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/japfa-ltd" target="_blank" data-smartkarma-citation="entities:15597:1" rel="noopener">Japfa Ltd (JAP SP)</a> disclosed privatisation through a scheme of arrangement from the Santosa family at S$0.62 per share, a 34.8% premium, to the undisturbed price of S$0.460.</li>
<li>While the offer is attractive compared to historical share price ranges, it is light compared to peer and historical multiples.</li>
<li>The offer has not been declared final. However, the irrevocable, the lack of a disinterested shareholder holding a blocking stake and moderate retail ownership minimises the vote risk.  </li>
</ul>



Japfa Ltd (JAP SP) disclosed privatisation through a scheme of arrangement from the Santosa family at S$0.62 per share, a 34.8% premium, to the undisturbed price of S$0.460.
While the offer is attractive compared to historical share price ranges, it is light compared to peer and historical multiples.
The offer has not been declared final. However, the irrevocable, the lack of a disinterested shareholder holding a blocking stake and moderate retail ownership minimises the vote risk.  


Japfa (JAP SP): Santosa Family’s S$0.62 Scheme Offer

<ul>
<li>On March 8, <a href="https://www.bloomberg.com/news/articles/2024-03-08/top-asia-poultry-firm-japfa-owners-said-to-mull-go-private-deal?embedded-checkout=true" target="_blank" rel="noopener">Bloomberg reported</a> that <a href="https://www.smartkarma.com/entities/japfa-ltd" target="_blank" data-smartkarma-citation="entities:15597:1" rel="noopener">Japfa Ltd (JAP SP)</a> owners were considering taking it private and started talks about a loan of around US$150 million. </li>
<li>Japfa has faced ongoing profitability issues since 2022 due to cost-of-living pressures. Privatisation interest is unsurprising, as the shares have been down 72% over the last three years. </li>
<li>An attractive premium would be required, irrespective of the offer structure. At a S$0.26 offer (20% premium to last close), Japfa would trade in line with peer multiples.  </li>
</ul>


On March 8, Bloomberg reported that Japfa Ltd (JAP SP) owners were considering taking it private and started talks about a loan of around US$150 million. 
Japfa has faced ongoing profitability issues since 2022 due to cost-of-living pressures. Privatisation interest is unsurprising, as the shares have been down 72% over the last three years. 
An attractive premium would be required, irrespective of the offer structure. At a S$0.26 offer (20% premium to last close), Japfa would trade in line with peer multiples.  


Japfa (JAP SP): Evaluating a Potential Privatisation

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shandong-fengxiang-co-ltd-h" target="_blank" data-smartkarma-citation="entities:29164:1" rel="noopener">Shandong Fengxiang (9977 HK)</a>'s delisting resolution was overwhelmingly voted against by independent H Shareholders. The results were not helped by the poor turnout.</li>
<li>PAG's MGO at HK$1.5132 per H Share is not conditional on the approval of the delisting resolution. The MGO remains open with a final closing date of 1 February.</li>
<li>PAG currently holds 85.44% of the outstanding shares. At the last close and for a 10 February payment, the gross and annualised spread is 1.6% and 28.9%, respectively.</li>
</ul>



Shandong Fengxiang (9977 HK)'s delisting resolution was overwhelmingly voted against by independent H Shareholders. The results were not helped by the poor turnout.
PAG's MGO at HK$1.5132 per H Share is not conditional on the approval of the delisting resolution. The MGO remains open with a final closing date of 1 February.
PAG currently holds 85.44% of the outstanding shares. At the last close and for a 10 February payment, the gross and annualised spread is 1.6% and 28.9%, respectively.


Fengxiang (9977 HK): Delisting Resolution Fails, MGO Closes 1 February

<ul>
<li>PAG completed the auction procedures for the acquisition of a 70.92% stake in <a href="https://www.smartkarma.com/entities/shandong-fengxiang-co-ltd-h" target="_blank" data-smartkarma-citation="entities:29164:1" rel="noopener">Shandong Fengxiang (9977 HK)</a>. This will trigger an unconditional MGO at HK$1.5132 per H Share.</li>
<li>As PAG has no compulsory acquisition rights, it will also seek shareholder delisting approval. The MGO is not conditional on the approval of the delisting resolution.</li>
<li>The composite document is to be despatched on or before 28 December. At last close and for an end-of-January payment, the gross and annualised spread is 5.1% and 65.9%, respectively.</li>
</ul>


PAG completed the auction procedures for the acquisition of a 70.92% stake in Shandong Fengxiang (9977 HK). This will trigger an unconditional MGO at HK$1.5132 per H Share.
As PAG has no compulsory acquisition rights, it will also seek shareholder delisting approval. The MGO is not conditional on the approval of the delisting resolution.
The composite document is to be despatched on or before 28 December. At last close and for an end-of-January payment, the gross and annualised spread is 5.1% and 65.9%, respectively.


Fengxiang (9977 HK)’s Share Transfer to PAG Complete, Unconditional MGO

<ul>
<li>PAG is the successful bidder for <a href="https://www.smartkarma.com/entities/shandong-fengxiang-co-ltd-h" target="_blank" data-smartkarma-citation="entities:29164:1" rel="noopener">Shandong Fengxiang (9977 HK)</a>'s controlling shareholder’s 70.92% stake at HK$1.5132 per H Share (RMB1.3822 per domestic share).</li>
<li>As PAG has no compulsory acquisition rights, it will also seek shareholder delisting approval. The MGO is not conditional on the approval of the delisting resolution.</li>
<li>The share sale transfer requires SAMR approval which will be forthcoming. Our best guess is the MGO completes end-January 2023. At the last close, the gross spread is 14.6%.</li>
</ul>


PAG is the successful bidder for Shandong Fengxiang (9977 HK)'s controlling shareholder’s 70.92% stake at HK$1.5132 per H Share (RMB1.3822 per domestic share).
As PAG has no compulsory acquisition rights, it will also seek shareholder delisting approval. The MGO is not conditional on the approval of the delisting resolution.
The share sale transfer requires SAMR approval which will be forthcoming. Our best guess is the MGO completes end-January 2023. At the last close, the gross spread is 14.6%.


Fengxiang’s Unconditional MGO at HK$ 1.5132 from PAG

Malaysia

Leong Hup International Berhad provides poultry services. The Company offers breeding, egg production, broiler, and livestock feeding solutions, as well as manufactures chicken products. Leong Hup International serves customers in Asian.

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Leong Hup International (LHIB MK)

Japfa (JAP SP): Santosa Family’s S$0.62 Scheme Offer

The offer is arguably light. However, the irrevocable, the lack of a disinterested shareholder holding a blocking stake and moderate retail...

Arun George

Japfa (JAP SP): Evaluating a Potential Privatisation

An attractive takeover premium would be required, irrespective of the offer structure. Funding could be an issue due to the high current leverage.

Arun George

Fengxiang (9977 HK): Delisting Resolution Fails, MGO Closes 1 February

The MGO is not conditional on the approval of the delisting resolution. At the last close and for a 10 February payment, the annualised spread is...

Arun George

Fengxiang’s Unconditional MGO at HK$ 1.5132 from PAG

The unconditional MGO is HK$1.5132 per H Share. Our best guess is the MGO completes end-January 2023. At the last close, the gross spread is 14.6%.

Arun George

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Japfa (JAP SP): Santosa Family’s S$0.62 Scheme Offer

The offer is arguably light. However, the irrevocable, the lack of a disinterested shareholder holding a blocking stake and moderate retail...

Arun George

Japfa (JAP SP): Evaluating a Potential Privatisation

An attractive takeover premium would be required, irrespective of the offer structure. Funding could be an issue due to the high current leverage.

Arun George

Fengxiang (9977 HK): Delisting Resolution Fails, MGO Closes 1 February

The MGO is not conditional on the approval of the delisting resolution. At the last close and for a 10 February payment, the annualised spread is...

Arun George

Fengxiang (9977 HK)’s Share Transfer to PAG Complete, Unconditional MGO

The composite document is to be despatched on or before 28 December. At last close and for an end-of-January payment, the gross and annualised...

Arun George

Fengxiang’s Unconditional MGO at HK$ 1.5132 from PAG

The unconditional MGO is HK$1.5132 per H Share. Our best guess is the MGO completes end-January 2023. At the last close, the gross spread is 14.6%.

Arun George