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.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/yashili-international-holdings-ltd" target="_blank" data-smartkarma-citation="entities:3397:1" rel="noopener">Yashili International Holdings (1230 HK)</a> announced its controlling shareholder, <a href="https://www.smartkarma.com/entities/china-mengniu-dairy-co" target="_blank" data-smartkarma-citation="entities:354:1" rel="noopener">China Mengniu Dairy Co (2319 HK)</a>, is in discussions regarding its holdings in Yashili and several potential transactions.</li>
<li>If the transactions proceed, the potential privatisation offer is HK$1.20 per Yashili share, a 31.9% premium to the last close price of HK$0.91 (prior to the trading halt).</li>
<li>The potential transactions are subject to a number of pre-conditions and conditions. We think the potential offer is attractive.  </li>
</ul>



Yashili International Holdings (1230 HK) announced its controlling shareholder, China Mengniu Dairy Co (2319 HK), is in discussions regarding its holdings in Yashili and several potential transactions.
If the transactions proceed, the potential privatisation offer is HK$1.20 per Yashili share, a 31.9% premium to the last close price of HK$0.91 (prior to the trading halt).
The potential transactions are subject to a number of pre-conditions and conditions. We think the potential offer is attractive.  


Yashili’s Potential Pre-Conditional Privatisation Offer from Mengniu

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Lanzhou Zhuangyuan Pasture / Event-Driven

<ul>
<li>PRC dairy farmer <a href="https://www.smartkarma.com/entities/lanzhou-zhuangyuan-pasture-co-ltd" target="_blank" data-smartkarma-citation="entities:10174:1" rel="noopener"></a><a href="https://www.smartkarma.com/entities/lanzhou-zhuangyuan-pasture-co-ltd" target="_blank" data-smartkarma-citation="entities:10174:1" rel="noopener">Lanzhou Zhuangyuan Pasture (1533 HK)</a> is proposing to buy back its H-shares, in cash. No price was cited in the HKEx announcement.</li>
<li>Such an Offer is expected to be done via a voluntary cash Offer. This suggests a condition to the Offer involves a tendering condition. </li>
<li>This is the second proposal in the Chinese dairy space in as many months, after 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>'s Scheme</li>
</ul>


PRC dairy farmer Lanzhou Zhuangyuan Pasture (1533 HK) is proposing to buy back its H-shares, in cash. No price was cited in the HKEx announcement.
Such an Offer is expected to be done via a voluntary cash Offer. This suggests a condition to the Offer involves a tendering condition. 
This is the second proposal in the Chinese dairy space in as many months, after infant-formula  firm Ausnutria Dairy Corp (1717 HK)'s Scheme


Lanzhou Zhuangyuan Pasture (1533 HK): Possible H-Share Delisting 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.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-youran-dairy-group-ltd" target="_blank" data-smartkarma-citation="entities:31075:1" rel="noopener">China Youran Dairy Group Ltd (9858 HK)</a> was listed on Hong Kong Exchange on 18th June, 2021. The company’s six-month lock-up expiry will expire on 18th December, 2021.</li>
<li>The company is now trading 41% below its IPO price based on yesterday’s close price.</li>
<li>Pre-IPO and cornerstone investors could sell. These shareholders account for 399 days of ADV with the majority coming from PAG III.</li>
</ul>



China Youran Dairy Group Ltd (9858 HK) was listed on Hong Kong Exchange on 18th June, 2021. The company’s six-month lock-up expiry will expire on 18th December, 2021.
The company is now trading 41% below its IPO price based on yesterday’s close price.
Pre-IPO and cornerstone investors could sell. These shareholders account for 399 days of ADV with the majority coming from PAG III.


Youran Dairy(悠然牧业) IPO Lock-Up - Pre-IPO Investors Still Sitting in the Money Even After 41% Decline

<div>
<div class="content-highlight">
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. 
</div>
<div>
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

<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 an international high-end dairy and nutrition products company with an entire business chain of raw milk collection, R&amp;D, production, and end-market sales. Ausnutria is the fifth largest infant formula player in China with a 6.3% market share in 2020.   As discussed in <a href="https://www.smartkarma.com/insights/ausnutria-in-trading-halt-will-yili-lob-an-offer" target="_blank" data-smartkarma-citation="insights:58863" rel="noopener">Ausnutria in Trading Halt - Will Yili Lob an Offer?</a>,  Ausnutria entered a trading halt on 12 October pursuant to the Hong Kong Code on Takeovers and Mergers. Earlier, on 1 October, Bloomberg reported that <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> is exploring a potential takeover of Ausnutria. We noted that Yili is the likely suitor as it has a strategy to increase its scale in the milk powder business through mergers and acquisitions.Today, Ausnutria announced a share purchase and subscription agreement with Yili. Yili has entered into a share purchase agreement to acquire 530.8 million shares which represent 30.89% of the outstanding shares at a purchase price is HK$10.06 per sale share. Second, Yili has also entered into a subscription agreement to purchase 90.0 newly issued shares at a purchase price of HK$10.06 per subscription share. The subscription agreement requires EGM approval while both agreements require SAMR approval.The completion of the two agreements will result in Yili owning 34.33% of the enlarged share capital and voting rights, which will trigger a mandatory share offer under Rule 26.1 of the Takeovers Code. The potential MGO price of HK$10.06 per share represents a premium of 13.67% over the closing price of HK$8.85 per share on the last trading date (11 October prior to the trading halt) and a premium of 25.1% over the closing price of HK$8.04 per share on the unaffected date (30 September prior to the Bloomberg article).The mandatory share offer is conditional on the offeror and parties acting in concert with it holding more than 50% of the voting rights. The offeror has received irrecovables not to accept the offer which represents 24.23% of the enlarged share capital. <div class="content-highlight">The 50%+ voting threshold will be satisfied if Yili's MGO secures an additional 283 million shares. Due to the irrecovables not to accept, 37.5% of public shareholders (assuming other directors accept the offer) will need to accept the MGO for it to become unconditional. As the MGO price implies a modest premium to peer multiples and long-term share prices, we think achieving the 50%+ voting threshold could be a tough task. We also note that Yili has stated that it has no intention to privatize Ausnutria. </div>

Ausnutria Dairy Corp (1717 HK) is an international high-end dairy and nutrition products company with an entire business chain of raw milk collection, R&amp;D, production, and end-market sales. Ausnutria is the fifth largest infant formula player in China with a 6.3% market share in 2020.   As discussed in Ausnutria in Trading Halt - Will Yili Lob an Offer?,  Ausnutria entered a trading halt on 12 October pursuant to the Hong Kong Code on Takeovers and Mergers. Earlier, on 1 October, Bloomberg reported that Inner Mongolia Yili Industrial Group (A) (600887 CH) is exploring a potential takeover of Ausnutria. We noted that Yili is the likely suitor as it has a strategy to increase its scale in the milk powder business through mergers and acquisitions.Today, Ausnutria announced a share purchase and subscription agreement with Yili. Yili has entered into a share purchase agreement to acquire 530.8 million shares which represent 30.89% of the outstanding shares at a purchase price is HK$10.06 per sale share. Second, Yili has also entered into a subscription agreement to purchase 90.0 newly issued shares at a purchase price of HK$10.06 per subscription share. The subscription agreement requires EGM approval while both agreements require SAMR approval.The completion of the two agreements will result in Yili owning 34.33% of the enlarged share capital and voting rights, which will trigger a mandatory share offer under Rule 26.1 of the Takeovers Code. The potential MGO price of HK$10.06 per share represents a premium of 13.67% over the closing price of HK$8.85 per share on the last trading date (11 October prior to the trading halt) and a premium of 25.1% over the closing price of HK$8.04 per share on the unaffected date (30 September prior to the Bloomberg article).The mandatory share offer is conditional on the offeror and parties acting in concert with it holding more than 50% of the voting rights. The offeror has received irrecovables not to accept the offer which represents 24.23% of the enlarged share capital. The 50%+ voting threshold will be satisfied if Yili's MGO secures an additional 283 million shares. Due to the irrecovables not to accept, 37.5% of public shareholders (assuming other directors accept the offer) will need to accept the MGO for it to become unconditional. As the MGO price implies a modest premium to peer multiples and long-term share prices, we think achieving the 50%+ voting threshold could be a tough task. We also note that Yili has stated that it has no intention to privatize Ausnutria. 

Ausnutria’s Potential Conditional MGO from Yili

China

China Modern Dairy is a leading dairy farming operator and raw milk producer in China. The company also engages in the production and sale of animal feed, forage cultivation, dairy cow breeding, and provides digital intelligence platform services. It was founded in 2005 and is headquartered in Ma'anshan City, Anhui Province, China.

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China Modern Dairy (1117 HK)

Yashili’s Potential Pre-Conditional Privatisation Offer from Mengniu

Yashili announced that Mengniu is in discussions regarding its holdings in Yashili and several potential transactions, which could lead to a...

Arun George

Youran Dairy(悠然牧业) IPO Lock-Up - Pre-IPO Investors Still Sitting in the Money Even After 41% Decline

China Youran Dairy Group Ltd (9858 HK) was listed on Hong Kong Exchange on 18th June, 2021. The company’s six-month lock-up expiry will expire on...

Sumeet Singh

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

Ausnutria’s Potential Conditional MGO from Yili

The completion of the agreements will result in Yili owning 34.33% voting rights, triggering an MGO at HK$10.06 per share. However, we think...

Arun George

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52-week Range

Market Cap (USDm)

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Yashili’s Potential Pre-Conditional Privatisation Offer from Mengniu

Yashili announced that Mengniu is in discussions regarding its holdings in Yashili and several potential transactions, which could lead to a...

Arun George

Lanzhou Zhuangyuan Pasture (1533 HK): Possible H-Share Delisting Offer

PRC-Diary farmer Lanzhou Zhuangyuan Pasture (1533 HK) is proposing to buy back its H-shares, in cash. No price was cited in the HKEx announcement....

David Blennerhassett

Youran Dairy(悠然牧业) IPO Lock-Up - Pre-IPO Investors Still Sitting in the Money Even After 41% Decline

China Youran Dairy Group Ltd (9858 HK) was listed on Hong Kong Exchange on 18th June, 2021. The company’s six-month lock-up expiry will expire on...

Sumeet Singh

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

Ausnutria’s Potential Conditional MGO from Yili

The completion of the agreements will result in Yili owning 34.33% voting rights, triggering an MGO at HK$10.06 per share. However, we think...

Arun George