Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

As discussed in <a href="https://skr.ma/yN7Jw" target="_blank" rel="noopener">Jardine Matheson: Strategic Buyout Done</a>, after <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> shareholders <a href="https://links.sgx.com/FileOpen/JSH.ashx?App=Announcement&amp;FileID=659247" target="_blank" rel="noopener">voted through</a>, as expected, the Offer from <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>, after the vote, Matheson said a number of shareholders in Strategic voted against the acquisition, but also that:
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<blockquote>
a large number of shares voted against the resolution were held by investors who were not shareholders at the time of the announcement of the Acquisition on 8 March 2021. Some investors have indicated an intention to apply to the Court in Bermuda to appraise the fair value of their shares, in accordance with the process described in the shareholder circular issued by Jardine Strategic in connection with the Acquisition.
</blockquote>
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I initially wrote "Matheson appears to be suggesting that those who held shares before the announcement, and those who held after, potentially have different cases to argue."
But after consulting with my colleague <a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25" rel="noopener">Travis Lundy</a>, I omitted this line, as it was effectively moot.
Matheson would have singled out these short-term investors - hedge funds - irrespectively. Yet, such a statement is irrelevant. All shareholders, as at the record date of the Special General Meeting, have the same rights to be treated fairly and rights to dissension.
I note some recent commentary in the media addressing Matheson's oblique reference to hedge funds, so I'll provide some commentary sourced from legal references.
Of greater importance is what these dissenters will cost Matheson at the end of the day.
More below the fold.
<hr>
I've extensively dealt with appraisal rights in the Cayman Islands in past insights, which can also provide guidance as to how dissension may be interpreted in Bermuda (where Strategic is incorporated):
<a href="https://skr.ma/TDg1T" target="_blank" rel="noopener">Homecoming For Chinese Companies: Appraisal Rights &amp; Fair Value</a>
<a href="https://skr.ma/Hy3JW" target="_blank" rel="noopener">Trina Solar: Appraisal Rights Judgment Another Setback for Dissenters</a>
<a href="https://skr.ma/H7E1t" target="_blank" rel="noopener">Changyou (CYOU US): Short-Form Merger Dissent Now Permitted</a>

As discussed in Jardine Matheson: Strategic Buyout Done, after Jardine Strategic Holdings (JS SP) shareholders voted through, as expected, the Offer from Jardine Matheson Holdings (JM SP), after the vote, Matheson said a number of shareholders in Strategic voted against the acquisition, but also that:


a large number of shares voted against the resolution were held by investors who were not shareholders at the time of the announcement of the Acquisition on 8 March 2021. Some investors have indicated an intention to apply to the Court in Bermuda to appraise the fair value of their shares, in accordance with the process described in the shareholder circular issued by Jardine Strategic in connection with the Acquisition.


I initially wrote "Matheson appears to be suggesting that those who held shares before the announcement, and those who held after, potentially have different cases to argue."
But after consulting with my colleague Travis Lundy, I omitted this line, as it was effectively moot.
Matheson would have singled out these short-term investors - hedge funds - irrespectively. Yet, such a statement is irrelevant. All shareholders, as at the record date of the Special General Meeting, have the same rights to be treated fairly and rights to dissension.
I note some recent commentary in the media addressing Matheson's oblique reference to hedge funds, so I'll provide some commentary sourced from legal references.
Of greater importance is what these dissenters will cost Matheson at the end of the day.
More below the fold.

I've extensively dealt with appraisal rights in the Cayman Islands in past insights, which can also provide guidance as to how dissension may be interpreted in Bermuda (where Strategic is incorporated):
Homecoming For Chinese Companies: Appraisal Rights &amp; Fair Value
Trina Solar: Appraisal Rights Judgment Another Setback for Dissenters
Changyou (CYOU US): Short-Form Merger Dissent Now Permitted

Thematic (Sector/Industry)

<ul>
<li>In officially decided cases concerning dissentient shareholders in privatised US-listed China plays, the uplift to the merger price versus time value of money and legal costs, is less than ideal. </li>
<li>The outcome for each case will turn on the underlying facts. But it would appear <a href="https://www.smartkarma.com/entities/ikang-healthcare-group-adr" target="_blank" data-smartkarma-citation="entities:741:1" rel="noopener">iKang Healthcare Group (ADR) (KANG US)</a> is following a similar trend.  </li>
<li>Reportedly the uplift to the iKang merger price is just 10%. Dissenters can still lodge an appeal.</li>
</ul>


In officially decided cases concerning dissentient shareholders in privatised US-listed China plays, the uplift to the merger price versus time value of money and legal costs, is less than ideal. 
The outcome for each case will turn on the underlying facts. But it would appear iKang Healthcare Group (ADR) (KANG US) is following a similar trend.  
Reportedly the uplift to the iKang merger price is just 10%. Dissenters can still lodge an appeal.


IKang Healthcare (KANG US): Another Setback For Dissenters

Back on the 6 July last year, <a href="https://www.smartkarma.com/entities/sina-corp-china" target="_blank" data-smartkarma-citation="entities:22691:1" rel="noopener">Sina Corp (Class A) (SINA US)</a> <a href="http://ir.sina.com/index.php/static-files/69e95aee-2729-457f-be56-73628090b8ea" target="_blank" rel="noopener">announced</a> the receipt of a preliminary non-binding “going private” proposal from New Wave MMXV - a company controlled by its chairman/CEO Charles Chao - at US$41/share. This was followed by an <a href="http://ir.sina.com/static-files/de1ddd0f-354f-42de-9b33-b1bc414ab1b4" target="_blank" rel="noopener">Agreement and Plan of Merger</a> pursuant to which New Wave will acquire all of the outstanding ordinary shares not owned at US$43.30/share.
Despite an undemanding Offer price, shareholders approved (93.6% of the total votes) the merger on the <a href="http://ir.sina.com/static-files/ea4a5614-30e8-472c-895c-31e120de3261" target="_blank" rel="noopener">23 December</a>.
Completion of the merger was contingent on the satisfaction or waiver of the closing conditions set forth in the Merger Agreement, including no more than 10% of the ordinary shares dissenting.
Prior to the  EGM, <a href="http://ir.sina.com/static-files/722deb54-0426-4b43-a58a-1c8be8b59b61" target="_blank" rel="noopener">21.5mn shares or 35.9%</a> of the total issued and outstanding shares of Sina issued notices of objections to the company. 
On or prior to January 12, 2021, Sina intended to issue written notices of authorization to all the objecting shareholders. Within 20 days immediately after the date on which these notices were given, any objecting shareholder was required to give written notice of its decision to dissent.
There has been no update on the merger from Sina since the 28 December. Behind the scenes, Charles Chao can choose to walk, negotiate a superior price with dissentient shareholders, or waive the condition.  Should he waive the condition, dissentient shareholders have the right to be paid fair value for their shares, as determined by the Cayman Island's Grand Court.
More below the fold.<a href="https://www.collascrill.com/news-updates/articles/grand-court-confirms-that-dissent-rights-are-available-to-minority-shareholders-in-short-form-mergers/" target="_blank" rel="noopener"></a>

Back on the 6 July last year, Sina Corp (Class A) (SINA US) announced the receipt of a preliminary non-binding “going private” proposal from New Wave MMXV - a company controlled by its chairman/CEO Charles Chao - at US$41/share. This was followed by an Agreement and Plan of Merger pursuant to which New Wave will acquire all of the outstanding ordinary shares not owned at US$43.30/share.
Despite an undemanding Offer price, shareholders approved (93.6% of the total votes) the merger on the 23 December.
Completion of the merger was contingent on the satisfaction or waiver of the closing conditions set forth in the Merger Agreement, including no more than 10% of the ordinary shares dissenting.
Prior to the  EGM, 21.5mn shares or 35.9% of the total issued and outstanding shares of Sina issued notices of objections to the company. 
On or prior to January 12, 2021, Sina intended to issue written notices of authorization to all the objecting shareholders. Within 20 days immediately after the date on which these notices were given, any objecting shareholder was required to give written notice of its decision to dissent.
There has been no update on the merger from Sina since the 28 December. Behind the scenes, Charles Chao can choose to walk, negotiate a superior price with dissentient shareholders, or waive the condition.  Should he waive the condition, dissentient shareholders have the right to be paid fair value for their shares, as determined by the Cayman Island's Grand Court.
More below the fold.

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14 months ago, almost to the day, <a href="https://www.smartkarma.com/entities/china-biologic-products-hold" target="_blank" data-smartkarma-citation="entities:22633:1" rel="noopener">China Biologic Products (CBPO US)</a> <a href="http://chinabiologic.investorroom.com/2019-09-18-China-Biologic-Announces-Receipt-of-Preliminary-Non-Binding-Going-Private-Proposal" target="_blank" rel="noopener">announced</a> the receipt of a preliminary non-binding proposal from Beachhead Holdings, CITIC, PW Medtech, Parfield International, Hillhouse, and V-Sciences Investments for US$120/share, in cash.
Yesterday, CBPO entered into a <a href="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=115451875&amp;type=PDF&amp;symbol=CBPO&amp;companyName=China+Biologic+Products+Holdings+Inc.&amp;formType=6-K&amp;dateFiled=2020-11-19&amp;CK=1369868" target="_blank" rel="noopener">definitive merger agreement</a>, also at US$120/share.
The merger is conditional on an affirmative vote from shareholders representing at least two-thirds of the shares out, and that the aggregate quantity of dissenting shares shall be less than 8% of shares out.
As of the date of merger agreement, members of the Buyer Consortium (including <a href="https://www.smartkarma.com/entities/pw-medtech-group-ltd" target="_blank" data-smartkarma-citation="entities:9891:1" rel="noopener">Pw Medtech (1358 HK)</a>) and the Rollover Management Members, beneficially own shares representing ~68.84% of shares out.
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Done deal. Possible completion late 1Q21, early 2Q1.
More below the fold.
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14 months ago, almost to the day, China Biologic Products (CBPO US) announced the receipt of a preliminary non-binding proposal from Beachhead Holdings, CITIC, PW Medtech, Parfield International, Hillhouse, and V-Sciences Investments for US$120/share, in cash.
Yesterday, CBPO entered into a definitive merger agreement, also at US$120/share.
The merger is conditional on an affirmative vote from shareholders representing at least two-thirds of the shares out, and that the aggregate quantity of dissenting shares shall be less than 8% of shares out.
As of the date of merger agreement, members of the Buyer Consortium (including Pw Medtech (1358 HK)) and the Rollover Management Members, beneficially own shares representing ~68.84% of shares out.

Done deal. Possible completion late 1Q21, early 2Q1.
More below the fold.





China Biologics (CBPO US): Firm Offer Backed By Prerequisite Votes

On the 23 September, the Grand Court of Cayman handed down a <a href="https://www.judicial.ky/search_judgments/get.php?id=S0VUYmZHcGFoVVpWalVCNHJnZmQrQT09&amp;type=pdf&amp;ts=1602053133" target="_blank" rel="noopener">judgment</a> on the appraisal rights assessment for <a href="https://www.smartkarma.com/entities/trina-solar-ltd" target="_blank" data-smartkarma-citation="entities:686:1" rel="noopener">Trina Solar (TSL US)</a>. This is the fifth judgment pertaining to Section 238 of the <a href="https://www.cima.ky/upimages/commonfiles/CompaniesLaw2020Revision_1579811065.pdf" target="_blank" rel="noopener">Companies Law (2020 Revision)</a> to determine a fair value for dissenting shareholders. The other four were discussed in my early insight <a href="https://skr.ma/TDg1T" target="_blank" rel="noopener">Homecoming For Chinese Companies: Appraisal Rights &amp; Fair Value</a>.
<h3>To Recap</h3>
On the <a href="https://www.trinasolar.com/us/news/trina-solar-enters-definitive-agreement-going-private-transaction" target="_blank" rel="noopener">31 July 2016</a>, TSL entered a definitive agreement for a going private transaction with Fortune Solar, a buyer group which included Jifan Gao, TSL's chairman and CEO.  The merger price was US$11.60/ADS or US$0.232/share.
At an EGM on the 16 December 2016, TSL shareholders <a href="https://www.trinasolar.com/us/news/trina-solar-announces-shareholders-vote-approve-going-private-transaction" target="_blank" rel="noopener">approved</a> the merger, and it was completed on 13 March 2017.
Maso Capital and Blackwell dissented from the merger (Dissenting Shareholders) and a petition was heard between the 6 and 21 May 2019. Written closing submissions were filed on the 3 June 2019. 
<h3>Shanda Delays</h3>
On the 12 March 2019, the Privy Council heard an appeal from the judgment of the Cayman Court by Maso Capital and <a href="https://www.smartkarma.com/entities/shanda-games-ltd-spons-adr" target="_blank" data-smartkarma-citation="entities:8686:1" rel="noopener">Shanda Games Ltd Spons Adr (GAME US)</a>. As that decision was pertinent to the TSL case, both TSL and Dissenting Shareholders agreed to delayed proceedings until the outcome of the appeal. The Privy Council advice was handed down on the <a href="https://www.jcpc.uk/cases/docs/jcpc-2018-0062-judgment.pdf" target="_blank" rel="noopener">27 January</a> this year. 
<h3>Valuations Proposed</h3>
TSL's proposed valuation method was based on the price of shares bought and sold as at the EGM date; or the negotiated merger price. TSL argued that subsequent to the Shanda decision that the Court must determine fair value by reference to the price at which the relevant shares would be exchanged between a willing buyer and willing seller in an arms-length transaction based on publicly available information. 
Dissenting Shareholders argued for a DCF methodology.
<h3>The Decision And The Blended Assessment</h3>
The judge rejected the Shanda decision as being overriding and conclusive, not least as it would make s.238 void. But that the reference to what is fair requires that all relevant facts and matters be considered and that the:
<blockquote>
... sum selected properly reflects the true monetary worth to the shareholder of what he has lost, undistorted by the limitation and flaws of particular valuation methodologies and fairly balancing, where appropriate, the competing, reasonably reliable alternative approaches to valuation relied on the parties.
</blockquote>
The Court concluded the fair value should be determined with reference to the merger price (45%), the adjusted market price (30%); and 25% to the DCF valuation.
Given the adjusted market price is below the merger price; and the input for the DCF calculations preferred by the judge was primarily provided by TSL's own expert, the final fair price (which was not detailed in the judgment) is expected to result in a marginal uplift (at best) over and above the merger price.
As always, more below the fold.

On the 23 September, the Grand Court of Cayman handed down a judgment on the appraisal rights assessment for Trina Solar (TSL US). This is the fifth judgment pertaining to Section 238 of the Companies Law (2020 Revision) to determine a fair value for dissenting shareholders. The other four were discussed in my early insight Homecoming For Chinese Companies: Appraisal Rights &amp; Fair Value.
To Recap
On the 31 July 2016, TSL entered a definitive agreement for a going private transaction with Fortune Solar, a buyer group which included Jifan Gao, TSL's chairman and CEO.  The merger price was US$11.60/ADS or US$0.232/share.
At an EGM on the 16 December 2016, TSL shareholders approved the merger, and it was completed on 13 March 2017.
Maso Capital and Blackwell dissented from the merger (Dissenting Shareholders) and a petition was heard between the 6 and 21 May 2019. Written closing submissions were filed on the 3 June 2019. 
Shanda Delays
On the 12 March 2019, the Privy Council heard an appeal from the judgment of the Cayman Court by Maso Capital and Shanda Games Ltd Spons Adr (GAME US). As that decision was pertinent to the TSL case, both TSL and Dissenting Shareholders agreed to delayed proceedings until the outcome of the appeal. The Privy Council advice was handed down on the 27 January this year. 
Valuations Proposed
TSL's proposed valuation method was based on the price of shares bought and sold as at the EGM date; or the negotiated merger price. TSL argued that subsequent to the Shanda decision that the Court must determine fair value by reference to the price at which the relevant shares would be exchanged between a willing buyer and willing seller in an arms-length transaction based on publicly available information. 
Dissenting Shareholders argued for a DCF methodology.
The Decision And The Blended Assessment
The judge rejected the Shanda decision as being overriding and conclusive, not least as it would make s.238 void. But that the reference to what is fair requires that all relevant facts and matters be considered and that the:

... sum selected properly reflects the true monetary worth to the shareholder of what he has lost, undistorted by the limitation and flaws of particular valuation methodologies and fairly balancing, where appropriate, the competing, reasonably reliable alternative approaches to valuation relied on the parties.

The Court concluded the fair value should be determined with reference to the merger price (45%), the adjusted market price (30%); and 25% to the DCF valuation.
Given the adjusted market price is below the merger price; and the input for the DCF calculations preferred by the judge was primarily provided by TSL's own expert, the final fair price (which was not detailed in the judgment) is expected to result in a marginal uplift (at best) over and above the merger price.
As always, more below the fold.

Trina Solar: Appraisal Rights Judgment Another Setback for Dissenters

China

Shanda Games Limited develops, operates, and publishes online games in the Peoples Republic of China and internationally. It offers massively multi-player online role-playing games in various genres, including martial arts adventure, fantasy...

Shanda Games Ltd Spons Adr (GAME US)

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IKang Healthcare (KANG US): Another Setback For Dissenters

In officially decided cases concerning dissentient shareholders in privatised US-listed China plays, the uplift to the takeover price versus time...

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What's Going On With Sina Corp?

Currently trading to terms. This is an avoid. The Offer is being done too cheaply, But unless you have already dissented, you are effectively...

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China Biologics (CBPO US): Firm Offer Backed By Prerequisite Votes

Trading at a gross/annualised spread at 4.4%/11.7%. This looks like a pretty clean deal for around four-five months of work.

David Blennerhassett

Trina Solar: Appraisal Rights Judgment Another Setback for Dissenters

This insight is a compendium to my earlier report Homecoming For Chinese Companies: Appraisal Rights & Fair Value. Read more:...

David Blennerhassett