Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Zhejiang Cangnan Instrument Group / Event-Driven

Zhejiang Cangnan Instrument Group (1743 HK)

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<p>Back on the 5 February, gas meter manufacturer <a href="https://www.smartkarma.com/entities/zhejiang-cangnan-h" target="_blank" data-smartkarma-citation="entities:27212:1" rel="noopener">Zhejiang Cangnan Instrument (1743 HK)</a>  <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0205/2021020501022.pdf" target="_blank" rel="noopener">announced</a> the board of directors had resolved to repurchase all the issued H shares in the company at a minimum price of HK$22.00/share, a 15.18% premium to last close. The buyback was subject to approval from the local bureau of the State Administration of Foreign Exchange.</p>
<p>This was followed by a conditional cash offer on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0312/2021031201722.pdf" target="_blank" rel="noopener">12 March</a>. The Offer is a "Merger by Absorption", incorporating a Scheme-like vote (≥ 75% for, ≤10% against); and a tendering condition of 90%. All H-shares are subject to the buy-back and the effective tendering % is 90%.</p>
<p>The Offer Document has been despatched with the IFA <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0401/2021040100071.pdf" target="_blank" rel="noopener">concluding</a> the Offer price to be fair and reasonable.</p>
<p>The EGM will take place on the 17 May and the first closing date is the 31 May.</p>
<p>Trading at a gross/annualised spread of 7.3%/57.2%. But the thorny issue is the 90% tendering condition.</p>
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<p>More below the fold.</p>
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Back on the 5 February, gas meter manufacturer Zhejiang Cangnan Instrument (1743 HK)  announced the board of directors had resolved to repurchase all the issued H shares in the company at a minimum price of HK$22.00/share, a 15.18% premium to last close. The buyback was subject to approval from the local bureau of the State Administration of Foreign Exchange.
This was followed by a conditional cash offer on the 12 March. The Offer is a "Merger by Absorption", incorporating a Scheme-like vote (≥ 75% for, ≤10% against); and a tendering condition of 90%. All H-shares are subject to the buy-back and the effective tendering % is 90%.
The Offer Document has been despatched with the IFA concluding the Offer price to be fair and reasonable.
The EGM will take place on the 17 May and the first closing date is the 31 May.
Trading at a gross/annualised spread of 7.3%/57.2%. But the thorny issue is the 90% tendering condition.


More below the fold.


Zhejiang Cangnan (1743 HK): H-Share Buyback

Sichuan Languang Justbon Services / Event-Driven

Sichuan Languang Justbon Services (2606 HK)

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<p>Back on the 25 February, property management service provider <a href="https://www.smartkarma.com/entities/sichuan-languang-justbon-service-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:28337:1" rel="noopener">Sichuan Languang Justbon Service Group (2606 HK)</a> ("SLJS") <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0225/2021022500961.pdf" target="_blank" rel="noopener">announced</a> its major shareholder had entered into a MOU with <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> (CGS) to sell 115,090,200 H-shares or a 64.62% stake. The seller is Languang Hejun, a wholly-owned entity of <a href="https://www.smartkarma.com/entities/sichuan-languang-development-co-ltd" target="_blank" data-smartkarma-citation="entities:7403:1" rel="noopener">Sichuan Languang Development (600466 CH)</a>. Terms under the MOU were RMB42.1105/share. No HK$-equivalent figure was quoted, but at the prevailing exchange rate, this was roughly ~HK$50.61/share, or a ~30% premium to last close.</p>
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<p>On the 11 March, SLJS <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0311/2021031101126.pdf" target="_blank" rel="noopener">announced</a> some subtle changes to the MOU, such that shares to be acquired include 115,090,200 H shares AND 750,000 domestic shares or 65.04% of shares out. The price per H shares was also revised up to RMB42.8546/share.</p>
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<h3>The New News</h3>
<p>Late last night SLJS <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0322/2021032201066.pdf" target="_blank" rel="noopener">announced</a> a possible unconditional mandatory general Offer (MGO) from CGS for the H shares (at HK$51.0571/share) and domestic shares (at RMB42.8547/share).</p>
<p>CGS has also proposed a voluntary delisting, and if the delisting resolution is approved by independent H-shareholders and the listing acceptance condition (yep, one with an infamous 90% handle) is satisfied, H-shareholders will receive HK$54.30/share and domestic shareholders RMB45.5768/share.</p>
<p>The MGO appears a lock, so you have an effective floor of HK$51.0571. The question, therefore, is: do you chase the delisting bump?</p>
<p>More below the fold.</p>


Back on the 25 February, property management service provider Sichuan Languang Justbon Service Group (2606 HK) ("SLJS") announced its major shareholder had entered into a MOU with Country Garden Services Holdings (6098 HK) (CGS) to sell 115,090,200 H-shares or a 64.62% stake. The seller is Languang Hejun, a wholly-owned entity of Sichuan Languang Development (600466 CH). Terms under the MOU were RMB42.1105/share. No HK$-equivalent figure was quoted, but at the prevailing exchange rate, this was roughly ~HK$50.61/share, or a ~30% premium to last close.


On the 11 March, SLJS announced some subtle changes to the MOU, such that shares to be acquired include 115,090,200 H shares AND 750,000 domestic shares or 65.04% of shares out. The price per H shares was also revised up to RMB42.8546/share.

The New News
Late last night SLJS announced a possible unconditional mandatory general Offer (MGO) from CGS for the H shares (at HK$51.0571/share) and domestic shares (at RMB42.8547/share).
CGS has also proposed a voluntary delisting, and if the delisting resolution is approved by independent H-shareholders and the listing acceptance condition (yep, one with an infamous 90% handle) is satisfied, H-shareholders will receive HK$54.30/share and domestic shareholders RMB45.5768/share.
The MGO appears a lock, so you have an effective floor of HK$51.0571. The question, therefore, is: do you chase the delisting bump?
More below the fold.

Languang Justbon (2606 HK): Be Wary Of Chasing The Delisting Bump

Beijing Jingneng Clean Energy / Event-Driven

<p><strong>80.22%</strong>. That's the only figure that matters.</p>
<p><a href="https://www.smartkarma.com/entities/beijing-jingneng-clean-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:16316:1" rel="noopener">Beijing Jingneng Clean Energy (579 HK)</a> joins <a href="https://www.smartkarma.com/entities/harbin-electric-co-ltd-h" target="_blank" data-smartkarma-citation="entities:11116:1" rel="noopener">Harbin Electric Co Ltd H (1133 HK)</a> as the second Merger by Absorption transaction to <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0301/2021030103095.pdf" target="_blank" rel="noopener">fail</a> on account of the tendering condition.</p>
<p>1,207,310,872 H Shares, or 80.22% of the total issued H Shares held by the Independent H Shareholders, tendered. </p>
<p><a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0520/ltn20190520874.pdf" target="_blank" rel="noopener">85.8%</a> of independent shares tendered into the Harbin Offer by the 60th day, and the Offer was subsequently, and unprecedently, extended (&amp; then failed). <a href="https://www.smartkarma.com/entities/huaneng-renewables-corp-h" target="_blank" data-smartkarma-citation="entities:7542:1" rel="noopener">Huaneng Renewables Corp H (958 HK)</a> received <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0120/2020012000919.pdf" target="_blank" rel="noopener">90.8%</a> on the 60th day - therefore the Offer was declared unconditional as to <em>acceptances - </em>but the Offer was still subject to approvals from NDRC and MOFCOM, and the registration of SAFE approval - and was also granted an extension by the SFC.</p>
<p>With less than 90% tendered AND with approvals/registration with Beijing SASAC, NDRC, and BAFE outstanding, the Offer for Jingneng was not extended.</p>
<p>Share tendered will be returned "<em>as soon as possible but in any event within ten days</em>".</p>
<p>More below the fold.</p>

80.22%. That's the only figure that matters.
Beijing Jingneng Clean Energy (579 HK) joins Harbin Electric Co Ltd H (1133 HK) as the second Merger by Absorption transaction to fail on account of the tendering condition.
1,207,310,872 H Shares, or 80.22% of the total issued H Shares held by the Independent H Shareholders, tendered. 
85.8% of independent shares tendered into the Harbin Offer by the 60th day, and the Offer was subsequently, and unprecedently, extended (&amp; then failed). Huaneng Renewables Corp H (958 HK) received 90.8% on the 60th day - therefore the Offer was declared unconditional as to acceptances - but the Offer was still subject to approvals from NDRC and MOFCOM, and the registration of SAFE approval - and was also granted an extension by the SFC.
With less than 90% tendered AND with approvals/registration with Beijing SASAC, NDRC, and BAFE outstanding, the Offer for Jingneng was not extended.
Share tendered will be returned "as soon as possible but in any event within ten days".
More below the fold.

Beijing Jingneng (579 HK): And That's a Fail

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<p>Subsequent to a low-turnout at the H-share class meeting last Friday (the 19th February), <a href="https://www.smartkarma.com/entities/beijing-jingneng-clean-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:16316:1" rel="noopener">Beijing Jingneng Clean Energy (579 HK)</a>'s shares declined 6.7% on Monday, followed by 6.3% yesterday, and 3.1% today. All on above-average volume. </p>
<p>Jingneng is now trading at a 25% gross spread to the voluntary conditional offer price of HK$2.70/share. Quite remarkable given deal completion is binary, and there is little in the way of clarity to indicate deal failure is more certain.</p>
<p>Jingneng's undisturbed price back in early July 2020 when a possible Offer was first <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0706/2020070602025.pdf" target="_blank" rel="noopener">floated</a>, was HK$1.58. However, the power mix that Jingneng supplies has sector-by-sector average gains - some considerable - since the deal.</p>
<p>Jingneng has overshot to the downside, and is a buy outright or against a basket of peers.</p>
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<div>More below the fold.</div>
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Subsequent to a low-turnout at the H-share class meeting last Friday (the 19th February), Beijing Jingneng Clean Energy (579 HK)'s shares declined 6.7% on Monday, followed by 6.3% yesterday, and 3.1% today. All on above-average volume. 
Jingneng is now trading at a 25% gross spread to the voluntary conditional offer price of HK$2.70/share. Quite remarkable given deal completion is binary, and there is little in the way of clarity to indicate deal failure is more certain.
Jingneng's undisturbed price back in early July 2020 when a possible Offer was first floated, was HK$1.58. However, the power mix that Jingneng supplies has sector-by-sector average gains - some considerable - since the deal.
Jingneng has overshot to the downside, and is a buy outright or against a basket of peers.






More below the fold.






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<p>Back on the 17 November, <a href="https://www.smartkarma.com/entities/beijing-jingneng-clean-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:16316:1" rel="noopener">Beijing Jingneng Clean Energy (579 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1117/2020111701054.pdf" target="_blank" rel="noopener">announced</a> a voluntary conditional offer at HK$2.70/share, a 70.89% premium to the undisturbed price. </p>
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<p>As Jingneng is PRC-incorporated, which confers no rights to the Bidder/Owner to compulsorily acquire shares, or to residual shareholders to require a buyout, the two-step Offer comprises a Scheme-like vote (≥ 75% for, ≤10% against) and a 90% tendering condition.</p>
<p>The <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1231/2020123100105.pdf" target="_blank" rel="noopener">Composite Document</a> was despatched on the 31 December, and the EGM and H-share class meetings were held on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0219/2021021900730.pdf" target="_blank" rel="noopener">19 February</a>. All resolutions were passed. For the H-share class meeting, 97.9% of shares in attendance voted for the Offer.</p>
<p>The vote was not seen as a risk to the deal. Yet shares are off 4.3% as I type. The low turn-out at the meeting (38.21% of H-shareholders) is likely the cause of today's move. 61.79% of shareholders didn't bother to cast a vote - does that apathy to the Offer make it harder for the bankers to rustle up the necessary 90% to tender shares?</p>
<p>More below the fold.</p>
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Back on the 17 November, Beijing Jingneng Clean Energy (579 HK) announced a voluntary conditional offer at HK$2.70/share, a 70.89% premium to the undisturbed price. 


As Jingneng is PRC-incorporated, which confers no rights to the Bidder/Owner to compulsorily acquire shares, or to residual shareholders to require a buyout, the two-step Offer comprises a Scheme-like vote (≥ 75% for, ≤10% against) and a 90% tendering condition.
The Composite Document was despatched on the 31 December, and the EGM and H-share class meetings were held on the 19 February. All resolutions were passed. For the H-share class meeting, 97.9% of shares in attendance voted for the Offer.
The vote was not seen as a risk to the deal. Yet shares are off 4.3% as I type. The low turn-out at the meeting (38.21% of H-shareholders) is likely the cause of today's move. 61.79% of shareholders didn't bother to cast a vote - does that apathy to the Offer make it harder for the bankers to rustle up the necessary 90% to tender shares?
More below the fold.


Beijing Jingneng (579 HK): Low Voter Turn-Out Sees Spread Widening

China

Harbin Electric Company Limited is primarily engaged in the manufacturing and sales of power-generation equipment. Its core activities include manufacturing complete sets of large-scale thermal, hydro, and nuclear power generation equipment, providing turnkey engineering for power plant projects, and developing marine propulsion systems and electric drive units. The company was founded in October 1994 and is headquartered in Harbin, China.

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Harbin Electric (1133 HK)

Languang Justbon (2606 HK): Be Wary Of Chasing The Delisting Bump

The MGO price is all but assured. The delisting offer price less so. But it does avail investors to a possible free option. This is a buy in the...

David Blennerhassett

Beijing Jingneng (579 HK): And That's a Fail

There will be selling pressure on the stock, in two phases - tomorrow, and when shares are returned. However, Jingneng is trading cheap. This is a...

David Blennerhassett

Beijing Jingneng (579 HK): This Is A Buy

If it does not go through, the downside should be limited. And current valuations are not demanding - 8.8x PER on an LTM basis. I would buy...

David Blennerhassett

Beijing Jingneng (579 HK): Low Voter Turn-Out Sees Spread Widening

Currently trading at a massive gross spread of 11%, the widest since the deal was announced. This is in effect, a binary deal. I still believe this...

David Blennerhassett

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Zhejiang Cangnan (1743 HK): H-Share Buyback

Given the company's dubious price action and shareholder concentration, I would normally give this stock a wide birth. Bit it is precisely this...

David Blennerhassett

Languang Justbon (2606 HK): Be Wary Of Chasing The Delisting Bump

The MGO price is all but assured. The delisting offer price less so. But it does avail investors to a possible free option. This is a buy in the...

David Blennerhassett

Beijing Jingneng (579 HK): And That's a Fail

There will be selling pressure on the stock, in two phases - tomorrow, and when shares are returned. However, Jingneng is trading cheap. This is a...

David Blennerhassett

Beijing Jingneng (579 HK): This Is A Buy

If it does not go through, the downside should be limited. And current valuations are not demanding - 8.8x PER on an LTM basis. I would buy...

David Blennerhassett

Beijing Jingneng (579 HK): Low Voter Turn-Out Sees Spread Widening

Currently trading at a massive gross spread of 11%, the widest since the deal was announced. This is in effect, a binary deal. I still believe this...

David Blennerhassett