Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p>This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks.</p>
</div>
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<p>I number 40, mostly firm, deals around the region.</p>
</div>
<div>
<p>More below the fold.</p>
</div>


This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks.


I number 40, mostly firm, deals around the region.


More below the fold.


Asia-Pac Weekly Risk Arb Summary: Shinsei Bank, Aussie Pharma, Ebook Initiative, Smartgroup

<div>
<p>This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks.</p>
</div>
<div>
<p>I number 37, mostly firm, deals around the region.</p>
</div>
<div>
<p>More below the fold.</p>
</div>


This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks.


I number 37, mostly firm, deals around the region.


More below the fold.


Asia-Pac Weekly Risk Arb Summary: Shinsei Bank, Soho China, Nippo Corp, Rhipe, Oil Search/Santos

Travis Lundy

<p>In <a href="https://www.smartkarma.com/insights/houlihan-lokey-to-take-out-gca-light-but-likely-done" target="_blank" data-smartkarma-citation="insights:55490" rel="noopener">Houlihan Lokey To Take Out GCA :  Light But Likely Done</a> I suggested that the price for the investment bank/consultant was light, but that the tender offer at ¥1,380/share would most likely get done. </p><div class="content-highlight"><p>Today, Houlihan Lokey <a href="https://ssl4.eir-parts.net/doc/2174/ir_material3/168782/00.pdf" target="_blank" rel="noopener">bumped the Tender Offer Price</a>. </p></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/228/851/original/Screenshot+2021-09-09+at+2.46.44+PM.png?1631170030" class="editor-image img-responsive" data-smartkarma-image-id="228851"></figure></section><div class="content-highlight"><p>By ¥18/share - 1.30435% - from ¥1,380/share to ¥1,398/share.</p></div><p>Don't spend it all in one place ladies and gents.</p><p>It was not clear that Houlihan Lokey <em>needed</em> to bump. The price hadn't cleared the Tender Offer Price since announcement. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/228/865/original/Screenshot+2021-09-09+at+3.05.10+PM.png?1631171145" class="editor-image img-responsive" data-smartkarma-image-id="228865"></figure></section><p></p><p>More below the fold.</p>

In Houlihan Lokey To Take Out GCA :  Light But Likely Done I suggested that the price for the investment bank/consultant was light, but that the tender offer at ¥1,380/share would most likely get done. Today, Houlihan Lokey bumped the Tender Offer Price. By ¥18/share - 1.30435% - from ¥1,380/share to ¥1,398/share.Don't spend it all in one place ladies and gents.It was not clear that Houlihan Lokey needed to bump. The price hadn't cleared the Tender Offer Price since announcement. More below the fold.

Houlihan Lokey Bumps the GCA Offer - A Whopping 1.3%!!!

<p><a href="https://www.smartkarma.com/entities/gca-savvian-corp" target="_blank" data-smartkarma-citation="entities:3841:1" rel="noopener">Gca Savvian (2174 JP)</a> was a business formed in 2004 and listed in Tokyo on the MOTHERS exchange in October 2006. In March 2008 it merged with US M&amp;A boutique, and remained listed in Tokyo. In July 2016, the company absorbed Europe-based Altium Corporate Finance Group and in April 2020 acquired Stella EOC in Northern Europe. </p><p>Over time, the business has grown so Japan is now but a third of revenues, and in the past 12 months, the firm has booked JPY 34.2bn in revenues. The company has grown and grown and while 2020 was a trying year, 2021 is bouncing back. Re-booming in fact. </p><p>Today, the company reported <a href="https://ssl4.eir-parts.net/doc/2174/ir_material3/166089/00.pdf" target="_blank" rel="noopener">Q2</a> and <a href="https://ssl4.eir-parts.net/doc/2174/ir_material3/166088/00.pdf" target="_blank" rel="noopener">H1 results</a>, and an <a href="https://ssl4.eir-parts.net/doc/2174/ir_material3/166091/00.pdf" target="_blank" rel="noopener">increase in forecast</a> from the last time a forecast was released (just two months ago on 2 June). Full year revenues are expected 14.7% higher than originally and nearly double last year. Full year OP is expected 17% higher than the previous forecast and more than double last year. Net Profit is forecast at 17.2% higher than the last forecast and 117% higher than last year, all on a non-GAAP basis. On an IFRS basis, all those gains are a percent or two higher.</p><p>The other news was that US niche investment bank <a href="https://www.smartkarma.com/entities/houlihan-lokey-inc" target="_blank" data-smartkarma-citation="entities:1744:1" rel="noopener">Houlihan Lokey (HLI US)</a> announced a <a href="https://ssl4.eir-parts.net/doc/2174/ir_material3/166093/00.pdf" target="_blank" rel="noopener">deal</a> to take GCA private in a Tender Offer - a friendly deal <a href="https://ssl4.eir-parts.net/doc/2174/ir_material3/166092/00.pdf" target="_blank" rel="noopener">recommended</a> by management - at ¥1380/share. </p><p>This is at a decent premium to recent price, but at ¥1380/share it is just ¥1000/share after one converts the options and deducts the net cash (cash minus other current liabilities, which are far larger than debt). That is 12x 2021 company forecast EPS. That may not be that generous if there are synergies to be had. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/221/948/original/Screenshot+2021-08-03+at+7.23.23+PM.png?1627989828" class="editor-image img-responsive" data-smartkarma-image-id="221948"></figure><p></p></section><p>Of course, the <em>investment</em> banking and advisory business is not unlike the advertising business (and I am sure many of the readers here will agree from their own perspective. There are not a lot of hard assets in investment banking and as the principals will tell you, the best assets walk out the door at the end of every day. So assigning earnings multiples is <em>something</em> of a hit and miss situation. </p><p>That said, concluding that a growing business (with a low cost base, high variable cost ratio, and minimal capital needs) in a growing market is worth only 12x earnings, on an un-levered basis, including control premium strikes me as aggressive, and the bump described on p9 of the <a href="https://ssl4.eir-parts.net/doc/2174/ir_material3/166092/00.pdf" target="_blank" rel="noopener">Opinion</a> tells you that Houlihan Lokey is looking for a deal, and GCA was too - they asked for a bump given upgraded forecasts (which themselves are a bit light for H2) and HLI paid 2.5x the marginal improvement per share. The other issue is that we don't know what deals that a purchasing investment bank could make with its future employees which could allow the purchasing employees to be favourable to such an acquisition. Critics could suggest we are closer to the top of the cycle than the bottom for investment bank earnings, but downturns create their own opportunities when you are not a capital provider, and HLI and GCA have financial restructuring teams.</p><p>More below the fold.</p>

Gca Savvian (2174 JP) was a business formed in 2004 and listed in Tokyo on the MOTHERS exchange in October 2006. In March 2008 it merged with US M&amp;A boutique, and remained listed in Tokyo. In July 2016, the company absorbed Europe-based Altium Corporate Finance Group and in April 2020 acquired Stella EOC in Northern Europe. Over time, the business has grown so Japan is now but a third of revenues, and in the past 12 months, the firm has booked JPY 34.2bn in revenues. The company has grown and grown and while 2020 was a trying year, 2021 is bouncing back. Re-booming in fact. Today, the company reported Q2 and H1 results, and an increase in forecast from the last time a forecast was released (just two months ago on 2 June). Full year revenues are expected 14.7% higher than originally and nearly double last year. Full year OP is expected 17% higher than the previous forecast and more than double last year. Net Profit is forecast at 17.2% higher than the last forecast and 117% higher than last year, all on a non-GAAP basis. On an IFRS basis, all those gains are a percent or two higher.The other news was that US niche investment bank Houlihan Lokey (HLI US) announced a deal to take GCA private in a Tender Offer - a friendly deal recommended by management - at ¥1380/share. This is at a decent premium to recent price, but at ¥1380/share it is just ¥1000/share after one converts the options and deducts the net cash (cash minus other current liabilities, which are far larger than debt). That is 12x 2021 company forecast EPS. That may not be that generous if there are synergies to be had. Of course, the investment banking and advisory business is not unlike the advertising business (and I am sure many of the readers here will agree from their own perspective. There are not a lot of hard assets in investment banking and as the principals will tell you, the best assets walk out the door at the end of every day. So assigning earnings multiples is something of a hit and miss situation. That said, concluding that a growing business (with a low cost base, high variable cost ratio, and minimal capital needs) in a growing market is worth only 12x earnings, on an un-levered basis, including control premium strikes me as aggressive, and the bump described on p9 of the Opinion tells you that Houlihan Lokey is looking for a deal, and GCA was too - they asked for a bump given upgraded forecasts (which themselves are a bit light for H2) and HLI paid 2.5x the marginal improvement per share. The other issue is that we don't know what deals that a purchasing investment bank could make with its future employees which could allow the purchasing employees to be favourable to such an acquisition. Critics could suggest we are closer to the top of the cycle than the bottom for investment bank earnings, but downturns create their own opportunities when you are not a capital provider, and HLI and GCA have financial restructuring teams.More below the fold.

Houlihan Lokey To Take Out GCA :  Light But Likely Done

Japan

GCA Corporation provides an advisory service for mergers and acquisitions.  The Group handles cross-border transactions and business strategies including stock transfer, stock split, and divestiture.  GCA Savvian Group also conducts due diligence services and reorganization form.

GCA Corporation (2174 JP)

Asia-Pac Weekly Risk Arb Summary: Shinsei Bank, Aussie Pharma, Ebook Initiative, Smartgroup

This insight provides a summary of gross/annualised spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and...

David Blennerhassett

Asia-Pac Weekly Risk Arb Summary: Shinsei Bank, Soho China, Nippo Corp, Rhipe, Oil Search/Santos

This insight provides a summary of gross/annualised spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and...

David Blennerhassett

Houlihan Lokey Bumps the GCA Offer - A Whopping 1.3%!!!

Houlihan Lokey bumped the offer for GCA even though not a share had traded above terms to date. This is a last-minute ask by GCA agreed by HL. I...

Travis Lundy

Houlihan Lokey To Take Out GCA : Light But Likely Done

Large US-based boutique IB Houlihan Lokey has offered to buy smaller Japan-listed but global boutique IB GCA Global. 57% is owned by current+former...

Travis Lundy