 2022, or within 7 days of completion of the pre-conditions. Timing is the main risk for the pre-cons.
Given the light premium, this MGO turning unconditional is not a sure thing. Yet at the current level, and mindful of at least a back-end re-rate, this looks attractive here.


Ausnutria (1717 HK): Below Undisturbed Levels

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Corrigenda: There is an error in this Insight. Please note the correction.
Correction: I initially took the view the MGO was conditional on the Offeror (Yili) and parties acting in concert with it holding more than 50% of the voting rights – and that the Vendors were acting in concert given the SPAs and irrevocables.   In hindsight, this is the wrong interpretation - otherwise, the MGO would be obligated by Yili AND the Vendors.   This changes how you view the outcome of the MGO. The MGO needs 15.67% of shares out to turn unconditional. ~24.27% won’t tender. Therefore  ~37.8% of the remaining  register needs to tender. Given the light premium, this MGO turning unconditional is by no means a certainty.
</div>
On the 12 October, infant-formula firm <a href="https://www.smartkarma.com/entities/ausnutria-dairy-corp-ltd" target="_blank" data-smartkarma-citation="entities:13799:1" rel="noopener">Ausnutria Dairy Corp (1717 HK)</a> was <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1012/2021101200109.pdf" target="_blank" rel="noopener">suspended</a> ahead of morning trading "pursuant to The Hong Kong Code on Takeovers and Mergers". But not before shares had gained 7.8% the day before on the largest volume since November of last year. 
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The rumour was that China’s biggest dairy producer <a href="https://www.smartkarma.com/entities/inner-mongolia-yili-indus-a" target="_blank" data-smartkarma-citation="entities:3220:1" rel="noopener">Inner Mongolia Yili Industrial Group (A) (600887 CH)</a> was set to make a proposal. As I wrote in <a href="https://skr.ma/Ft2Ss" target="_blank" rel="noopener">Will Yili Gulp Down Ausnutria (1717 HK)?</a>, a possible Offer could be structured by way of a Scheme - if Yili wanted to take Ausnutria private -  or Yili secures a majority stake via a sale and purchase agreement (SPA) and then a follow-on mandatory general offer (MGO).
Turns out to be the latter.
Late yesterday afternoon (the 27 October), Ausnutria <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/1027/2021102700542.pdf" target="_blank" rel="noopener">announced</a> Yili had entered into various SPAs with major shareholders CITIC, <a href="https://www.smartkarma.com/entities/center-laboratories-inc" target="_blank" data-smartkarma-citation="entities:10778:1" rel="noopener">Center Laboratories (4123 TT)</a>, and CEO van der Meer with a collective ownership in Ausnutria of 30.89%. Concurrently, Ausnutria entered into a subscription agreement with Yili for 90mn new shares or 5.24% of issued shares (4.98% on a fully diluted basis).
All told, should the agreements complete - and the SPA and subscription agreement are subject to various PRC regulatory approvals -  Yili would hold 34.33% of shares out on a fully diluted basis, and would then be obligated to make an MGO.
The MGO price is $10.06/share, a 13.67% premium to last close. The MGO is conditional on Yili and concert parties holding 50% of the voting rights. No irrevocables have been given to tender into the Offer. But Yili and concert parties would hold 51.93%.
This looks done. It's just a question of timing.
</div>



Corrigenda: There is an error in this Insight. Please note the correction.
Correction: I initially took the view the MGO was conditional on the Offeror (Yili) and parties acting in concert with it holding more than 50% of the voting rights – and that the Vendors were acting in concert given the SPAs and irrevocables.   In hindsight, this is the wrong interpretation - otherwise, the MGO would be obligated by Yili AND the Vendors.   This changes how you view the outcome of the MGO. The MGO needs 15.67% of shares out to turn unconditional. ~24.27% won’t tender. Therefore  ~37.8% of the remaining  register needs to tender. Given the light premium, this MGO turning unconditional is by no means a certainty.

On the 12 October, infant-formula firm Ausnutria Dairy Corp (1717 HK) was suspended ahead of morning trading "pursuant to The Hong Kong Code on Takeovers and Mergers". But not before shares had gained 7.8% the day before on the largest volume since November of last year. 


The rumour was that China’s biggest dairy producer Inner Mongolia Yili Industrial Group (A) (600887 CH) was set to make a proposal. As I wrote in Will Yili Gulp Down Ausnutria (1717 HK)?, a possible Offer could be structured by way of a Scheme - if Yili wanted to take Ausnutria private -  or Yili secures a majority stake via a sale and purchase agreement (SPA) and then a follow-on mandatory general offer (MGO).
Turns out to be the latter.
Late yesterday afternoon (the 27 October), Ausnutria announced Yili had entered into various SPAs with major shareholders CITIC, Center Laboratories (4123 TT), and CEO van der Meer with a collective ownership in Ausnutria of 30.89%. Concurrently, Ausnutria entered into a subscription agreement with Yili for 90mn new shares or 5.24% of issued shares (4.98% on a fully diluted basis).
All told, should the agreements complete - and the SPA and subscription agreement are subject to various PRC regulatory approvals -  Yili would hold 34.33% of shares out on a fully diluted basis, and would then be obligated to make an MGO.
The MGO price is $10.06/share, a 13.67% premium to last close. The MGO is conditional on Yili and concert parties holding 50% of the voting rights. No irrevocables have been given to tender into the Offer. But Yili and concert parties would hold 51.93%.
This looks done. It's just a question of timing.


Yili's Pre-Conditional Offer & Ausnutria (1717 HK)'s Crowded Register

Taiwan

Center Laboratories Inc. manufactures and markets oral liquid formulations and children's formulations.  The Company is focusing on the development of respiratory care and pain relief products.

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Center Laboratories (4123 TT)

Ausnutria (1717 HK): Composite Doc Out. Offer Now Open

At HK$9.91/share, Ausnutria is currently trading at a gross/annualised spread of 1.5%/18%, assuming mid-March payment. That's okay. With Yili now...

David Blennerhassett

Ausnutria (1717 HK): SPAs Done (Just Not Officially)

That spread is okay. You still need the MGO turns unconditional. In any event, I would expect a back-end re-rate following the completion of the...

David Blennerhassett

Ausnutria (1717 HK): MGO Imminent As NDRC Approval Obtained

At HK$9.64/share, Ausnutria is currently trading at a gross/annualised spread of 4.4%/22.1%, assuming late 1Q22 completion. That still looks...

David Blennerhassett

Ausnutria (1717 HK): Below Undisturbed Levels

Failing the MGO turning unconditional, expect a re-rating of Ausnutria following the completion of the SPAs and share subscription.

David Blennerhassett

Yili's Pre-Conditional Offer & Ausnutria (1717 HK)'s Crowded Register

At HK$9.39/share, Ausnutura is currently trading at a gross/annualised spread of 7.1%/17.9%, assuming late 1Q22 completion (~ 5 months). That looks...

David Blennerhassett

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