Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd (VEDL IN)</a> has, for the last year, been subject to dramatic corporate actions which have roiled the share price, and expectations. The launch last May of a Delisting Proposal by the promoters when the shares were trading sub Rs. 90/share led to a rally in the shares which could not even track peer stock performance, and when the Delisting Proposal failed, shares dropped to a dramatically low level, despite the fact that Vedanta owned its shareholders a substantial dividend from the pay-through of dividends from <a href="https://www.smartkarma.com/entities/hindustan-zinc-ltd" target="_blank" data-smartkarma-citation="entities:8688:1" rel="noopener">Hindustan Zinc (HZ IN)</a>. As commodity prices continued to rally, and VEDL paid a big dividend in October 2020, it looked like the time to double-up. Everyone "knew" the promoters were willing to pay 40-50% than the post-Delisting Proposal failure to take the whole thing private. I expected a buyback. 10 days after the CEO said "we have no plans to buy more shares" we got an off-market block purchase of 5% by the promoters in December at Rs 160, followed a couple of weeks later by a proposed Open Offer to buy another 10%, which was later upsized and up-priced - by 47%, and still the Promoters could only get 10% of the 17.5% they sought to buy. A month on from that and the shares are nearly 10% higher than the Open Offer Price while a Peer Basket is largely unchanged from two months back. This means VEDL shares are again (as they were just before  at their high point against Peers since pre-pandemic. The current situation of covid-19 and variant spread in India is terrible and one could imagine that some drastic measures may still be taken to contain the spread, which could slow down the economy dramatically. The 70% catchup vs peers to reach the December 2019 level (as of post-Delisting Proposal failure) has now been caught up. The VEDL 2-3yr forward EV/EBIT ratio is now less than 1 turn from its long-term average spread to peers. More below the fold.

Vedanta Ltd (VEDL IN) has, for the last year, been subject to dramatic corporate actions which have roiled the share price, and expectations. The launch last May of a Delisting Proposal by the promoters when the shares were trading sub Rs. 90/share led to a rally in the shares which could not even track peer stock performance, and when the Delisting Proposal failed, shares dropped to a dramatically low level, despite the fact that Vedanta owned its shareholders a substantial dividend from the pay-through of dividends from Hindustan Zinc (HZ IN). As commodity prices continued to rally, and VEDL paid a big dividend in October 2020, it looked like the time to double-up. Everyone "knew" the promoters were willing to pay 40-50% than the post-Delisting Proposal failure to take the whole thing private. I expected a buyback. 10 days after the CEO said "we have no plans to buy more shares" we got an off-market block purchase of 5% by the promoters in December at Rs 160, followed a couple of weeks later by a proposed Open Offer to buy another 10%, which was later upsized and up-priced - by 47%, and still the Promoters could only get 10% of the 17.5% they sought to buy. A month on from that and the shares are nearly 10% higher than the Open Offer Price while a Peer Basket is largely unchanged from two months back. This means VEDL shares are again (as they were just before  at their high point against Peers since pre-pandemic. The current situation of covid-19 and variant spread in India is terrible and one could imagine that some drastic measures may still be taken to contain the spread, which could slow down the economy dramatically. The 70% catchup vs peers to reach the December 2019 level (as of post-Delisting Proposal failure) has now been caught up. The VEDL 2-3yr forward EV/EBIT ratio is now less than 1 turn from its long-term average spread to peers. More below the fold.  

Vedanta Now Caught Up With Peers - A Different Skew Ahead

David Blennerhassett


For the month of February, 20 new deals were discussed on Smartkarma with an overall announced deal size of ~US$31bn.


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




Vocus Communications (VOC AU) 
Telcos
2.6
Scheme
25.6%


Vocus Back In Focus As MIRA Takes A Turn








Hong Kong




Beijing Digital Telecom (6188 HK) 
Mobile devices
0.2
Possible MGO
7.0%


Beijing Digital (6188 HK): Possible Offer From Zhuhai SASAC



Kerry Logistics Network (636 HK) 
Logistics
2.2
Partial
11.22%


Kerry Logistics (636 HK): SF Holdings' Pre-Conditional Partial Offer



Sichuan Languang Justbon (2606 HK) 
Property services
0.7
MOU/Poss Offer
30%


Languang Justbon (2606 HK): Potential General Offer From Country Gardens






India








National Aluminium (NACL IN) 
Aluminium
0.1
Buyback Tender
30%


NALCO India Buyback Tender Offer: A Small Arb








Japan




Being Co Ltd (4734 JP) 
Software
0.1
Tender Offer
34.7%


MBO for Being Co (4734 JP): Tender Offer Is a Done Deal



Dynac Holdings Corporation (2675 JP) 
Restaurants
0.1
Tender Offer
11.5%


Dynac Corp (2675 JP) Tender Offer: Looks like a Done Deal



Japan Asia (3751 JP) 
Infrastructure
0.3
Tender Offer
1%


Japan Asia Group MBO Fails, Now JAG Against Murakami's Higher Bid 



Maeda Corp (1824 JP) &amp; Maeda Road Construction Co (1883 JP) &amp; Maeda Seisakusho (6281 JP) 
Construction
4.0
Merger
14% for Maeda Road


Maeda Corp/Road/Seisakusho - 3-Way Merger 1 Year After Hostile Takeover 



N Field Co Ltd (6077 JP) 
Nursing care
0.2
Tender Offer
42.2%


N Field (6077) Take-Private by Unison Capital - Fast Growth Long Runway Asset Going Not So Rich



Sakai Ovex (3408 JP) 
Textiles
0.2
Tender Offer
31.7%


Sakai Ovex MBO - Wrong Price (And the Bidder Knows It)



Sanken Electric (6707 JP) 
Semis
0.2
Partial Tender
17.1%


Effissimo Launches Unsolicited/Hostile Partial Tender On Sanken Electric



Tsukui Corp (2398 JP) 
Nursing care
0.5
Tender Offer
51.7%


Tsukui Holdings (2398) - Another CHEAP Japan Nursing Care Take-Private Deal



Unimat Retirement Community (9707 JP) 

Nursing care
0.1
Tender Offer
28.4%


MBO for Unimat (9707 JP): Deserves a Bump!


 



Europe








Aggreko PLC (AGK LN) 
Energy
3.2
Offer
39%


Aggreko: £2bn Potential Bid from PE Consortium



Arrow Global (ARW LN) 
Debt purchaser
0.8
Offer
36.2%


Arrow Global - TDR Capital: Preliminary Conditional Proposal



ASTM SpA (AT IM) 
Infrastructure
4.0
Offer
28.8%


ASTM SpA - Nuova Argo Finanziaria Takeout Offer, Trading Tight



Dialog Semiconductor (DLG GR) 
Semi
6.0
Offer
20.3%


Dialog Semiconductor - Renesas Electronics Recommended Cash Offer



Signature Aviation (SIG LN) 
Aviation services
4.7
Scheme
53%


Signature Aviation - PE Consortium Agreed Offer








US




Hollysys Automation Technolo (HOLI US) 
Automation
1.0
Offer
36.7%


Hollysys (HOLI US): Machine Earning


Source: Smartkarma Insights





The above does not include the possible deal for Brilliance China Automotive (1114 HK) (Brilliance China (1114 HK): Grilling Kidneys). 

The average premium for the new deals announced (or first discussed) in February was ~27.5%, with a year-to-date average of ~31%. This compares to the average premium for all deals in 2020 and 2019 of 31% and 31.5% respectively. 




Summary of News in February 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) 

22-Feb: 1H21 results




amaysim Australia (AYS AU) 

1-Feb: WAM Capital Ltd (WAM AU) Offer for amaysim Australia (AYS AU) is free of all defeating conditions. Here is the Bidder's Statement. Offer closes on the 30 March - unless extended. 




Asaleo Care Ltd (AHY AU) 

18-Feb: Asaleo (ASX: AHY): Essity's Revised Offer




Bingo Industries (BIN AU) 

22-Feb: 1H21 results




Coca Cola Amatil (CCL AU) 

16-Feb: Coca Cola Amatil: CCEP's Best &amp; Final Offer
17-Feb: Coca-Cola Amatil Takeover Offer Raised 5.9%, Seems Like a Done Deal




Think Childcare (TNK AU) 

20-Jan: Think Childcare (TNK AU): Bigger Bid by Busy Bees




Vitalharvest Freehold Trust (VTH AU) 

26-Feb: Non-binding Offer from ROC of A$1.08/share by way of a Scheme.




WPP AUNZ (WPP AU) 

25-Feb: FY20 results










Hong Kong


Comments (with links to announcements &amp; insights)




Beijing Jingneng Clean Energy (579 HK) 

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




Car Inc (699 HK) 

18-Feb: Car Inc (699 HK)'s Offer unconditional in all respects. Offeror (MBK) holds 52.11%. Offer closes on the 4 March.




China Logistics Property Holdings (1589 HK) 

No February update




China Machinery Engineering (1829 HK) 

3-Feb: Despatch of Composite Doc pushed out to 20 Jan 2022.




HKC Holdings (190 HK) 

5-Feb: Despatch of Scheme Doc pushed out to 30 April this year.




Huifu Payment Limited (1806 HK) 

19-Feb: Shareholders approved the Scheme at Huifu Payment Limited (1806 HK)'s Scheme Meeting. Cheques to be despatched on or before 8 April.




I.T Ltd (999 HK) 

19-Feb: Court to convene a meeting on the 4 March.




New Century REIT (1275 HK) 

17-Feb: Circular for New Century REIT (1275 HK) has been delayed until the 19 March - on or before. 




Polytec Asset Holdings (208 HK) 

11-Feb: As expected, Polytec Asset Holdings (208 HK) has extended the despatch of the Scheme Doc to 16 April.




Rivera Holdings (281 HK) 

5-Feb: Rivera Holdings (281 HK) Scheme Doc pushed way out to 7 June as the High Court has directed that the hearing of the originating summons for an order to issue its directions for convening the Court Meeting will only be held on 28 May 2021




SHK Hong Kong Industries (666 HK) 

11-Feb: SHK (666 HK): Scheme Doc Out, IFA Says Fair




China Traditional Chinese Medicine (570 HK) 

No February update




Zhejiang New Century Hotel Management Group (1158 HK) 

5-Feb: The pre-conditions for Zhejiang New Century Hotel Management Group (1158 HK) have been satisfied. Composite Doc to be despatched on ore before the 31 March, about a week earlier than my prior estimate. 




Zhuhai Holdings Investment (908 HK) 

11-Feb: As expected, the despatch of the Scheme Doc for Zhuhai Holdings Investment (908 HK) has been pushed back to the 21 April.










India


Comments (with links to insights)




Allcargo Logistics (AGLL IN) 

No February update




Engineers India (ENGR IN) 

No February update




INEOS Styrolution India Limited (INEOS IN) 

No February update




Vedanta Ltd (VEDL IN) 

19-Feb: Vedanta Soars Beyond Indicative Open Offer Level. Not Expensive










Japan


Comments (with links to announcements &amp; insights)




Cocokara Fine (3098 JP) 
2-Feb: Cocokara/​MatsuKiyo Deal Finally Coming?




Honshu Chemical Industry (4115 JP) 

14-Feb: Honshu Chemical - What WAS the Wrong Price Gets Wronger




Japan Asia (3751 JP) 

4-Feb: Overbid: JAG Special Committee Plays Stupid so Murakami Plays Hardball
20-Feb: Japan Asia Group MBO Fails, Now JAG Against Murakami's Higher Bid




Joban Kaihatsu (1782 JP) 

Tender Offer was successful.




Toa Oil Co Ltd (5008 JP) 

12-Feb: Toa Oil (5008) Tender - Has the Dog Caught the Car?
17-Feb: Toa Oil (5008) - The Dog Has Caught the Car, But Beware Mangalores 25 Feb: Toa Oil (5008) - Idemitsu Looking To The Next Attempt?




Tokyo Rope Mfg (5981 JP) 

3-Feb: Nippon Steel Corporation (5401 JP) replied to questions posed to it by Tokyo Rope Mfg (5981 JP) in the latter's Opinion Statement regarding NSC's tender offer.  It is quite clear, and quite non-combative, relatively speaking. 











Malaysia


Comments (with links to announcements)




Batu Kawan Bhd (BAK MK) 

5-Feb: Compulsory acquisition notice sent out




FGV Holdings Bhd (FGV MK) 

16-Feb: Offer extended until the 2 March 25-Feb: Offer extended until the 15 March












New Zealand


Comments (with links announcements)




Infratil Ltd (IFT NZ) 

4-Feb: Lots of interest in Tilt Renewables Ltd (TLT NZ) 












Philippines


Comments (with links announcements)




Lopez Holdings (LPZ PM) 

17-Feb:  There's been an amendment to the partial offer for Lopez Holdings (LPZ PM). The maximum to be acquired will now be 1.43bn shares or 31.5%.   
"the reduction is intended to address concerns and the risk that LPZ may still fall below the public ownership requirement despite the initial reduced maximum number of shares to be acquired."  The Tender Offer price remains at P3.85 per share. The Tender Offer period will be extended from February 19, 2021, to March 8, 2021.











Singapore


Comments (with links to announcements &amp; insights)




CEI Limited (CEI SP) 

15-Feb: Pre-cons met. Offer doc to be sent 14-21 from this date.
15-Feb: AEM's Privatization Deal for CEI Limited (CEI SP): Pre-Condition Satisfied




GL Ltd (GLL SP) 

4-Feb: Offer Doc for GL Ltd (GLL SP) is out. The Circular, which will include an IFA opinion, is expected to be despatched on or before the 18 Feb. 
18-Feb: The Circular is out for GL Ltd (GLL SP). The IFA says the Offer is not fair but reasonable.




Penguin International (PBS SP) 

24-Feb: Penguin International (PBS SP)'s Circular is out - independent directors and IFA recommend shareholders accept Emet Grace offer.




Soilbuild Business Space REIT (SBREIT SP) 

18-Feb: Soilbuild REIT: Scheme Doc Out. EGM Convened










Taiwan


Comments (with links to announcements &amp; insights)




Jih Sun Financial (5820 TT) 

24-Feb: The Taiwan Fair Trade Commission has "approved" the takeover of Jih Sun Financial (5820 TT) by Fubon Financial Holding Co (2881 TT). This is a little earlier than expected. Fubon Financial Deal for Jih Sun Gets TFTC Signoff





















North America


Comments (with links to announcements and insights)





51 Job Inc Adr (JOBS US) 

No February update




China Biologic Products (CBPO US) 

China Biologic calls EGM on 1 March to consider proposed take-private



HUYA Inc (HUYA US)
No February update



PNM Resources (PNM US) 
12-Feb: PNM Resources shareholders supported the integration with Avangrid, Iberdrola's US subsidiary. The approval represents another milestone in the integration process between the New Mexico and Texas power company and the Iberdrola group company.
The operation, which already has the approval of the Committee on Foreign Investments in the United States (CFIUS) and Hart Scott Rodino Clearance (HSR), expects to obtain all the necessary approvals at both the state and federal levels throughout 2021.




Sina Corp (Class A) (SINA US) 

22-Feb: What's Going On With Sina Corp?




Sogou Inc (SOGO US) 
4-Feb: FY20 results




Wanda Sports Group (WSG US) 
1-Feb: Offer to expire on the 26 Feb.






































Equity Bottom-Up

In mid-December, eight trading days after Vedanta promotor Anil Agarwal said the promoter (Vedanta Resources, himself, the associated companies) had no plans at all to increase their stake in <a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd (VEDL IN)</a> and no plans to make an Open Offer, the promoter launched a block bid to buy 4.98% in a post-market trade. The shares had climbed more than 50% in the previous two months to Rs 150/share, but the deal got done at Rs 160/share.Less than three weeks later, two entities controlled by <a href="https://www.smartkarma.com/entities/vedanta-resources-limited" target="_blank" data-smartkarma-citation="entities:22202:1" rel="noopener">Vedanta Resources (VED LN)</a> announced an intention to conduct an Open Offer to buy another 10% of its main Indian-listed asset, VEDL at the same Rs. 160/share price as the clearing price. But by that time (9 January), the price had risen past Rs. 180/share as global market movements had propelled gains in cyclicals and commodity markets had propelled the underlying products.But even then, VEDL was quite cheap on a relative basis. The question was about the nature of the Open Offer. Was it a real Open Offer?  Or was it designed for another purpose in mind? We still do not know the answer, but on 18 February the stock reached a new 2-year intraday high, closing at Rs. 195+/share. And VEDL is still not expensive vs peers. Q3 results at both HZ and at VEDL ex-HZ were great. VEDL ex-HZ Operating Income was the highest since March 2014, and VEDL ex-HZ Net Income in Q3 was the second highest non-accounting gimmick Net Income ever?Looking forward, consensus on VEDL is stale. It shows the largest negative number for VEDL ex-HZ OP in the modern VEDL era in Q4 this year despite strong commodity pricing.And VEDL still owes a lot of back dividends to its shareholders. And we await the Open Offer details.This and a lot more below.

In mid-December, eight trading days after Vedanta promotor Anil Agarwal said the promoter (Vedanta Resources, himself, the associated companies) had no plans at all to increase their stake in Vedanta Ltd (VEDL IN) and no plans to make an Open Offer, the promoter launched a block bid to buy 4.98% in a post-market trade. The shares had climbed more than 50% in the previous two months to Rs 150/share, but the deal got done at Rs 160/share.Less than three weeks later, two entities controlled by Vedanta Resources (VED LN) announced an intention to conduct an Open Offer to buy another 10% of its main Indian-listed asset, VEDL at the same Rs. 160/share price as the clearing price. But by that time (9 January), the price had risen past Rs. 180/share as global market movements had propelled gains in cyclicals and commodity markets had propelled the underlying products.But even then, VEDL was quite cheap on a relative basis. The question was about the nature of the Open Offer. Was it a real Open Offer?  Or was it designed for another purpose in mind? We still do not know the answer, but on 18 February the stock reached a new 2-year intraday high, closing at Rs. 195+/share. And VEDL is still not expensive vs peers. Q3 results at both HZ and at VEDL ex-HZ were great. VEDL ex-HZ Operating Income was the highest since March 2014, and VEDL ex-HZ Net Income in Q3 was the second highest non-accounting gimmick Net Income ever?Looking forward, consensus on VEDL is stale. It shows the largest negative number for VEDL ex-HZ OP in the modern VEDL era in Q4 this year despite strong commodity pricing.And VEDL still owes a lot of back dividends to its shareholders. And we await the Open Offer details.This and a lot more below.

Vedanta Soars Beyond Indicative Open Offer Level. Not Expensive

Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Indian Aluminium manufacturer <a href="https://www.smartkarma.com/entities/national-aluminium-co-ltd" target="_blank" data-smartkarma-citation="entities:1770:1" rel="noopener">National Aluminium (NACL IN)</a> ("NALCO") informed the market on 21st January 2021 that they were <a href="https://www.bseindia.com/xml-data/corpfiling/AttachHis/D6D61779-CB52-4346-8C8F-78C23F1EEE3F-162006.pdf" target="_blank" rel="noopener">considering a buyback</a> of shares. As planned, a week later on 27th January, the <a href="https://www.bseindia.com/xml-data/corpfiling/AttachHis/D6D61779-CB52-4346-8C8F-78C23F1EEE3F-162006.pdf" target="_blank" rel="noopener">board meeting</a> was held and the resolution to conduct a buyback offer was passed as required. On 29th January, NALCO made a <a href="https://www.sebi.gov.in/filings/buybacks/jan-2021/national-aluminium-company-limited-public-announcement_48946.html" target="_blank" rel="noopener">public announcement</a> confirming more details regarding this buyback. This will be the third buyback by NALCO in the last five years. This time, they are planning to buy up to 130,279,083 shares through a Tender Offer at a price of INR57.50/share. The size of this buyback is around INR7.5bn (~US$100mn). This is an interesting situation.More below the fold.

Indian Aluminium manufacturer National Aluminium (NACL IN) ("NALCO") informed the market on 21st January 2021 that they were considering a buyback of shares. As planned, a week later on 27th January, the board meeting was held and the resolution to conduct a buyback offer was passed as required. On 29th January, NALCO made a public announcement confirming more details regarding this buyback. This will be the third buyback by NALCO in the last five years. This time, they are planning to buy up to 130,279,083 shares through a Tender Offer at a price of INR57.50/share. The size of this buyback is around INR7.5bn (~US$100mn). This is an interesting situation.More below the fold. 

NALCO India Buyback Tender Offer: A Small Arb

Last Week in Event SPACE: UNIZO, Maanshan, SK Holdings, Z Holdings, AVIC, TVB, HN Renewable, Webster

India

National Aluminium Co. Ltd. is an integrated aluminum manufacturer. The Company mines for bauxite, refines bauxite into aluminum and manufactures and sells aluminum and aluminum products. National Aluminium Company's products include bauxite, aluminum hydrate, calcined aluminum, aluminum ingots and aluminum wire rods, as well as electricity which is generated for captive consumption.

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National Aluminium (NACL IN)

Vedanta Now Caught Up With Peers - A Different Skew Ahead

VEDL has been a rocket the last several months. And it still "owes" dividends of ~Rs 24/share to its shareholders. HZL results were salutary, but...

Travis Lundy

(Mostly) Asia M&A: February 2021 Roundup

The average premium for the new deals announced in February was ~27.5%, with a year-to-date average of ~31%. This compares to the average premium...

David Blennerhassett

Vedanta Soars Beyond Indicative Open Offer Level. Not Expensive

VEDL is STILL cheap to peers relative, on a stub basis, on a fundamental basis using current or forward EV/consensus EBIT or EBITDA. We await the...

Travis Lundy

NALCO India Buyback Tender Offer: A Small Arb

NALCO has an interesting and large buyback in the form of a public tender offer. Minimum pro-ration for large shareholders is about 6.7% and there...

Janaghan Jeyakumar, CFA

Last Week in Event SPACE: UNIZO, Maanshan, SK Holdings, Z Holdings, AVIC, TVB, HN Renewable, Webster

Last Week in Event SPACE ... On a risk-reward basis on the Unizo Holdings (3258 JP) deal, if Ichigo, Elliott, and others do not step in, this may...

David Blennerhassett

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