Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Beijing Capital Land Ltd H / Event-Driven

At long last - a summary of M&amp;A spreads (on deals discussed on Smartkarma) across Asia-Pacific.
I number 32, mostly firm, deals around the region.
This insight provides a quick summary of gross/annualised (where possible) spreads as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks
More below the fold.

At long last - a summary of M&amp;A spreads (on deals discussed on Smartkarma) across Asia-Pacific.
I number 32, mostly firm, deals around the region.
This insight provides a quick summary of gross/annualised (where possible) spreads as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks
More below the fold.

Asia-Pac Weekly Risk Arb Summary: Sydney Aiport, Beijing Capital Land, IGO/Western Areas

Travis Lundy

<a href="https://www.smartkarma.com/entities/bhp-group-ltd" target="_blank" data-smartkarma-citation="entities:147:1" rel="noopener">BHP Group (BHP AU)</a> has been reasonably widely thought to be interested in selling its global oil &amp; gas assets business as CEO Mike Henry looks to "future-facing" commodities businesses. Over the weekend, it came out that BHP global O&amp;G head Geraldine Slattery <a href="https://www.theaustralian.com.au/business/mining-energy/bhps-geraldine-slattery-arrival-sparks-woodside-deal-talk/news-story/d654f29deab29380c23abb6ca2ce261a" target="_blank" rel="noopener">had flown to Perth</a>, where <a href="https://www.smartkarma.com/entities/woodside-petroleum-ltd" target="_blank" data-smartkarma-citation="entities:177:1" rel="noopener">Woodside Petroleum (WPL AU)</a> is headquartered. Australian Financial Review's Street Talk column on Sunday confirmed that <a href="https://www.smartkarma.com/entities/woodside-petroleum-ltd" target="_blank" data-smartkarma-citation="entities:177:1" rel="noopener">Woodside Petroleum (WPL AU)</a> and <a href="https://www.smartkarma.com/entities/bhp-group-ltd" target="_blank" data-smartkarma-citation="entities:147:1" rel="noopener">BHP Group (BHP AU)</a> were in talks to do a deal on BHP's oil and gas assets whereby Woodside would issue BHP $20bn of shares in return for the assets, and then BHP would distribute most of the shares to shareholders so as to make sure it did not turn into a change-of-control transaction. There simply is no way this would be done as a cash transaction.I note that Woodside itself is looking for a permanent CEO after longtime CEO Peter Coleman exited in June. Meg O’Neill in charge of Woodside’s development and marketing arm, is acting CEO. Getting a new CEO in the process of buying assets to make it bigger - especially increasing its presence in the Scarborough project and in the Gulf of Mexico, might be just the ticket. The discussion being mooted suggests a change of control situation might be or have been in the offing. Based on revenues and operating profits that may be reasonable. Based on total assets, it would suggest a strong premium for BHP's producing and development assets. BHP reports earnings on Tuesday after market close, and Woodside reports pre-open on Wednesday.BHP has been distributing proceeds of its shrinkage to its investors for the last while. One should not expect that to change. What "price" BHP "gets" in such a deal is almost irrelevant - A$18bn? A$20bn? A$18bn? If they get an extra A$1bn it will be a nice cherry on top for the owners of A$250bn market cap company but there are questions about upfront vs ongoing liability and one does not know if they would retain a 15-20% stake, as is apparently being <a href="https://www.theaustralian.com.au/business/mining-energy/bhps-geraldine-slattery-arrival-sparks-woodside-deal-talk/news-story/d654f29deab29380c23abb6ca2ce261a" target="_blank" rel="noopener">mooted</a>.However, the deal structure itself creates some interesting issues which will mean some very big changes.More below.

BHP Group (BHP AU) has been reasonably widely thought to be interested in selling its global oil &amp; gas assets business as CEO Mike Henry looks to "future-facing" commodities businesses. Over the weekend, it came out that BHP global O&amp;G head Geraldine Slattery had flown to Perth, where Woodside Petroleum (WPL AU) is headquartered. Australian Financial Review's Street Talk column on Sunday confirmed that Woodside Petroleum (WPL AU) and BHP Group (BHP AU) were in talks to do a deal on BHP's oil and gas assets whereby Woodside would issue BHP $20bn of shares in return for the assets, and then BHP would distribute most of the shares to shareholders so as to make sure it did not turn into a change-of-control transaction. There simply is no way this would be done as a cash transaction.I note that Woodside itself is looking for a permanent CEO after longtime CEO Peter Coleman exited in June. Meg O’Neill in charge of Woodside’s development and marketing arm, is acting CEO. Getting a new CEO in the process of buying assets to make it bigger - especially increasing its presence in the Scarborough project and in the Gulf of Mexico, might be just the ticket. The discussion being mooted suggests a change of control situation might be or have been in the offing. Based on revenues and operating profits that may be reasonable. Based on total assets, it would suggest a strong premium for BHP's producing and development assets. BHP reports earnings on Tuesday after market close, and Woodside reports pre-open on Wednesday.BHP has been distributing proceeds of its shrinkage to its investors for the last while. One should not expect that to change. What "price" BHP "gets" in such a deal is almost irrelevant - A$18bn? A$20bn? A$18bn? If they get an extra A$1bn it will be a nice cherry on top for the owners of A$250bn market cap company but there are questions about upfront vs ongoing liability and one does not know if they would retain a 15-20% stake, as is apparently being mooted.However, the deal structure itself creates some interesting issues which will mean some very big changes.More below.

If Woodside Buys BHP Petroleum for Scrip, There Will Be Flowback

Last Week in Event SPACE:  Afterpay, SPH, ESR Cayman, Prosus/Naspers, Kingsoft, Milton, SOHO China

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Despite a momentary memory lapse from <a href="https://www.smartkarma.com/entities/oil-search-ltd" target="_blank" data-smartkarma-citation="entities:773:1" rel="noopener">Oil Search Ltd (OSH AU)</a>, <a href="https://www.smartkarma.com/entities/santos-ltd" target="_blank" data-smartkarma-citation="entities:711:1" rel="noopener">Santos Ltd (STO AU)</a> <a target="_blank">confirmed</a> on the 20 July it had submitted a confidential, non-binding, indicative all-scrip merger proposal to Oil Search's board on the 25 June.
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Santos proposed Oil Search shareholders receive 0.589 new Santos shares for each Oil Search share held, resulting in Oil Search shareholders holding 37% of the merged group and Santos shareholders 63%. The implied transaction price, to be implemented via a Scheme, was A$4.25 per Oil Search share - based on Santos’ closing price on 24 June 2021 - or a 12.3% premium to Oil Search's closing price on the same day.
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Oil Search considered the terms were not fair but <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02397158-2A1310798?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">agreed</a> there was strategic logic combining with Santos. 
In <a href="https://skr.ma/epYxh" target="_blank" rel="noopener">Santos/Oil Search: Getting Facts Straight</a>, I recommended buying Oil Search, with a view towards an improved ratio upwards of ~0.66x, or ~25% premium to last close using both share prices as 24 June. 
This morning Santos <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02402372-2A1313090?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">bumped</a> the consideration by 6.5% to 0.6275 new Santos shares for every Oil Search share.  This would give Oil Search's shareholders 38.5% of the merger group. The implied transaction price of A$4.52/share  - if using Santos price on the 24 June - is a 19.7% premium to the undisturbed price. 
The Oil Search board recommends the Offer in the absence of superior proposal. Due diligence has been afforded.
More below the fold.
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Despite a momentary memory lapse from Oil Search Ltd (OSH AU), Santos Ltd (STO AU) confirmed on the 20 July it had submitted a confidential, non-binding, indicative all-scrip merger proposal to Oil Search's board on the 25 June.


Santos proposed Oil Search shareholders receive 0.589 new Santos shares for each Oil Search share held, resulting in Oil Search shareholders holding 37% of the merged group and Santos shareholders 63%. The implied transaction price, to be implemented via a Scheme, was A$4.25 per Oil Search share - based on Santos’ closing price on 24 June 2021 - or a 12.3% premium to Oil Search's closing price on the same day.


Oil Search considered the terms were not fair but agreed there was strategic logic combining with Santos. 
In Santos/Oil Search: Getting Facts Straight, I recommended buying Oil Search, with a view towards an improved ratio upwards of ~0.66x, or ~25% premium to last close using both share prices as 24 June. 
This morning Santos bumped the consideration by 6.5% to 0.6275 new Santos shares for every Oil Search share.  This would give Oil Search's shareholders 38.5% of the merger group. The implied transaction price of A$4.52/share  - if using Santos price on the 24 June - is a 19.7% premium to the undisturbed price. 
The Oil Search board recommends the Offer in the absence of superior proposal. Due diligence has been afforded.
More below the fold.






For the month of July, 13 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$34bn.



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




5G Networks Ltd/Australia (5GN AU) /  Webcentral (WCG AU) 
Telco
0.1
Scheme
n.a.


Webcentral - 5GN Merger: A Small-Cap Merger Aimed at ASX300 Status



Australian Pharmaceutical Industries (API AU) 
Healthcare
0.5
Scheme
20.5%


API AU: The Hunter Turns The Hunted As Wesfarmers Makes A Move



Empired Ltd (EPD AU) 
Systems
0.2
Scheme
64.6%


Empired (EPD AU): Capgemini's Full Offer



iCar Asia Ltd (ICQ AU) 
Auto portal
0.2
Scheme
83%


ICar (ICQ AU): Carsome &amp; Catcha Carpool



Iress Ltd (IRE AU) 
Software
2.3
Scheme
23%


Iress (ASX AU) Bats Away EQT - For Now



Oil Search Ltd (OSH AU) 
O&amp;G
7.1
Scheme
12.3%


Santos/Oil Search: Getting Facts Straight



Rhipe Ltd (RHP AU) 
Software
0.1
Scheme
20%


Rhipe (RHP AU): Crayon Sees Silver in Them Thar Clouds



Spark Infrastructure (SKI AU) 
Utility
3.9
Scheme
26%



Spark Infra (SKI AU): KKR &amp; OTPPB's Tilts Falls Short
Spark Infrastructure (SKI AU): KKR &amp; OTPPB Pay Up




Sydney Airport (SYD AU) 
Airports
17.0
Scheme
42%


Sydney Airports (SYD AU): Opportunistic Tilt Amid Cloudy Future



Youfoodz Holdings (YFZ AU) 
Home delivery
0.1
Scheme
82.4%


Youfoodz (YFZ AU): HelloFresh's Lowball Takeover Offer Difficult to Block But Not UnBumbable



Hong Kong




Beijing Capital Land Ltd H (2868 HK) 
Real Estate
0.4
Merger by Absorption
62.8%


Beijing Capital Land (2868 HK): Delisting Offer From Parent



Nature Home Holding Company (2083 HK) 
Floorboarding
0.1
Scheme
17.2%


Nature Home (2083 HK): Possible Takeover Target Nature Home (2083 HK)'s Full Offer



South Korea




Green Cross Cell (031390 KS) / Green Cross LabCell (144510 KS) 
Biopharmaceutical
1.5
Merger
n.a.


GC Cell - GC LabCell: Korean Biopharma Merger Trading Tight


Source: Smartkarma Insights







The average premium for the new deals announced (or first discussed) in July was ~41%, with a year-to-date average of ~34% (102 deals &amp; total deal size of US$195bn). This compares to the average premium for all deals in 2020 (158 deals) and 2019 (145 deals) of 31% and 31.5% respectively. 
Offer Premium Summary

     




2019


2020


2021 YTD



Australia
33.0%
32.4%
35.2%


Hong Kong
25.2%
34.7%
34.5%


Japan
44.0%
35.2%
28.5%


ROW
29.1%
24.2%
35.3%


Average
31.5%
31.1%
33.5%


Source: Smartkarma Insights 







Summary of News in July 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)





Australia


Comments (with links to announcements &amp; insights)




Altium Ltd (ALU AU) 

20-Jul: Autodesk Inc (ADSK US)'s early June Offer for Altium Ltd (ALU AU) was terminated.




APN Property Group (APD AU) 

27-Jul: All resolutions passed at the Scheme Meeting




Bingo Industries (BIN AU) 

13-Jul: All resolutions passed at the Scheme Meeting




Boral Ltd (BLD AU) 

14-Jul:  Boral's Bump Earned, Likely to Extend, but THEN WHAT? 19-Jul: Boral (BLD AU): Index Impact from Seven's Offer 22-Jul: Boral Ltd: Seven's Done Deal. What Happens Next?
29-Jul: The Seven Group Holdings (SVW AU) Offer for Boral Ltd (BLD AU) was not extended (as announced on 28 Sep). The deal closed yesterday. The resulting ownership is now 69.6%. 




Crown Resorts (CWN AU) 

22-Jul: Star Entertainment Group (SGR AU) walks away from its proposal for Crown Resorts (CWN AU). That's not a good look. 




Galaxy Resources (GXY AU) 

7-Jul: Scheme Booklet dispatched. The Scheme Meeting will be held on the 6 August.




Hansen Technologies (HSN AU) 

16-Jul: Co-operation agreement entered into




Japara Healthcare (JHC AU) 

27-Jul: Japara Healthcare (JHC): Calvary Takes Charge




Mainstream Group Holdings Ltd (MAI AU) 
No July update



Milton Corp Ltd (MLT AU) 

21-Jul: Milton's Marvelous Arb Meanders Along... Marvelously




Think Childcare (TNK AU) 

No July update












Hong Kong


Comments (with links to announcements &amp; insights)




Bestway Global Holding (3358 HK) 

16-Jul: Scheme Doc pushed out to the 31 August. 




China Machinery Engineering (1829 HK) 

6-Jul: CMEC (1829 HK): Circ Out. H-Class Meeting Firmed. Looks Done




China Traditional Chinese Medicine (570 HK) 

9-Jul: In its monthly update regarding a potential Offer, China Traditional Chinese Medicine (570 HK) says there is no update.




China Youzan Limited (8083 HK) 

15-Jul: In its monthly update, China Youzan (8083 HK) said in its monthly update, that there is no update.




Chong Hing Bank (1111 HK) 

30-Jul: Chong Hing Bank (1111 HK): Scheme Doc Out. IFA Says Fair



Kerry Logistics Network (636 HK)
20-Jul: Kerry Logistics Network (636 HK) announced approval by the Independent Shareholders in respect of the Special Deal Agreements and the Framework Services Agreement had been obtained.



Rivera Holdings (281 HK) 

23-Jul: Scheme approved. 




Sichuan Languang Justbon Service (2606 HK) 

15-Jul: Desliting conditions met. Last day of trading is the 9 August. 




Soho China Ltd (410 HK) 

2-Jul: SOHO China (410 HK): Known Knowns As Spread Widens 30-Jul: SOHO China (410 HK): In For a Penny .... 




WH Group (288 HK) 

5-Jul: WH Group - Trading Opportunities Abound 10-Jul: WH Group - Long-Only Fundamental Investors Can Take Advantage Too 30-Jul: WH Group Offer Doc Out - This Little Piggy Went To Market.










India


Comments (with links to insights)




Adani Power (ADANI IN) 

23- Jul: After going limit up today, to INR 101.80/share, Adani Power (ADANI IN) is now back above INR 100/share after having fallen from INR 160. The 1-year deadline to file the Delisting Offer to the Exchange is 23 July. The Exchange would respond within 5 business days if they file. 




Mphasis Ltd (MPHL IN) 

No July update




Vedanta Ltd (VEDL IN) 

No July update









Japan


Comments (with links to announcements &amp; insights)




Aomori Bank (8342 JP) / Michinoku Bank (8350 JP) 
No July update


EPS Holdings (4282 JP)
9-Jul: The bidder for EPS Holdings (4282 JP) now has 86.97%. This will lead us to an EGM and a squeezeout. 



Hitachi Metals (5486 JP) 

No July update




Invesco Office J Reit (3298 JP) 

28-Jul: Invesco Real Estate Deal for Invesco Office (3298) Successful - Now For the Aftermath



Japan Asia (3751 JP)
14-Jul: City Index Eleventh has raised its bid from ¥960/share to ¥970/share. That forces an extension from expected end date tomorrow to the 30th of July. That's why it was raised. He doesn't have enough shares to do what he wants yet. But in raising it, he has gotten the board to agree to recommend his offer, which is something pretty special. 



Locoguide (4497 JP) / Kufu (4399 JP)

9-Jul: Kufu (4399 JP) confirmed on 7th July 2021 that shareholders have voted in favour of the Deal. Locoguide (4497 JP) shareholder vote (which was quite straightforward as the top shareholder held more than two-thirds) was also confirmed on 25th June 2021. Both stocks are expected to be delisted on 29th September 2021. The combined NewCo will be listed on 1st October 2021. 



Maruka Machinery (7594 JP) / Furusato Industries (8087 JP) 
No July update



Oliver Corp (7959 JP) 
No July update



Sakai Ovex (3408 JP) 
27-Jul: Sakai Ovex MBO Reloaded - Up 27% from Last Weak Bump But Still Cheap




Sanshin Electronics (8150 JP) 
No July update



Sawada Holdings (8699 JP) 

3-Jul: Sawada (8699) - Upsilon To End Its Tender, and Khan Bank Applies to List




Secom Co Ltd (9735 JP) 

No July update




Takeei Corp (2151 JP) 

8-Jul: Takeei (2151 JP) - Rever (5690 JP): Shareholder Approvals Complete - Road to TOPIX Upweight Clear




Toshiba Corp (6502 JP) 

20-Jul: Toshiba Corp (6502 JP) Chapter 5: Assessing the Next Move 21-Jul: Toshiba Support Cracked




Yamada Denki (9831 JP) 

No July update












Malaysia


Comments 




IHH Healthcare (IHH MK) 
No July update



Ijm Plantations (IJMP MK) 
No July update



MMC Corp Bhd (MMC MK) 
14-Jul: the Offeror has granted the Company an extension of time to no later than 5.00pm on 30 August 2021 for the Company to respond to the Offeror with its decision as to whether or not to implement and to recommend the Proposed SCR to the Entitled Shareholders for their consideration, based on the terms set out in the SCR Offer Letter.









New Zealand


Comments (&amp; link to insight)




Tilt Renewables Ltd (TLT NZ) 

15-Jul: At the Scheme Meeting,  shareholders representing 91.84% of all Tilt Renewables' shares on issue, voted by proxy or at the meeting. Over 75% of the votes of shareholders in each interest class who were entitled to vote and who voted, were cast in favour of the Scheme. Further, of all the votes cast, 99.94% of votes were in favour of the Scheme.








Singapore


Comments (&amp; link to insight)




Dutech Holdings (DTECH SP) 

15-Jul: Offer price revised to $0.435/share. Offer closes on the 2 August.






Australia

Oil Search Limited explores for and produces gas and oil through operations in Papua New Guinea.  The Company's activities are located in the Papuan Highlands which include the Kutubu, Hides, and Gobe oil and gas projects.

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Oil Search Ltd (OSH AU)

Asia-Pac Weekly Risk Arb Summary: Sydney Aiport, Beijing Capital Land, IGO/Western Areas

This insight provides a quick summary of gross/annualised spreads as at the last trading day, and how those spreads have changed over the last...

David Blennerhassett

If Woodside Buys BHP Petroleum for Scrip, There Will Be Flowback

Woodside and BHP may announce WPL will buy BHP's oil & gas business for scrip. An announcement could come in the next 36 hrs. It would mean a huge...

Travis Lundy

Last Week in Event SPACE: Afterpay, SPH, ESR Cayman, Prosus/Naspers, Kingsoft, Milton, SOHO China

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Santos and Oil Search Agree on Terms

This remains a non-binding offer but ostensibly is done. Yet Wulff's resignation, Mubadala's sell-down, and chairman Rick Lee's odd short-term...

David Blennerhassett

(Mostly) Asia M&A: July 2021 Roundup

The average premium for new deals announced (or first discussed) in July was ~41%, with a YTD average of ~34%. This compares to the average premium...

David Blennerhassett

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