Equity Analyst, Event-driven, Quiddity Advisors

Janaghan Jeyakumar, CFA

Equity Analyst, Event-driven

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>The TOPIX liquidity factor removal names (upweights) for April 2023 were announced after the close on Friday 7th April 2023 as expected.</li>
<li>According to the announcement, 22 names will see their Liquidity Factors removed and experience index inflows later this month. </li>
<li>Today was the first day of trading post-announcement and the 22 names gained +1.1% (+0.47% vs the TOPIX Index). I feel there could be more upside for some names.</li>
</ul>


The TOPIX liquidity factor removal names (upweights) for April 2023 were announced after the close on Friday 7th April 2023 as expected.
According to the announcement, 22 names will see their Liquidity Factors removed and experience index inflows later this month. 
Today was the first day of trading post-announcement and the 22 names gained +1.1% (+0.47% vs the TOPIX Index). I feel there could be more upside for some names.


TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next

<ul>
<li>The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation. </li>
<li>For companies with "low liquidity" the FFW will be multiplied by a fixed liquidity factor of 0.75 to derive the final FFW used for index calculation. </li>
<li>Every April, the application of this liquidity factor is reviewed by the TSE for all TSE1 constituents. This situation opens up interesting opportunities for a basket trade. </li>
</ul>


The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation. 
For companies with "low liquidity" the FFW will be multiplied by a fixed liquidity factor of 0.75 to derive the final FFW used for index calculation. 
Every April, the application of this liquidity factor is reviewed by the TSE for all TSE1 constituents. This situation opens up interesting opportunities for a basket trade. 


TOPIX Index Upweights: The Big April Basket 2022 (Pre-Event)

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

A month ago, known active (and occasional activist and concentrated investor) Effissimo Capital Management announced an unsolicited partial Tender Offer to purchase 4,834,343 shares of <a href="https://www.smartkarma.com/entities/sanken-electric-co-ltd" target="_blank" data-smartkarma-citation="entities:6073:1" rel="noopener">Sanken Electric (6707 JP)</a> to take it from 9.97% to 30.00% at ¥5210/share. The announcement was deliberately couched in terms to make it seem friendly. Effissimo is not going for negative control, or seeking to interfere with management in any way. They say they just want more stock. The shares, which had recently traded from the area of the Tender Offer Price down to sub-¥4500/share, immediately bounced, trading 10% through terms on the first full day of trading after going limit up on Day 1.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/192/998/original/Screenshot+2021-03-09+at+3.51.32+PM.png?1615276314" class="editor-image img-responsive" data-smartkarma-image-id="192998"></figure></section>Since then, <a href="https://www.smartkarma.com/entities/allegro-microsystems" target="_blank" data-smartkarma-citation="entities:29707:1" rel="noopener">Allegro MicroSystems (ALGM US)</a> shares - Sanken's 52% subsidiary which it listed in November (and the key value driver for Sanken Electric), have fallen nearly 20% from just under US$31/share on 8 Feb the day after the announcement to US$25.14 yesterday.And Sanken itself has fallen back down to ¥5300/share, ~1.7% above the Tender Offer Price.In my first insight on the deal, I did not address "the stub trade" (Sanken's holding in Allegro, which was originally Sanken North America) and where I thought it should trade - as such - in the insight because frankly, it's difficult. The future is tough to predict. Below is a brief look at the parameters and the modalities.

A month ago, known active (and occasional activist and concentrated investor) Effissimo Capital Management announced an unsolicited partial Tender Offer to purchase 4,834,343 shares of Sanken Electric (6707 JP) to take it from 9.97% to 30.00% at ¥5210/share. The announcement was deliberately couched in terms to make it seem friendly. Effissimo is not going for negative control, or seeking to interfere with management in any way. They say they just want more stock. The shares, which had recently traded from the area of the Tender Offer Price down to sub-¥4500/share, immediately bounced, trading 10% through terms on the first full day of trading after going limit up on Day 1.Since then, Allegro MicroSystems (ALGM US) shares - Sanken's 52% subsidiary which it listed in November (and the key value driver for Sanken Electric), have fallen nearly 20% from just under US$31/share on 8 Feb the day after the announcement to US$25.14 yesterday.And Sanken itself has fallen back down to ¥5300/share, ~1.7% above the Tender Offer Price.In my first insight on the deal, I did not address "the stub trade" (Sanken's holding in Allegro, which was originally Sanken North America) and where I thought it should trade - as such - in the insight because frankly, it's difficult. The future is tough to predict. Below is a brief look at the parameters and the modalities.

Effissimo, Sanken, and Allegro - Thinking About the Future

Effissimo Capital Management today after the close announced it would launch a partial Tender Offer to purchase up to 4,834,343 shares of <a href="https://www.smartkarma.com/entities/sanken-electric-co-ltd" target="_blank" data-smartkarma-citation="entities:6073:1" rel="noopener">Sanken Electric (6707 JP)</a> to take it from 9.97% to 30.00%. It was non-solicited, and Effissimo did not contact the company about it, but the Tender Offer is being presented as very friendly, and only conducted so as to make it more efficient to buy a large volume of stock. The Tender Offer is priced at ¥5,205/share - a 17.1% premium to last - and will start 9 February 2021 and go for 30 business days, ending on 24 March 2021.Effissimo first showed up on the shareholder register with a large shareholder filing on 19 December 2018 showing a 5.06% position. It reported larger positions in May, June, then July 2019 to get to 9.58%. Their position has always been for the purpose of 純投資 or "pure investment". We do not know Effissimo's in-price, but looking at the chart below, we can suppose it is probably in the ¥2,000-2,500/share range.<section class="figure"></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/187/436/original/Screenshot+2021-02-08+at+7.16.40+PM.png?1612783058" class="editor-image img-responsive" data-smartkarma-image-id="187436"></figure></section>Another activist (Oasis) showed up in November 2019 with a 5+% position, with a purpose of "portfolio investment making important proposals", and they upped their stake in February last year to a 6.47% position. It looks like their average is in the ¥2,500-3,000/share range.This is going to be interesting. So we have analysis, and Ye Olde Arbe Grids below.

Effissimo Capital Management today after the close announced it would launch a partial Tender Offer to purchase up to 4,834,343 shares of Sanken Electric (6707 JP) to take it from 9.97% to 30.00%. It was non-solicited, and Effissimo did not contact the company about it, but the Tender Offer is being presented as very friendly, and only conducted so as to make it more efficient to buy a large volume of stock. The Tender Offer is priced at ¥5,205/share - a 17.1% premium to last - and will start 9 February 2021 and go for 30 business days, ending on 24 March 2021.Effissimo first showed up on the shareholder register with a large shareholder filing on 19 December 2018 showing a 5.06% position. It reported larger positions in May, June, then July 2019 to get to 9.58%. Their position has always been for the purpose of 純投資 or "pure investment". We do not know Effissimo's in-price, but looking at the chart below, we can suppose it is probably in the ¥2,000-2,500/share range.Another activist (Oasis) showed up in November 2019 with a 5+% position, with a purpose of "portfolio investment making important proposals", and they upped their stake in February last year to a 6.47% position. It looks like their average is in the ¥2,500-3,000/share range.This is going to be interesting. So we have analysis, and Ye Olde Arbe Grids below.

Effissimo Launches Unsolicited/Hostile Partial Tender On Sanken Electric

David Blennerhassett

Beijing Jingneng Clean Energy / Event-Driven


For the month of November, 18 new deals were discussed on Smartkarma with an overall announced deal size of ~US$20bn.


Clicking on the company name in the table below will take you to the entity page where you can read the initial insight(s) written by Smartkarma contributors on these new deals and follow up discussions, or simply click on the insight link(s) below the name.






New Deals


Industry


Size (US$bn)


Type


Premium




Australia



Regis Healthcare (REG AU) 
Retirement
0.4
Poss. Scheme
25%


Regis Healthcare (REG AU): Potential New Home For The Old


Think Childcare (TNK AU) 
Childcare
0.1
Poss. Scheme
8%


Think Childcare (TNK AU) : Takeover Proposal From Alceon Group Seems Light


Vitalharvest Freehold Trust (VTH AU) 
Agriculture
0.1
Scheme
27.4%


Vitalharvest (VTH AU): Macquarie Doesn't See A Lemon






Hong Kong




Beijing Jingneng Clean Energy (579 HK) 
Energy
2.8
Vol. Offer
70.89%


Beijing Jingneng (579 HK): Privatisation Offer From Parent






Japan



Honshu Chemical Industry (4115 JP) 
Chemical
0.1
Tender Offer
42.6%


Honshu Chemical (4115) - An Embarrassment of Riches


Imasen Electric Industrial (7266 JP) 
Auto parts
0.1
Partial Tender
41%


Imasen Electric Partial Tender - Set Governance to Ludicrous Mode


Japan Asia (3751 JP) 
Community ops
0.2
Tender Offer
70.5%


Japan Asia (3751 JP) Management Buyout: Should There Be a BUMP?


Joban Kaihatsu (1782 JP) 
Construction
0.1
Tender Offer
32%


SmallCap Joban Kaihatsu Founder Tries a Free MBO


Kansai Mirai Financial (7321 JP) 
Financials
0.6
Tender Offer
3%


Resona To Take Kansai Mirai Private!







Keihanshin Building (8818 JP) 

Building leasing
0.2
Partial Tender
1%


Opportunistic Keihanshin (8818) Tender Offer Designed to Fail


Kenedix Inc (4321 JP) 
Real estate
1.25
Tender Offer
32%


A Curiously Unsatisfying Takeover Bid For Kenedix


Tohto Suisan (8038 JP) 
Fresh seafood
0.2
Partial Tender
9.2%


Tohto Suisan Partial Tender Offer - A Weird Tender Which Leads To Listed Zombie-Ism


Tokyo Dome Corp (9681 JP) 
Amusement parks
1.0
Rumoured



Mitsui Fudosan Tender For Tokyo Dome (9681) Mooted, and Tokyo Dome Sells Itself For the Wrong Price  


Yomiuri Land (9671 JP) 
Theme Park
0.4
Tender Offer
26%


Yomiuri Land (9671) Takeover - Probably The Wrong Price But Whaddya Gonna Do?










Malaysia



Batu Kawan Bhd (BAK MK) 
Chemical/rubber
0.1
MGO
13.14%


Batu Kawan (BAK MK)'s Mandatory Offer for CCM: Low Risk Risk Arb






US



China Biologic Products (CBPO US) 
Medical
1.9
Merger
16.8%


China Biologics (CBPO US): Firm Offer Backed By Prerequisite Votes










Europe/UK



Aryzta AG (ARYN VX) 
B2B solutions
0.9
Indicative Offer
32%


Aryzta - Elliott: Prospective Offer


RSA Insurance (RSA LN) 
Insurance
9.5
Offer
48%


RSA - Intact Financial &amp; Tryg: Generous Break-Up Takeover Proposal





Source: Smartkarma Insights

The above does not include the US$0.2bn SPA for amaysim Australia (AYS AU) discussed in Amaysim To Be Wound-Up After Mobile Sale.

Technically, China Biologic Products (CBPO US) was first mentioned on Smartkarma 14 months ago - but now we have a firm offer.


The average premium for the new deals announced (or first discussed) in November was ~29% and the YTD average premium for all deals discussed on Smartkarma (139 all-in) is ~31.5%.  The average for all deals discussed on Smartkarma in 2019 (145 deals all-in) was 31.5%.



The charts below provide a snapshot of deals YTD discussed on Smartkarma. Where the deal is a merger of equals or similar, I've assigned no premium.







Summary of News in November of Arb Situations On Smartkarma's Radar



(Again, click on the company names to take to you to the insights and/or discussion posts for a more comprehensive read-through on each situation. Where a new insight was written on these names in July, I've included a link, in bold, to that insight in italics.)






Australia


Comments (with links to announcements &amp; insights)




3P Learning (3PL AU) 

15-Nov: 3P Learning (3PL AU) : Indian Ed-Tech Giant BYJU's Competitive Bid 24-Nov: 3P Learning (3PL AU): Ed-Tech Deal Faces a New Twist




Cardinal Resources (CDV AU) 

4-Nov: In an ASX update, Cardinal Resources (CDV AU) goes into detail the numerous Takeover Panel applications. All of a bit of a mess right now.  25-Nov: Cardinal Resources: Three's A Crowd 26-Nov: Nordgold extends its Offer until the 14 December for Cardinal Resources (CDV AU) while continuing to air its concerns over E&amp;P's Offer. Cardinal continues to unanimously recommend Shandong's Offer.




Citadel Group (CGL AU) 

No November update




Coca Cola Amatil (CCL AU) 

4-Nov: A Scheme implementation Deed has now been entered into, at $12.75/share. The Scheme Meeting is expected to be held in early/mid-March, with an expected implementation date in late March/early April. 




Cromwell Property (CMW AU) 

17-Nov: Board spill for Cromwell Property (CMW AU). One more step for ARA.  26-Nov: ARA's proportional Offer will close on the 30 November.




DWS Ltd (DWS AU) 

No November update




Link Administration Holdings (LNK AU) 

25-Nov: An update to say there is no update




OptiComm Ltd (OPC AU) 

3-Nov: OptiComm Ltd (OPC AU) announced it "not received any contact whatsoever from Aware Super " since 15 October.
6-Nov: OptiComm Ltd (OPC AU) shareholders overwhelmingly approve Scheme.




Northern Star Resources (NST AU) 

25-Nov: some finance conditions are met




Village Roadshow (VRL AU) 

9-Nov: In a new announcement, Village Roadshow (VRL AU) said the A$0.12/share uplift is now locked in.
12-Nov: Spheria said it will vote against Scheme B for Village Roadshow (VRL AU).
17-Nov: Mittleman ups stake in Village Roadshow (VRL AU) to 14.34% from 12.87%.
23-Nov: Village Roadshow: Rollercoaster Economics
27-Nov: Mittleman Brothers posted a presentation, which describes its concerns regarding the currently proposed takeover of VLR.  "The current A$2.95 to A$3.00 range of best outcomes provided still appears unfairly low versus our estimate of indicative fair value which is currently A$5.24 per share."





 




Hong Kong


Comments (with links to announcements &amp; insights)




Allied Properties (H.K.) (56 HK) 
26-Nov: The High Court just upheld the appeal. And the Scheme will now be sanctioned Allied Prop (56 HK): In High Court Today .... 




AMVIG Holdings (2300 HK) 
2-Nov: The Composite doc has now been delayed until the 18 November.   18-Nov: Offer doc for AMVIG Holdings (2300 HK) is out. The first close is the 9 December. The IFA says the Offer is fair &amp; reasonable.   25-Nov: Offer for AMVIG Holdings (2300 HK) now declared unconditional in all respects. 



Beijing Jingneng Clean Energy (579 HK) 
18-Nov: Beijing Jingneng (579 HK): Privatisation Offer From Parent




Car Inc (699 HK) 
14-Nov: Car Inc (699 HK): MBK's Firm Offer




Changshouhua Food (1006 HK) 

11-Nov: China Zhongdi Dairy (1492 HK) will hold an EGM on the 2 December to consider the Offer from Inner Mongolia Yili Industrial Group (A) (600887 CH).
19-Nov: Fortune Hero, with 4.04%, has given an irrevocable to accept the Offer for China Zhongdi Dairy (1492 HK).
25-Nov: More irrevocables trickle in for China Zhongdi Dairy (1492 HK). This takes the shares held plus irrevocables to 96.58%, and is therefore expected to turn unconditional on the 7th day after the despatch of the Composite Doc.




CIMC-TianDa Holdings (445 HK) 
No November update



Cross Harbour Holdings (32 HK) 
4-Nov: The Offer is now unconditional in all respects. The Offer will remain open for acceptances until the 23 November. 



Get Nice Holdings (64 HK) 

25-Nov: Composite Doc despatched for Get Nice Financial Group Ltd (1469 HK).




Haier Electronics Group Co (1169 HK) 

14-Nov:Pre-conditions have now been fulfilled for the Haier Electronics Group Co (1169 HK) Offer. 16-Nov: Haier Electric (1169 HK): The "H-Share" Guessing Game




Hengxing Gold Holding (2303 HK) 

3-Nov: As expected, the despatch of the Scheme Doc has been pushed back to 30 November, from 4 November.
13-Nov: Pre-conditions have now been fulfilled for the Hengxing Gold Holding (2303 HK) Offer.




Leyou Technologies (1089 HK) 

12-Nov: Leyou Tech (1089 HK): Offer Doc Despatched




Macau Legend Development (1680 HK) 

2-Nov: The Composite Document is out. The closing date is the 24 November. The IFA says fair &amp; reasonable.




Powerleader Science &amp; Technology Group (8236 HK) 

No November update




Shanghai Prime Machinery H (2345 HK) 

3-Nov: As expected, the Composite Doc for  Shanghai Prime Machinery H (2345 HK) has been delayed until 22 January, if need be. 
25-Nov: SEG's shareholders approve the merger of Shanghai Prime Machinery H (2345 HK). This is one of the pre-cons. Regulatory approvals form other pre-cons are still outstanding. 




Sun Art Retail (6808 HK) 

9-Nov: As expected, the Composite Doc has been delayed - but only for a week, and is now expected to be despatched on or before the 18 November. 
27-Nov: Sun Art (6808 HK): Offer Doc Out. Not Fair And Reasonable




Yixin Group Ltd (2858 HK) 
6-Nov: Yixin (2858 HK)’s Downstream Unconditional MGO 11-Nov: Composite Doc is out for Yixin Group Ltd (2858 HK). The first (&amp; probably last) close is the 2 December. 











India


Comments (with links to insights)




Allcargo Logistics (AGLL IN) 

No November update




Hexaware Technologies (HEXW IN) 

No November update




INEOS Styrolution India Limited (INEOS IN) 

No November update













Japan


Comments (with links to insights)




Cocokara Fine (3098 JP) 
No November update, but Oasis now over 5%



Medical &amp; Biological Laboratories (4557 JP) 

No November update




NTT Docomo Inc (9437 JP) 

11-Nov: NTT/Docomo - The KDDI Quibble
17-Nov:Surprising NTT Docomo Tender Result Accelerates Squeezeout, Great Re-Allocation, Nikkei 225 Change
27-Nov: The Other Docomo Selldown and TOPIX Buy  Delisting scheduled for late December.




Shimachu Co Ltd (8184 JP) 

13-Nov: Nitori's Bid for Shimachu Goes Friendly as Shimachu Dumps DCM
16-Nov: DCM Holdings (3050 JP) has extended its Tender Offer for Shimachu Co Ltd (8184 JP) by 10 days, so now it ends on 1 December 2020.  This gives it time to await an expected Phase 1 decision by the JFTC regarding the bid by Nitori Holdings (9843 JP). It was something of a no-brainer for them to extend.   On 27Nov, DCM extended again.




Softbrain (4779 JP) 

Tender Offer succeeded.  27Nov: EGM to consolidate is 29 Dec. Delisting to be 19 Jan.














Singapore


Comments (with links to insights and announcements)




ESR-REIT (EREIT SP) / Sabana Shari'ah Compliant Industrial REIT (SSREITR SP) 

27-Nov:  ESR-REIT/Sabana: Furphys And Fear-Mongering
















Thailand


Comments 




COL PCL (COL TB) 
No November update


















Middle East


Comments 




Samba Financial Group (SAMBA AB) /
National Commercial Bank (NCB AB) 

No November update










Europe/UK


Comments (with links to announcements and insights)




Ahlstrom-Munksjo (AM1 FH) 
No November update



Altice NV A (ATC NA) 


No November update




CaixaBank SA (CABK SM) 
No November update



G4S PLC (GFS LN) 
6-Nov: G4S Playing Hard-To-Get




Play Communications SA (1P1 GR) 
No November update



Talktalk Telecom (TALK LN) 
No November update



William Hill (WMH LN) 
No November update





Japan

Keihanshin Building Co., Ltd. leases office buildings, computer and telecommunication equipped buildings, off-track-betting, and other commercial facilities.  The Company also provides building management services and undertakes construction works.

Keihanshin Building (8818 JP)

TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next

There could be around US$450mn of flows and an average of 12 days of ADV to buy for the 13 names which I identify as "surprise" names. I expect...

Janaghan Jeyakumar, CFA

TOPIX Index Upweights: The Big April Basket 2022 (Pre-Event)

Every April, the application of this liquidity factor is reviewed by the TSE for all TSE1 constituents. This situation opens up interesting...

Janaghan Jeyakumar, CFA

Effissimo, Sanken, and Allegro - Thinking About the Future

Effissimo launched a partial tender for Sanken (6707) and it went through terms as people noted the "stub trade" for Allegro Microsystems. It's...

Travis Lundy

Effissimo Launches Unsolicited/Hostile Partial Tender On Sanken Electric

Effissimo launches a friendly-ish unsolicited (therefore "hostile") partial offer to buy 20% of Sanken Electric. It is "pure investment" but Sanken...

Travis Lundy

(Mostly) Asia M&A: November 2020 Roundup

The average premium for the new deals announced (or first discussed) in November was ~29% and the YTD average premium for all deals discussed on...

David Blennerhassett