European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>
Deals in the regulated power industry have longer closing times (and higher spreads) than those of other sectors.  On 2 November, Ashley Schannauer, the hearing examiner for the New Mexico Public Regulation Commission in charge of the merger application, recommended against the proposed $4.3 billion merger between <a href="https://www.smartkarma.com/entities/avangrid-inc" target="_blank" data-smartkarma-citation="entities:26503:1" rel="noopener">Avangrid Inc (AGR US)</a>, an affiliate of <a href="https://www.smartkarma.com/entities/iberdrola-sa" target="_blank" data-smartkarma-citation="entities:21276:1" rel="noopener">Iberdrola SA (IBE SM)</a>, and <a href="https://www.smartkarma.com/entities/pnm-resources-inc" target="_blank" data-smartkarma-citation="entities:16546:1" rel="noopener">PNM Resources (PNM US)</a>, saying its potential harms outweigh benefits to the public. Investors are getting nervous on the stumbling block of Mr. Schannauer's 447-page report.
</li>
<li>
Parties have until 12 November to file responses to the hearing examiner's report, after which commissioners could hold a hearing or vote on the proposal. If the merger is rejected by the commission, the company could submit a revised proposal. Also, the commission’s decision can be appealed to the New Mexico Supreme Court.
</li>
<li>
The median implied valuation of PNM Resources (comparables EV/Fwd EBITDA based, source Capital IQ consensus) is $50.14/share.
</li>
<li>
The main hurdle to completing this deal is New Mexico regulatory approval. Nevertheless, my understanding, after conversations with Iberdrola's IR and considering the stance of Public Regulation Commission staff, is that the deal should complete, although it may take longer than the initial "October to December 2021" deadline. My TP for PNM is $50.3/share. Investors have made some money on this deal, several times (as can be seen in the chart in the insight). Gross spread as of 3 November is 5.3%. Recommendation is long PNM US, underpinned by stand-alone comparables-based valuation.
</li>
</ul>



Deals in the regulated power industry have longer closing times (and higher spreads) than those of other sectors.  On 2 November, Ashley Schannauer, the hearing examiner for the New Mexico Public Regulation Commission in charge of the merger application, recommended against the proposed $4.3 billion merger between Avangrid Inc (AGR US), an affiliate of Iberdrola SA (IBE SM), and PNM Resources (PNM US), saying its potential harms outweigh benefits to the public. Investors are getting nervous on the stumbling block of Mr. Schannauer's 447-page report.


Parties have until 12 November to file responses to the hearing examiner's report, after which commissioners could hold a hearing or vote on the proposal. If the merger is rejected by the commission, the company could submit a revised proposal. Also, the commission’s decision can be appealed to the New Mexico Supreme Court.


The median implied valuation of PNM Resources (comparables EV/Fwd EBITDA based, source Capital IQ consensus) is $50.14/share.


The main hurdle to completing this deal is New Mexico regulatory approval. Nevertheless, my understanding, after conversations with Iberdrola's IR and considering the stance of Public Regulation Commission staff, is that the deal should complete, although it may take longer than the initial "October to December 2021" deadline. My TP for PNM is $50.3/share. Investors have made some money on this deal, several times (as can be seen in the chart in the insight). Gross spread as of 3 November is 5.3%. Recommendation is long PNM US, underpinned by stand-alone comparables-based valuation.



Hearing Examiner Recommends Against Iberdrola (Avangrid)/PNM Resources Deal

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors


For the month of May, 11 new deals were discussed on Smartkarma with an overall announced deal size of ~US$7.3bn.



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




APN Property Group (APD AU) 
Property
0.2
Scheme
50%


APN Prop (APD AU): Dexus' Done Deal



Boral Ltd (BLD AU) 
Construction
4.8
Off-market
Nil


Boral Ltd (BLD AU): Seven's Nil Premium



Japara Healthcare (JHC AU) 
Healthcare
0.2
Scheme
30%


Japara Healthcare (JHC AU): Here Comes The Calvary


 



Hong Kong




Chong Hing Bank (1111 HK) 
Banking
0.2
Scheme
51.2%



Chong Hing Bank (1111 HK): Takeover Talk As Shares Pop
Chong Hing Bank (1111 HK): Yue Xiu's Offer Is Light



 



Japan




Aomori Bank (8342 JP) / Michinoku Bank (8350 JP) 
Bank
0.6
Merger



Aomori Bank &amp; Michinoku Bank Merger - Nothing To Write Home About Yet



EPS Holdings (4282 JP) 
Data/software
0.1
Tender Offer
35.5%


Another Too-Cheap MBO as Founder Takes Out EPS


 Locoguide (4497 JP) / Kufu (4399 JP)

Real estate
0.4
Merger



Locoguide (4497 JP) - Kufu (4399 JP): Merger Is a Done Deal



Maruka Machinery (7594 JP) / Furusato Industries (8087 JP) 
Trading
0.4
Merger



A Complex SmallCap Merger in Japan: Maruka (7594) And Furusato (8087)



Secom Joshinetsu (4342 JP) 
Security
0.3
Tender Offer
66.2%


Secom To Finally Buy Out Affiliate Secom Joshinetsu (4342)








Malaysia




Can-One Bhd (CAN MK) 
Manufacturing
0.1
MTO
15.8%


Can-One (CAN MK)? Yeoh Can Lah!



IHH Healthcare (IHH MK) 
Healthcare
N/A
N/A
N/A


IHH Healthcare (IHH MK): More Medicine For Mitsui?


Source: Smartkarma Insights






The above does not include BetMakers Technology Group (BET AU) lobbing a non-binding offer of A$4bn (A$1bn cash, $3bn scrip into BET) for Tabcorp Ltd (TAH AU)'s wagering and media division, and Apollo's prior tilt - Tabcorp (TAH AU): Apollo Shows Its Hand.

Nor does the table include the rumoured merger between  Angang Steel Co Ltd (H) (347 HK) and Bengang Steel (000761 CH) - Amalgamated Steel: Merging Angang &amp; Bengang As, Bs, and Hs.



The average premium for the new deals announced (or first discussed) in May was ~41%, with a year-to-date average of ~31% (78 deals). This compares to the average premium for all deals in 2020 (158 deals) and 2019 (145 deals) of 31% and 31.5% respectively. 




Summary of News in May 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)




3P Learning (3PL AU) 

No May update




Bingo Industries (BIN AU) 

1-May: Capital Group announced it has sold its entire 9.7% stake in Bingo Industries (BIN AU).




Crown Resorts (CWN AU) 

10-May: Crown Resorts: Blackstone &amp; Star Place Their Bets
17-May: Crown Says Blackstone's Bid Is Light. Undecided On Star
20-May: Crown Resorts Ltd: Blackstone Offer Rejected, Star Offer May Still Not Reflect True Forward Value




Galaxy Resources (GXY AU) 

No May update




Link Administration Holdings (LNK AU) 

27-May: Link Group (LNK AU): KKR Opens The Bidding For PEXA
31-May: Link Admin (LNK AU) Goes IPO Route For PEXA Afterall




Mainstream Group Holdings Ltd (MAI AU) 

2-May: Mainstream (MAI AU): More-Than-Double in Less than 2 Months After Apex Bump
6-May: Mainstream (MAI AU): Bidding War Continues as SS&amp;C Overbids for the 4th Time
14-May: Mainstream (MAI AU): +120% in ~2 Months but Bidding War Continues....




McPherson's Ltd (MCP AU) 

No May update




Mortgage Choice (MOC AU) 

26-Mau FIRB gives its approval



Primewest Group Ltd (PWG AU)

14-May: Target's Statement and Bidder's Statements were published. Primewest Group Ltd (PWG AU)'s Board has unanimously recommended shareholders to accept the Offer. 




Think Childcare (TNK AU) 

12-May: Think Childcare (TNK AU) has agreed to extend the Exclusivity Period with Busy Bees to 31st May 2021 (vs. original deadline of 14th May). This is still a non-binding deal with an expected completion date to be in 1Q CY22. 




Vitalharvest Freehold Trust (VTH AU) 

1-May: And so it goes - MAFM bumps its Offer for Vitalharvest Freehold Trust (VTH AU) to $1.26.
7-May: MAFM exercises a call option and acquires 16.2% of Vitalharvest Freehold Trust (VTH AU).
28-May Roc bumps its Offer for Vitalharvest Freehold Trust (VTH AU) to $1.29/share.  And says it will overbid any MAFM counter! 




Vocus Communications (VOC AU) 

10-May: Vocus Comms (VOC AU): MIRA/Aware's Done Deal
19-May: Vocus Comms (VOC AU): MIRA/​Aware’s Scheme Doc Despatched. EGM On 22 June










Hong Kong


Comments (with links to announcements &amp; insights)




Beijing Digital Telecom (6188 HK) 

1-May: Beijing Digital (6188 HK): Offer Now Open. IFA Says Fair
20-May: Beijing Digital Telecom (6188 HK)'s MGO is now unconditional in all respects. 




China Machinery Engineering (1829 HK) 

28-May: China Machinery Engineering (1829 HK): Movement In The Works?




China Traditional Chinese Medicine (570 HK) 

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




China Youzan Limited (8083 HK) 

10-May: China Youzan (8083 HK): Reality Check As Shares Rollover




Kerry Logistics Network (636 HK) 

4-May: Kerry Logistics Network (636 HK) will hold an EGM on the 26 May for shareholders to vote on the sale of the Hong Kong and Taiwan warehouse businesses to Kerry Holdings. 
26-May: At its SGM, Kerry Logistics Network (636 HK) shareholders overwhelmingly approved the sale of its Hong Kong, Taiwan warehouse business to Kerry Holdings.




New Century REIT (1275 HK) 

No May update




Rivera Holdings (281 HK) 

No April update




Sichuan Languang Justbon Service Group (2606 HK) 

3-May: Languang Justbon (2606 HK): Offer Now Open - For Up To Four Months










India


Comments (with links to insights)




Mphasis Ltd (MPHL IN) 

4-May: The Detailed Public Statement on Mphasis Ltd (MPHL IN) has been released. The Open Offer is scheduled tentatively to run from 18 June to 1 July, which means it is running Very Tight and the option is worth a bit less than I expected. But that just means there is more gamma. One could get big at the high Rs 1600s area. 




Vedanta Ltd (VEDL IN) 

4-May: Vedanta Now Caught Up With Peers - A Different Skew Ahead










Japan


Comments (with links to announcements &amp; insights)




BeNEXT Group (2154 JP) 
No May update



Cocokara Fine (3098 JP) 
No May update



Fuji Kosan Company (5009 JP) 
17-May:  Fuji Kosan Company (5009 JP) has responded to Aslead Strategic Value Fund's Tender Offer with its initial Target Opinion Statement which is "Opinion Withheld." This is because Fuji Kosan hasn't actually done anything yet - two weeks in. They have sent questions to Aslead, and Aslead has five business days to respond. This is slow-walking it. This tender offer is likely to be extended because of that.



Hitachi Metals (5486 JP) 

5-May: Hitachi Metals - Should I Stay or Should I Go Now?




Honshu Chemical Industry (4115 JP) 

13-May: Honshu Chemical (4115) Shareholders Perhaps One Day From a Wrong Price Takeover
16-May:: Honshu Chemical Shareholders Get the Short End of the Stick As The Board Is Ex-Gourd




Invesco Office J Reit (3298 JP) 

6-May:  Invesco Office OPPOSES Starwood Hostile Offer and Gets a Distinctly Beige Knight
11-May:  Starwood Bumps Terms, Lowers Threshold on Invesco Office
13-May:  Invesco Office's Terrible, Horrible, No Good Very Bad Day... Changes Things
20-May:  Invesco Office's Beige Knight (Deemed Dirty Gray By Markets) Suddenly Looks Brighter and Whiter
23-May:  Starwood Responds to Invesco Office's White Knight Proposal
24-May: Starwood has extended their Tender Offer on Invesco Office J Reit (3298 JP) from the 24th of May to 15th of June after the close of the 24th. They did not raise the price. This is basically the equivalent of Starwood calling Invesco's bluff. They can extend again if they want but they are going to make Invesco come out. They can change price later if they think it necessary.



Japan Asia (3751 JP)
No May update



Sawada Holdings (8699 JP) 

9-May:  Sawada Selldown Was NOT Done - Shareholder Structure Looks Different Now
23-May: Sawada Is A Different Stock Now
31-May:  Be Careful of Expectations on Sawada (8699)




Toshiba Corp (6502 JP) 

14-May: Toshiba – Shareholder Returns Trump Weak Guidance
17-May: Toshiba Results &amp; Shareholder Return - Possibly Big Impact Buyback Coming











New Zealand


Comments 




Tilt Renewables Ltd (TLT NZ) 

No May update











Singapore


Comments (with links to announcements)




Procurri Corporation (PROC SP) 

3-May: The Partial Offer has not become unconditional in all respects on the Closing Date and has therefore lapsed










Thailand


Comments




Intouch Holdings (INTUCH TB) 

No May update




Vinythai Public Co (VNT TB) 

No May update






There are two approvals pending:
<ul>
<li>
New Mexico Public Regulation Commission (PRC)
</li>
<li>
Nuclear Regulatory Commission
</li>
</ul>
PRC hearing examiner, Ashley Schannauer, wants Avangrid to address concerns and explain why the company didn't make some disclosures ($25 million in penalties and disallowances for poor service over the past 16 months). The hearing examiner order directs the filing companies to submit response proposals by 18 May and tentatively scheduled a status conference to determine next steps by 28 May.
Meanwhile Iberdrola has posted solid Q1 results and has announced that it will subscribe to 81.5% ($3,260 mn) of Avangrid's $4 bn increase, with the Qatar Investment Authority (QIA, top shareholder in Iberdrola with a 6% stake) subscribing the remaining $740 mn.
<div>
The concerns of the PRC hearing examiner, although legitimate in my view, are more akin to a public dress down "you kids have been very naughty", but should not significantly delay the approvals needed for the acquisition of PNM. The deal seems on track for completion during H2 2021.
PNM closed on 12 May at $49.15, vs. an offer price of $50.3.
</div>
<ul style="list-style-type: disc;">
<li>which represents a gross spread of 2.3%, c. 4.6% annualized (assuming the deal completes in six months), which I consider attractive for a low-risk deal that is almost certainly to close in H2 2021.</li>
<li>Reiterate Long PNM.</li>
</ul>

There are two approvals pending:


New Mexico Public Regulation Commission (PRC)


Nuclear Regulatory Commission


PRC hearing examiner, Ashley Schannauer, wants Avangrid to address concerns and explain why the company didn't make some disclosures ($25 million in penalties and disallowances for poor service over the past 16 months). The hearing examiner order directs the filing companies to submit response proposals by 18 May and tentatively scheduled a status conference to determine next steps by 28 May.
Meanwhile Iberdrola has posted solid Q1 results and has announced that it will subscribe to 81.5% ($3,260 mn) of Avangrid's $4 bn increase, with the Qatar Investment Authority (QIA, top shareholder in Iberdrola with a 6% stake) subscribing the remaining $740 mn.

The concerns of the PRC hearing examiner, although legitimate in my view, are more akin to a public dress down "you kids have been very naughty", but should not significantly delay the approvals needed for the acquisition of PNM. The deal seems on track for completion during H2 2021.
PNM closed on 12 May at $49.15, vs. an offer price of $50.3.


which represents a gross spread of 2.3%, c. 4.6% annualized (assuming the deal completes in six months), which I consider attractive for a low-risk deal that is almost certainly to close in H2 2021.
Reiterate Long PNM.


Iberdrola (Avangrid)/PNM Resources: Regulator's Reprimand and Capital Increase

Iberdrola, via its subsidiary Avangri,d announced the acquisition of PNM on 21 October.announced the merger of both companies.
<ul>
<li>Under the proposed transaction, shareholders of PNM will receive $50.30 per share, in cash, representing a premium of 10% over PNM's share price as of Oct. 20, 2020.</li>
<li>for a transaction value, as reported, of $8,300 mn and $4,342 mn in total consideration to shareholders.</li>
<li>11.7x EV/Fwd EBITA and 24.,4x P/Fwd EPS.</li>
</ul>
The hurdles are being cleared (read on for details) and the transaction is expected to close by the end of December.
PNM began trading on 12 January at $48.41,
<ul>
<li>which represents a gross spread of 3.75%, which I consider attractive for alow-risk deal that is almost certainly to close by the end of December 2021, i.e. almost a year.</li>
<li>Recommendation is LONG PNM.</li>
<li>Average 3-months daily volume is 2,012,899</li>
</ul>

Iberdrola, via its subsidiary Avangri,d announced the acquisition of PNM on 21 October.announced the merger of both companies.

Under the proposed transaction, shareholders of PNM will receive $50.30 per share, in cash, representing a premium of 10% over PNM's share price as of Oct. 20, 2020.
for a transaction value, as reported, of $8,300 mn and $4,342 mn in total consideration to shareholders.
11.7x EV/Fwd EBITA and 24.,4x P/Fwd EPS.

The hurdles are being cleared (read on for details) and the transaction is expected to close by the end of December.
PNM began trading on 12 January at $48.41,

which represents a gross spread of 3.75%, which I consider attractive for alow-risk deal that is almost certainly to close by the end of December 2021, i.e. almost a year.
Recommendation is LONG PNM.
Average 3-months daily volume is 2,012,899


PNM Resources - Iberdrola, Work-In-Progress, Attractive Spread

<a href="https://www.smartkarma.com/entities/iberdrola-sa" target="_blank" data-smartkarma-citation="entities:21276:1" rel="noopener">Iberdrola SA (IBE SM)</a> accelerates its expansion in the United States. <a href="https://www.smartkarma.com/entities/avangrid-inc" target="_blank" data-smartkarma-citation="entities:26503:1" rel="noopener">Avangrid Inc (AGR US)</a> , an 81.5% Iberdrola controlled company has announced an agreement to acquire <a href="https://www.smartkarma.com/entities/pnm-resources-inc" target="_blank" data-smartkarma-citation="entities:16546:1" rel="noopener">Pnm Resources (PNM US)</a>, a New Mexico and Texas power company listed on the NYSE.
Iberdrola offers $50.3 in cash, for a total equity value of $4,317.5 mn (€3,663.5 mn), according to a relevant fact sent to the CNMV. Iberdrola has undertaken to provide Avangrid with "the funds that are necessary" for the price of the transaction.
The offer price represents:
<ul>
<li>10% premium over PNM's price per share at the close of Tuesday 20 October and 19.3% premium to PNM Resources 30-day VWAP</li>
<li>22.8x Capital IQ's consensus P/E estimate</li>
<li>2.2x P/BV</li>
<li>12.6x EV/Forward EBITDA vs. 10.9x for comparable companies.</li>
</ul>
The proposed transaction is all cash and I do not see obvious regulatory issues, therefore I expect the merger arbitrage spread to narrow quickly.

Iberdrola SA (IBE SM) accelerates its expansion in the United States. Avangrid Inc (AGR US) , an 81.5% Iberdrola controlled company has announced an agreement to acquire Pnm Resources (PNM US), a New Mexico and Texas power company listed on the NYSE.
Iberdrola offers $50.3 in cash, for a total equity value of $4,317.5 mn (€3,663.5 mn), according to a relevant fact sent to the CNMV. Iberdrola has undertaken to provide Avangrid with "the funds that are necessary" for the price of the transaction.
The offer price represents:

10% premium over PNM's price per share at the close of Tuesday 20 October and 19.3% premium to PNM Resources 30-day VWAP
22.8x Capital IQ's consensus P/E estimate
2.2x P/BV
12.6x EV/Forward EBITDA vs. 10.9x for comparable companies.

The proposed transaction is all cash and I do not see obvious regulatory issues, therefore I expect the merger arbitrage spread to narrow quickly.

PNM Resources - Iberdrola: Friendly Acquisition

United States

PNM Resources Inc. is a holding company. The Company, through its subsidiaries, generates, transmits, and distributes electricity.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

PNM Resources (PNM US)

Hearing Examiner Recommends Against Iberdrola (Avangrid)/PNM Resources Deal

TP is $50.3, as the deal should complete, in my view, although it may take longer than the initial deadline. Gross spread is 5.3%. Long PNM US,...

Jesus Rodriguez Aguilar

(Mostly) Asia M&A: May 2021 Roundup

The average premium for the new deals announced (or first discussed) in May was ~41%, with a year-to-date average of ~31% (78 deals).

David Blennerhassett

Iberdrola (Avangrid)/PNM Resources: Regulator's Reprimand and Capital Increase

PRC's concerns delay the approvals needed. The deal seems on track for completion during H2 2021. Gross spread 2.3%, c. 4.6% annualized (assuming...

Jesus Rodriguez Aguilar

PNM Resources - Iberdrola, Work-In-Progress, Attractive Spread

PNM began trading on 12 January at $48.41, a gross spread of 3.75%, which I consider attractive for a low-risk deal that is almost certainly to...

Jesus Rodriguez Aguilar

PNM Resources - Iberdrola: Friendly Acquisition

Iberdrola offers $50.3 in cash. Iberdrola has undertaken to provide Avangrid with the necessary funds. I do not see any obvious regulatory issues,...

Jesus Rodriguez Aguilar

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)