IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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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/origin-energy-ltd" target="_blank" data-smartkarma-citation="entities:797:1" rel="noopener">Origin Energy (ORG AU)</a>’s exclusivity agreement with Brookfield/EIG expired on 24 January. Brookfield/EIG is reportedly continuing its due diligence on its A$9.00 per share offer.</li>
<li>Time often kills deals. There is speculation that recent price caps would result in Brookfield/EIG walking away or trying to recut the deal terms. ACCC approval is also an overhang.</li>
<li>Peers' share prices have risen despite the price cap which weakens the case for a recut to the deal terms. Brookfield/EIG clearly want Origin as it twice bid against itself. </li>
</ul>



Origin Energy (ORG AU)’s exclusivity agreement with Brookfield/EIG expired on 24 January. Brookfield/EIG is reportedly continuing its due diligence on its A$9.00 per share offer.
Time often kills deals. There is speculation that recent price caps would result in Brookfield/EIG walking away or trying to recut the deal terms. ACCC approval is also an overhang.
Peers' share prices have risen despite the price cap which weakens the case for a recut to the deal terms. Brookfield/EIG clearly want Origin as it twice bid against itself. 


Origin Energy (ORG AU): Risk/Reward Profile

<ul>
<li>
<a href="https://www.smartkarma.com/entities/genex-power-ltd" target="_blank" data-smartkarma-citation="entities:29079:1" rel="noopener">Genex Power Ltd (GNX AU)</a> received an improved non-binding offer from Skip Capital/Stonepeak at A$0.25 per share, an 8.7% bump from the previously rejected A$0.23 offer.</li>
<li>The headcount test is emerging as a key risk as retail shareholders are voicing their displeasure. The offer is underwhelming based on precedent transactions and average sell-side price targets. </li>
<li>The Board hopes that granting non-exclusive due diligence and stating an intention to recommend a binding A$0.25 offer will force rival bidders to kickstart an auction.    </li>
</ul>



Genex Power Ltd (GNX AU) received an improved non-binding offer from Skip Capital/Stonepeak at A$0.25 per share, an 8.7% bump from the previously rejected A$0.23 offer.
The headcount test is emerging as a key risk as retail shareholders are voicing their displeasure. The offer is underwhelming based on precedent transactions and average sell-side price targets. 
The Board hopes that granting non-exclusive due diligence and stating an intention to recommend a binding A$0.25 offer will force rival bidders to kickstart an auction.    


Genex Gets an Improved A$0.25 Offer, Headcount Test a Risk, Board Hoping for an Auction

<ul>
<li>
<a href="https://www.smartkarma.com/entities/genex-power-ltd" target="_blank" data-smartkarma-citation="entities:29079:1" rel="noopener">Genex Power Ltd (GNX AU)</a> shares rose 44% on the back of an A$0.23 per share offer from Skip Capital and Stonepeak. Skip also increased its stake to 19.99%.</li>
<li>At first glance, the offer looks generous in comparison to peer multiples and recent share prices. However, the offer is opportunistic partly due to Genex’s 500MW pipeline of projects. </li>
<li>Benchmarking the precedent transaction multiples suggests that Genex’s existing portfolio is worth at least A$0.27 per share. The Board should engage for a higher price. </li>
</ul>



Genex Power Ltd (GNX AU) shares rose 44% on the back of an A$0.23 per share offer from Skip Capital and Stonepeak. Skip also increased its stake to 19.99%.
At first glance, the offer looks generous in comparison to peer multiples and recent share prices. However, the offer is opportunistic partly due to Genex’s 500MW pipeline of projects. 
Benchmarking the precedent transaction multiples suggests that Genex’s existing portfolio is worth at least A$0.27 per share. The Board should engage for a higher price. 


Genex’s Offer of A$0.23 from Skip Capital Likely Won’t Cut It

<ul>
<li>The IFA supported the demerger by stating that “<em>in the absence of a fully priced takeover offer from a third party, the demerger is the most attractive course of action.</em>”</li>
<li>IFA concedes that “<em>it is not possible to form a definitive view</em>” if the demerger will generate higher shareholder returns. The report is light on qualitative analysis. </li>
<li>Mike Cannon-Brookes continues to gain retail support for a NO vote at <a href="https://www.smartkarma.com/entities/agl-energy-ltd" target="_blank" data-smartkarma-citation="entities:554:1" rel="noopener">AGL Energy Ltd (AGL AU)</a>'s 15 June scheme meeting. Our SoTP points to upside absent a demerger.</li>
</ul>


The IFA supported the demerger by stating that “in the absence of a fully priced takeover offer from a third party, the demerger is the most attractive course of action.”
IFA concedes that “it is not possible to form a definitive view” if the demerger will generate higher shareholder returns. The report is light on qualitative analysis. 
Mike Cannon-Brookes continues to gain retail support for a NO vote at AGL Energy Ltd (AGL AU)'s 15 June scheme meeting. Our SoTP points to upside absent a demerger.


AGL Energy’s Demerger Booklet Provides an Underwhelming Justification

<ul>
<li>Mike Cannon-Brookes (Grok Ventures) has become the largest <a href="https://www.smartkarma.com/entities/agl-energy-ltd" target="_blank" data-smartkarma-citation="entities:554:1" rel="noopener">AGL Energy Ltd (AGL AU)</a> shareholder, by acquiring an 11.28% interest through derivatives transactions. </li>
<li>Mr Cannon-Brookes will vote against the demerger scheme (vote on 15 June) and has launched an <a href="https://www.keepittogetheraustralia.com.au/" target="_blank" rel="noopener">online campaign</a> to influence the retail heavy share register.</li>
<li>The rationale for the demerger remains unconvincing. Our SoTP points to upside absent a demerger. If the demerger fails, the long-term play could still be to revisit the privatisation plan.</li>
</ul>


Mike Cannon-Brookes (Grok Ventures) has become the largest AGL Energy Ltd (AGL AU) shareholder, by acquiring an 11.28% interest through derivatives transactions. 
Mr Cannon-Brookes will vote against the demerger scheme (vote on 15 June) and has launched an online campaign to influence the retail heavy share register.
The rationale for the demerger remains unconvincing. Our SoTP points to upside absent a demerger. If the demerger fails, the long-term play could still be to revisit the privatisation plan.


AGL Energy’s Demerger Vote in the Balance with Grok Ventures’ Move

New Zealand

Meridian Energy Ltd. operates as a state-owned electricity generator. The Company produces hydro-electric power and supplies electricity to residential, business, and rural customers. Meridian Energy provides services throughout New Zealand.

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Meridian Energy (MEL NZ)

Origin Energy (ORG AU): Risk/Reward Profile

The risk-reward profile is favourable as the downside due to a deal break (-11% estimated decline) is lower than the upside (+23%) to the...

Arun George

Genex Gets an Improved A$0.25 Offer, Headcount Test a Risk, Board Hoping for an Auction

Maintain holding or buy with the view of a potential rival bid or that the risk of the headcount test forces Skip/Stonepeak to further bump their...

Arun George

Genex’s Offer of A$0.23 from Skip Capital Likely Won’t Cut It

At first glance, the A$0.23 offer looks generous. Benchmarking the precedent transaction multiples suggests that Genex’s existing portfolio is...

Arun George

AGL Energy’s Demerger Booklet Provides an Underwhelming Justification

While the IFA supports the demerger, the report is light on qualitative analysis. Mike Cannon-Brookes continues to gain retail support for a NO...

Arun George

AGL Energy’s Demerger Vote in the Balance with Grok Ventures’ Move

Mr Cannon-Brookes (11.28% stake) will vote against the demerger scheme on 15 June. The rationale for the demerger remains unconvincing. Our SoTP...

Arun George

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