Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Following <a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a>'s surprise <a href="https://links.sgx.com/FileOpen/JMH%20J.ashx?App=Announcement&amp;FileID=651169" target="_blank" rel="noopener">announcement</a> on the 8 March to acquire the 15.11% in <a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a> it does not own, Strategic has now released its <a href="https://data.fca.org.uk/artefacts/NSM/Portal/NI-000021381/NI-000021381.pdf" target="_blank" rel="noopener">circular</a> to shareholders.
The special general meeting (SGM) will be held on the 12 April at 8AM - in Bermuda. 
There is no independent financial advisor casting an opinion on the fairness of the Offer consideration. The circular simply echoes that the Strategic's transaction committee unanimously recommends that independent Strategic shareholders vote in favour of the Amalgamation resolution at the SGM.
Dissenters' rights are discussed in detail, for those shareholders who are not satisfied they are being offered a fair value. 
Some granularity on the shareholder structure of Matheson, as it pertains to the Keswick family, is provided, but it is not comprehensive.
This is a done deal. Cheques are expected to be despatched on the 28 April.
More below the fold.

Following Jardine Matheson Holdings (JM SP)'s surprise announcement on the 8 March to acquire the 15.11% in Jardine Strategic Holdings (JS SP) it does not own, Strategic has now released its circular to shareholders.
The special general meeting (SGM) will be held on the 12 April at 8AM - in Bermuda. 
There is no independent financial advisor casting an opinion on the fairness of the Offer consideration. The circular simply echoes that the Strategic's transaction committee unanimously recommends that independent Strategic shareholders vote in favour of the Amalgamation resolution at the SGM.
Dissenters' rights are discussed in detail, for those shareholders who are not satisfied they are being offered a fair value. 
Some granularity on the shareholder structure of Matheson, as it pertains to the Keswick family, is provided, but it is not comprehensive.
This is a done deal. Cheques are expected to be despatched on the 28 April.
More below the fold. 

Since <a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a>'s surprise <a href="https://links.sgx.com/FileOpen/JMH%20J.ashx?App=Announcement&amp;FileID=651169" target="_blank" rel="noopener">announcement</a> earlier this week to acquire the 15.11% in <a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a> it does not own, I've fielded numerous questions concerning:
<ul>
<li>Who is entitled to vote at the forthcoming shareholder meeting for Strategic?</li>
<li>What rights do minorities have if they object to the Offer?</li>
<li>Why is there not a shareholder meeting for Matheson shareholders to vote on the acquisition of Strategic?</li>
<li>What is an effective economic interest in a cross-holding?</li>
</ul>
This insight answers these questions, among others.
Shareholders may feel aggrieved - and Matheson is getting Strategic for a bargain if simply eye-balling the long-term price chart.
But the risk to holding Strategic has been present ever since the Jardine's group moved the primary listings of their companies to the UK's Standard Board in 2014 from the Primary Board. 
For a more detailed run-through of the transaction itself, please refer to <a href="https://skr.ma/p6cqh" target="_blank" rel="noopener">Jardine Matheson: Collapsing The Circularity</a>.
More below the fold.

Since Jardine Matheson Holdings (JM SP)'s surprise announcement earlier this week to acquire the 15.11% in Jardine Strategic Holdings (JS SP) it does not own, I've fielded numerous questions concerning:

Who is entitled to vote at the forthcoming shareholder meeting for Strategic?
What rights do minorities have if they object to the Offer?
Why is there not a shareholder meeting for Matheson shareholders to vote on the acquisition of Strategic?
What is an effective economic interest in a cross-holding?

This insight answers these questions, among others.
Shareholders may feel aggrieved - and Matheson is getting Strategic for a bargain if simply eye-balling the long-term price chart.
But the risk to holding Strategic has been present ever since the Jardine's group moved the primary listings of their companies to the UK's Standard Board in 2014 from the Primary Board. 
For a more detailed run-through of the transaction itself, please refer to Jardine Matheson: Collapsing The Circularity.
More below the fold. 

Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

Yesterday <a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a> published its annual results in which it disclosed the NAV was 58.22 USD on 31/12/20. Contrast this with the 33 USD buyout offer tabled earlier this week. Something is seriously off here. Before one goes any further,<a href="https://www.jardines.com/assets/files/Investors/Reports/strategic/js-ar2019.pdf" target="_blank" rel="noopener"> please re-read the Corporate Governance (pages 136-141) of Jardine Strategic's 2019 annual report.</a> It will be good to contrast what is written there with what is happening in real-life.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/193/684/original/image_59443962741615508974779.png?1615508975" class="editor-image img-responsive" data-smartkarma-image-id="193684"></figure>The buzzword "du jour" for all investors is ESG. For the avoidance of doubt this stands for:Environmental, Social, and Governance.In the currently proposed buyout of <a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a> by <a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a> the entire board of both companies (largely the same people) is showing the investment community what it really thinks about the G in ESG. Given the transaction was advised by both <a href="https://www.smartkarma.com/entities/jpmorgan-chase-co" target="_blank" data-smartkarma-citation="entities:277:1" rel="noopener">JPMorgan Chase &amp; Co (JPM US)</a> and <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a> we now also know how "ingrained" the ESG ethos is in practice at those banks.Given the +/-85% ownership of Jardine Strategic by Matheson, one would expect that Matheson could not vote on the proposed transaction and only Jardine Strategic minorities would have an actual vote to deem this offer "fair and reasonable" and give it their thumbs up/down at an SGM. Not in this case. Matheson is intending to use its 85% votes to "ram" this offer across the finish line. Which explains why Matheson expects this deal to close by the end of April 2021. Some changes take decades at Jardine, others clearly don't.It is astonishing that not a single person in these large banking institutions has stood up to Jardine's board and challenged them on the "fairness", "correctness" and "governance" of its proposed 33 USD offer. It is not because you have found some loophole, as made clear by David Webb, in your byzantine listings between Bermuda-Singapore-London that you are required to put your "Gangster" hat on and use it. The "Governance" hat could have been used, a fair buyout of Strategic shareholders could have been chosen but...it was not. The 33 USD offer price might have been a 20% premium to last Friday's closing price but other than that it was a completely arbitrary number unrelated to its Net Asset Value.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/193/672/original/image_53585158121615504013720.png?1615504014" class="editor-image img-responsive" data-smartkarma-image-id="193672"></figure>Any ESG fund worth their name in salt should therefore shun Jardine and any of its subsidiaries as the directors at Jardine are mostly the same directors at <a href="https://www.smartkarma.com/entities/dairy-farm-intl-hldgs-ltd" target="_blank" data-smartkarma-citation="entities:7427:1" rel="noopener">Dairy Farm Intl Hldgs (DFI SP)</a>, <a href="https://www.smartkarma.com/entities/mandarin-oriental-intl-ltd" target="_blank" data-smartkarma-citation="entities:4773:1" rel="noopener">Mandarin Oriental Intl (MAND SP)</a>, <a href="https://www.smartkarma.com/entities/hongkong-land-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15465:1" rel="noopener">Hongkong Land (HKL SP)</a>  and <a href="https://www.smartkarma.com/entities/jardine-cycle-carriage-ltd" target="_blank" data-smartkarma-citation="entities:347:1" rel="noopener">Jardine Cycle &amp; Carriage (JCNC SP)</a>. If you do invest in any of the above know one thing: the ESG statements in their annual reports are not worth the paper they are written on. Buyer beware.

Yesterday Jardine Strategic Holdings (JS SP) published its annual results in which it disclosed the NAV was 58.22 USD on 31/12/20. Contrast this with the 33 USD buyout offer tabled earlier this week. Something is seriously off here. Before one goes any further, please re-read the Corporate Governance (pages 136-141) of Jardine Strategic's 2019 annual report. It will be good to contrast what is written there with what is happening in real-life.The buzzword "du jour" for all investors is ESG. For the avoidance of doubt this stands for:Environmental, Social, and Governance.In the currently proposed buyout of Jardine Strategic Holdings (JS SP) by Jardine Matheson Holdings (JM SP) the entire board of both companies (largely the same people) is showing the investment community what it really thinks about the G in ESG. Given the transaction was advised by both JPMorgan Chase &amp; Co (JPM US) and HSBC Holdings (5 HK) we now also know how "ingrained" the ESG ethos is in practice at those banks.Given the +/-85% ownership of Jardine Strategic by Matheson, one would expect that Matheson could not vote on the proposed transaction and only Jardine Strategic minorities would have an actual vote to deem this offer "fair and reasonable" and give it their thumbs up/down at an SGM. Not in this case. Matheson is intending to use its 85% votes to "ram" this offer across the finish line. Which explains why Matheson expects this deal to close by the end of April 2021. Some changes take decades at Jardine, others clearly don't.It is astonishing that not a single person in these large banking institutions has stood up to Jardine's board and challenged them on the "fairness", "correctness" and "governance" of its proposed 33 USD offer. It is not because you have found some loophole, as made clear by David Webb, in your byzantine listings between Bermuda-Singapore-London that you are required to put your "Gangster" hat on and use it. The "Governance" hat could have been used, a fair buyout of Strategic shareholders could have been chosen but...it was not. The 33 USD offer price might have been a 20% premium to last Friday's closing price but other than that it was a completely arbitrary number unrelated to its Net Asset Value.Any ESG fund worth their name in salt should therefore shun Jardine and any of its subsidiaries as the directors at Jardine are mostly the same directors at Dairy Farm Intl Hldgs (DFI SP), Mandarin Oriental Intl (MAND SP), Hongkong Land (HKL SP)  and Jardine Cycle &amp; Carriage (JCNC SP). If you do invest in any of the above know one thing: the ESG statements in their annual reports are not worth the paper they are written on. Buyer beware.

G Stands for Governance: When Jardine Makes a Mockery of ESG; JS Publishes 58.22 USD NAV on 31/12/20

The Kerry Group has been busy of late.
Back in December, <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a> IPO'ed <a href="https://www.smartkarma.com/entities/kerry-express-thailand" target="_blank" data-smartkarma-citation="entities:29253:1" rel="noopener">Kerry Express Thailand (KEX TB)</a> as discussed by <a href="https://www.smartkarma.com/profiles/sumeet-singh" target="_blank" data-smartkarma-citation="accounts:4" rel="noopener">Sumeet Singh</a> in <a href="https://skr.ma/uGPdd" target="_blank" rel="noopener">Kerry Express Thailand IPO - Time for Delivery</a>.
Last month <a href="https://www.smartkarma.com/entities/kerry-properties-ltd" target="_blank" data-smartkarma-citation="entities:3320:1" rel="noopener">Kerry Properties (683 HK)</a> ("KPL") and <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a> ("KLN") <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0210/2021021000043.pdf" target="_blank" rel="noopener">announced</a> a pre-conditional Partial Offer from  <a href="https://www.smartkarma.com/entities/maanshan-dingtai-rare-a" target="_blank" data-smartkarma-citation="entities:4128:1" rel="noopener">S.F. Holding (002352 CH)</a>.  This is an ongoing transaction - see <a href="https://skr.ma/D9RK7" target="_blank" rel="noopener">Kerry Logistics (636 HK): SF Holdings' Pre-Conditional Partial Offer</a>. KLN announced last night the composite document has been <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0308/2021030801425.pdf" target="_blank" rel="noopener">delayed</a> potentially up to the 16 August 201. 
<div>
<a href="https://www.smartkarma.com/entities/shangri-la-asia-ltd" target="_blank" data-smartkarma-citation="entities:19690:1" rel="noopener">Shangri-La Asia (69 HK)</a>, majority-owned by the Kerry Group, is well up on its March 2020 COVID low, and up 9.5% YTD.  Around half of its hotels are in China, which have witnessed a strong uptick in local leisure and corporate traveling, generating positive EBITDA as early as June last year, the first time since the first outbreak of the pandemic.</div>
<div></div>
<div>Currently trading at 0.6x P/B against a pre-COVID average multiple of 0.8x., this is worth a second look.</div>
<div></div>
<div>More below the fold.</div>

The Kerry Group has been busy of late.
Back in December, Kerry Logistics Network (636 HK) IPO'ed Kerry Express Thailand (KEX TB) as discussed by Sumeet Singh in Kerry Express Thailand IPO - Time for Delivery.
Last month Kerry Properties (683 HK) ("KPL") and Kerry Logistics Network (636 HK) ("KLN") announced a pre-conditional Partial Offer from  S.F. Holding (002352 CH).  This is an ongoing transaction - see Kerry Logistics (636 HK): SF Holdings' Pre-Conditional Partial Offer. KLN announced last night the composite document has been delayed potentially up to the 16 August 201. 

Shangri-La Asia (69 HK), majority-owned by the Kerry Group, is well up on its March 2020 COVID low, and up 9.5% YTD.  Around half of its hotels are in China, which have witnessed a strong uptick in local leisure and corporate traveling, generating positive EBITDA as early as June last year, the first time since the first outbreak of the pandemic.

Currently trading at 0.6x P/B against a pre-COVID average multiple of 0.8x., this is worth a second look.

More below the fold.

<div class="content-highlight">
Corrigenda: There is an error in this Insight. Please note the correction.
Correction: There is NO “headcount” test at the Jardine Strategic special general meeting. The vote is therefore done. Apologies for the misinterpretation.
</div>
<hr>
Whilst I did not believe that the Keswicks - the controlling family - had any need to immediately restructure the <a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a> / <a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a> organisation, the ultimate restructuring of the group was most likely to be done in a way where value for the family was maximised.
A buyout offer for Strategic would allow Matheson to capture value from minorities if the buyout offer was made below NAV. It is a cheaper alternative to a full buyout of Matheson. It maintains the group ownership levels in Strategic-held subsidiaries. And the family’s ownership in the group (which would be just Matheson and its direct subsidiaries) increases to ~43%, up from ~17.5% by my estimate currently.
And now we have a long-awaited <a href="https://links.sgx.com/FileOpen/JMH%20J.ashx?App=Announcement&amp;FileID=651169" target="_blank" rel="noopener">transaction</a>. And just like that it is also done and dusted.
<blockquote>
Jardine Matheson Holdings Limited has today announced its plans for the simplification of the parent company structure of the Group. This will result in a single holding company with a conventional ownership structure and a further increase in the Group’s operational efficiency and financial flexibility.
</blockquote>
Under the terms of the Acquisition, Strategic shareholders (other than Matheson) will receive US$33.00/share in cash.
The Acquisition will be implemented by way of an Amalgamation under the Bermuda Companies Act, which requires approval by a majority (the headcount test) of at least 75% of the votes cast by Strategic shareholders. Matheson, holding 940,903,135 Strategic shares - representing 84.89% of shares out - is entitled to vote on the amalgamation resolution, all but assuring Strategic shareholder approval.
Apart from playing the Strategic arb, the key questions are where Matheson should trade, and what next for key listed subsidiaries.
More below the fold.


Corrigenda: There is an error in this Insight. Please note the correction.
Correction: There is NO “headcount” test at the Jardine Strategic special general meeting. The vote is therefore done. Apologies for the misinterpretation.


Whilst I did not believe that the Keswicks - the controlling family - had any need to immediately restructure the Jardine Matheson Holdings (JM SP) / Jardine Strategic Holdings (JS SP) organisation, the ultimate restructuring of the group was most likely to be done in a way where value for the family was maximised.
A buyout offer for Strategic would allow Matheson to capture value from minorities if the buyout offer was made below NAV. It is a cheaper alternative to a full buyout of Matheson. It maintains the group ownership levels in Strategic-held subsidiaries. And the family’s ownership in the group (which would be just Matheson and its direct subsidiaries) increases to ~43%, up from ~17.5% by my estimate currently.
And now we have a long-awaited transaction. And just like that it is also done and dusted.

Jardine Matheson Holdings Limited has today announced its plans for the simplification of the parent company structure of the Group. This will result in a single holding company with a conventional ownership structure and a further increase in the Group’s operational efficiency and financial flexibility.

Under the terms of the Acquisition, Strategic shareholders (other than Matheson) will receive US$33.00/share in cash.
The Acquisition will be implemented by way of an Amalgamation under the Bermuda Companies Act, which requires approval by a majority (the headcount test) of at least 75% of the votes cast by Strategic shareholders. Matheson, holding 940,903,135 Strategic shares - representing 84.89% of shares out - is entitled to vote on the amalgamation resolution, all but assuring Strategic shareholder approval.
Apart from playing the Strategic arb, the key questions are where Matheson should trade, and what next for key listed subsidiaries.
More below the fold.

Jardine Matheson: Collapsing The Circularity

Hong Kong

Mandarin Oriental International Limited is a multinational hospitality and management group that owns and operates luxury hotels, resorts, and residences across Asia, Europe, the Middle East, Africa, and the Americas. The company also engages in hotel and residences branding, management, and property development activities, offering luxury accommodations, fine dining, and wellness facilities. It was founded in 1963 and is headquartered in Hong Kong.

Mandarin Oriental International (MAND SP)

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Mandarin Oriental International (MAND SP)

Jardine Strategic: SGM On The 12 April

I would avoid both Strategic and Matheson. I like Mandarin Oriental at a 0.6x P/B - and book value is not market value. HKL is inexpensive at 0.3x...

David Blennerhassett

Jardine Strategic: What's Yours Is Mine

What rights do minorities have if they object to the Offer? Why is there not a shareholder meeting for Matheson shareholders to vote on the...

David Blennerhassett

G Stands for Governance: When Jardine Makes a Mockery of ESG; JS Publishes 58.22 USD NAV on 31/12/20

ESG is the buzzword "du jour". When the G in ESG gets put to the test in the recent Jardine Strategic buyout the 33 USD offer price looks extremely...

Nicolas Van Broekhoven

Shangri-La Asia (69 HK): Stay Safe

Based on the average price to book - pre-COVID - I would expect around 33% upside from here, or HK$10.80/share, where it traded as recently as May...

David Blennerhassett

Jardine Matheson: Collapsing The Circularity

Only the headcount test stands in the way of the Strategic's privatisation completion. Elsewhere, Mandarin Oriental looks inexpensive, as does JCNC.

David Blennerhassett

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