Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Sembcorp Marine, AusNet, Shinsei Bank, MMC Corp

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<p>This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific 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.</p>
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<p>I number 38, mostly firm, deals around the region.</p>
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<p>More below the fold.</p>
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This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific 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.


I number 38, mostly firm, deals around the region.


More below the fold.


Asia-Pac Weekly Risk Arb Summary: AusNet Services, Sembcorp Marine, Roxy Pacific

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Sandfire Resources Limited / Event-Driven

<p>On 23 September pre-market open, <a href="https://www.smartkarma.com/entities/sandfire-resources-limited" target="_blank" data-smartkarma-citation="entities:1259:1" rel="noopener">Sandfire Resources Limited (SFR AU)</a> requested for a trading halt. A short time later, the company announced the acquisition of the MATSA mining complex from Mubadala and Trafigura for US$1.865bn (A$2.572bn).</p><p>The acquisition is expected to be completed in the March 2022 quarter and is subject to Spanish Foreign Direct Investment Approval and anti-trust merger control approval.</p><p>The acquisition will be funded by an A$120m strategic placement to AustralianSuper, a A$165m institutional placement, a A$963m fully underwritten 1 for 1 accelerated non-renounceable entitlement offer (ANREO), debt and cash on hand.</p><p>Just over 231m shares will be issued at A$5.40/share, a 13.2% discount to the last close of A$6.22/share, and a 6.2% discount to TERP.</p><p>The increase in market cap as a result of the placement and entitlement offer will result in <a href="https://www.smartkarma.com/entities/sandfire-resources-limited" target="_blank" data-smartkarma-citation="entities:1259:1" rel="noopener">Sandfire Resources Limited (SFR AU)</a> becoming a high probability inclusion to the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> at the December rebalance.</p><p>With a number of M&amp;A deals targeting <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> constituents, there will be more changes to the index over the next couple of regular rebalances (and in the interim as well).</p>

On 23 September pre-market open, Sandfire Resources Limited (SFR AU) requested for a trading halt. A short time later, the company announced the acquisition of the MATSA mining complex from Mubadala and Trafigura for US$1.865bn (A$2.572bn).The acquisition is expected to be completed in the March 2022 quarter and is subject to Spanish Foreign Direct Investment Approval and anti-trust merger control approval.The acquisition will be funded by an A$120m strategic placement to AustralianSuper, a A$165m institutional placement, a A$963m fully underwritten 1 for 1 accelerated non-renounceable entitlement offer (ANREO), debt and cash on hand.Just over 231m shares will be issued at A$5.40/share, a 13.2% discount to the last close of A$6.22/share, and a 6.2% discount to TERP.The increase in market cap as a result of the placement and entitlement offer will result in Sandfire Resources Limited (SFR AU) becoming a high probability inclusion to the S&amp;P/ASX 200 (AS51 INDEX) at the December rebalance.With a number of M&amp;A deals targeting S&amp;P/ASX 200 (AS51 INDEX) constituents, there will be more changes to the index over the next couple of regular rebalances (and in the interim as well).

Sandfire Resources (SFR AU): Acquisition, ANREO and ASX200 Inclusion

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<p>You get the impression <a href="https://www.smartkarma.com/entities/apa-group" target="_blank" data-smartkarma-citation="entities:18658:1" rel="noopener">APA Group (APA AU)</a> is a tad late to the party. Not that they still can't join in the fun - but only after the hors d'oeuvres and apéritifs have been consumed.</p>
<p>On the 20 September, Victorian electricity operator <a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">AusNet Services (AST AU)</a> <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02423286-3A576179?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> it would open its books to Brookfield after receiving a revised non-binding Offer of A$2.50/share, up from $2.35/share on the 30 August. Concurrently, APA had approached AusNet with a non-binding proposal of A$2.32 on the 1 September, and that APA had made AusNet aware last Thursday (16 September) it intended to make a revised proposal.</p>
<p>AusNet opted to grant Brookfield around 8 weeks of exclusive due diligence in return for a "materially increased indicative" offer.</p>
<p>APA subsequently <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02423895-2A1324638?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> a "superior proposal" on the 21 September, involving a non-binding indicative Offer by way of a Scheme for A$2.60/share in cash and scrip.</p>
<p>AusNet's board <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02424119_PS-3A576346?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">concluded</a> APA's Proposal was:</p>
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<p>inferior in respect of price, form of consideration, structure and certainty, and that it was in the best interests of AusNet shareholders to engage with Brookfield on its proposal.</p>
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<p>APA proceeded to lodge an <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02425258_PS-3A576544?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">application</a> to the Takeovers Panel yesterday, such that:</p>
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<p>The exclusivity arrangements (with Brookfield) prevent AusNet “from responding to a superior proposal provided by APA to acquire all of the issued shares of [AusNet] at an indicative value of $2.60 per [AusNet] share”; and that</p>
<p>The circumstances (including the entry into the confidentiality deed with Brookfield) “hinder, or are likely to hinder, the acquisition of control of [AusNet] taking place in an efficient, competitive and informed market, contrary to section 602(a) and deny, or are likely to deny, [AusNet] shareholders an opportunity to participate in the benefits of a proposal contrary to section 602(c)”.</p>
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<p>APA is seeking final orders including that the exclusivity arrangements “be terminated" to permit AusNet to respond to APA’s proposal (and any other competing proposals).</p>
<p>Today, APA issued a presentation deck further expounding its superior proposal. <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02425518-2A1325440?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">Page 15</a> summarises the "superiorness".</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/231/525/original/image_10447746721632445607373.png?1632445608" class="editor-image img-responsive" data-smartkarma-image-id="231525"></figure>
<p>APA's headline Offer price is clearly superior, although this is subject to fluctuations in APA's share price. The Offer consideration  - using the A$1.82/0.0878 cash/scrip breakdown as per the announcements - is currently worth $2.59. It remains unknown what the caps will be on either the cash or scrip portion of the consideration. </p>
<p>Not being subject to FIRB is a positive, but with AusNet already majority controlled by foreign shareholders, this is not APA's strongest argument. </p>
<p>APA is locked out of negotiations, for now. I'd be surprised if the TO backs APA's submission of "unacceptable circumstances". </p>
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<div>More below the fold.</div>


You get the impression APA Group (APA AU) is a tad late to the party. Not that they still can't join in the fun - but only after the hors d'oeuvres and apéritifs have been consumed.
On the 20 September, Victorian electricity operator AusNet Services (AST AU) announced it would open its books to Brookfield after receiving a revised non-binding Offer of A$2.50/share, up from $2.35/share on the 30 August. Concurrently, APA had approached AusNet with a non-binding proposal of A$2.32 on the 1 September, and that APA had made AusNet aware last Thursday (16 September) it intended to make a revised proposal.
AusNet opted to grant Brookfield around 8 weeks of exclusive due diligence in return for a "materially increased indicative" offer.
APA subsequently announced a "superior proposal" on the 21 September, involving a non-binding indicative Offer by way of a Scheme for A$2.60/share in cash and scrip.
AusNet's board concluded APA's Proposal was:

inferior in respect of price, form of consideration, structure and certainty, and that it was in the best interests of AusNet shareholders to engage with Brookfield on its proposal.

APA proceeded to lodge an application to the Takeovers Panel yesterday, such that:

The exclusivity arrangements (with Brookfield) prevent AusNet “from responding to a superior proposal provided by APA to acquire all of the issued shares of [AusNet] at an indicative value of $2.60 per [AusNet] share”; and that
The circumstances (including the entry into the confidentiality deed with Brookfield) “hinder, or are likely to hinder, the acquisition of control of [AusNet] taking place in an efficient, competitive and informed market, contrary to section 602(a) and deny, or are likely to deny, [AusNet] shareholders an opportunity to participate in the benefits of a proposal contrary to section 602(c)”.

APA is seeking final orders including that the exclusivity arrangements “be terminated" to permit AusNet to respond to APA’s proposal (and any other competing proposals).
Today, APA issued a presentation deck further expounding its superior proposal. Page 15 summarises the "superiorness".

APA's headline Offer price is clearly superior, although this is subject to fluctuations in APA's share price. The Offer consideration  - using the A$1.82/0.0878 cash/scrip breakdown as per the announcements - is currently worth $2.59. It remains unknown what the caps will be on either the cash or scrip portion of the consideration. 
Not being subject to FIRB is a positive, but with AusNet already majority controlled by foreign shareholders, this is not APA's strongest argument. 
APA is locked out of negotiations, for now. I'd be surprised if the TO backs APA's submission of "unacceptable circumstances". 

More below the fold.

AusNet (AST AU): APA Elevates Tussle With Brookfield And Taps Takeover Panel

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

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.

<p><a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">Ausnet Services (AST AU)</a> is a diversified Australian energy infrastructure business with over $11 billion of electricity and gas network and connection assets. AusNet has received a non-binding indicative offer from <a href="https://www.smartkarma.com/entities/apa-group" target="_blank" data-smartkarma-citation="entities:18658:1" rel="noopener">APA Group (APA AU)</a>. APA is offering cash and scrip comprising A$1.820 cash and 0.0878 stapled securities in Australian Pipeline Trust and APT Investment Trust per AusNet share. APA’s offer has an implied value of A$2.60 per share (based on APA’s share price on 20 September) and A$2.56 per share (APA’s last close price). </p><p>APA expressed frustration that AusNet had offered Brookfield due diligence access as it lobbed its first A$2.32 cash and scrip offer on 1 September, a day after Brookfield’s first offer of A$2.35 per share and made AusNet aware on 16 September it would return with a revised higher offer. </p><p>As a reminder, AusNet revealed yesterday a conditional, non-binding indicative offer from Brookfield Asset Management for A$2.50 cash per share. The Board announced that it will provide Brookfield exclusive due diligence access. If Brookfield puts forward a binding offer, the Board will also unanimously recommend the offer in the absence of a superior proposal.  </p><p>APA argues that its offer is superior as it is not conditional on FIRB approval, result in synergies (that AusNet shareholders can benefit through the scrip component) and would be only subject to four weeks of due diligence (vs eight weeks for Brookfield). AusNet responded that it offered Brookfield exclusive due diligence as APA’s original offer was inferior (consideration, structure and certainty) and Brookfield’s improved all-cash offer was conditional on exclusive due diligence. AusNet can only engage with APA following the completion of Brookfield’s eight weeks of due diligence. </p><div class="content-highlight"><p>AusNet is this year’s first large Australian M&amp;A deal to be contested. Both offers are attractive in terms of historical multiples and share prices. Clearly, the implied value of APA’s offer is less certain and will fluctuate based on APA’s share price. We think that there is another round to this contested takeover battle. At the last close price of A$2.59, AusNet’s shares are trading at a 3.6% premium to Brookfield’s cash offer of A$2.50 and a 1.1% premium to APA’s offer of A$2.56 (based on APA’s last close price).</p></div>

Ausnet Services (AST AU) is a diversified Australian energy infrastructure business with over $11 billion of electricity and gas network and connection assets. AusNet has received a non-binding indicative offer from APA Group (APA AU). APA is offering cash and scrip comprising A$1.820 cash and 0.0878 stapled securities in Australian Pipeline Trust and APT Investment Trust per AusNet share. APA’s offer has an implied value of A$2.60 per share (based on APA’s share price on 20 September) and A$2.56 per share (APA’s last close price). APA expressed frustration that AusNet had offered Brookfield due diligence access as it lobbed its first A$2.32 cash and scrip offer on 1 September, a day after Brookfield’s first offer of A$2.35 per share and made AusNet aware on 16 September it would return with a revised higher offer. As a reminder, AusNet revealed yesterday a conditional, non-binding indicative offer from Brookfield Asset Management for A$2.50 cash per share. The Board announced that it will provide Brookfield exclusive due diligence access. If Brookfield puts forward a binding offer, the Board will also unanimously recommend the offer in the absence of a superior proposal.  APA argues that its offer is superior as it is not conditional on FIRB approval, result in synergies (that AusNet shareholders can benefit through the scrip component) and would be only subject to four weeks of due diligence (vs eight weeks for Brookfield). AusNet responded that it offered Brookfield exclusive due diligence as APA’s original offer was inferior (consideration, structure and certainty) and Brookfield’s improved all-cash offer was conditional on exclusive due diligence. AusNet can only engage with APA following the completion of Brookfield’s eight weeks of due diligence. AusNet is this year’s first large Australian M&amp;A deal to be contested. Both offers are attractive in terms of historical multiples and share prices. Clearly, the implied value of APA’s offer is less certain and will fluctuate based on APA’s share price. We think that there is another round to this contested takeover battle. At the last close price of A$2.59, AusNet’s shares are trading at a 3.6% premium to Brookfield’s cash offer of A$2.50 and a 1.1% premium to APA’s offer of A$2.56 (based on APA’s last close price).

AusNet’s in a Contested Takeover Battle Between Brookfield and APA

Australia

Spark Infrastructure Group invests in utility infrastructure assets in Australia.

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Spark Infrastructure (SKI AU)

Last Week in Event SPACE: Sembcorp Marine, AusNet, Shinsei Bank, MMC Corp

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

Asia-Pac Weekly Risk Arb Summary: AusNet Services, Sembcorp Marine, Roxy Pacific

This insight provides a summary of gross/annualised spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and...

David Blennerhassett

Sandfire Resources (SFR AU): Acquisition, ANREO and ASX200 Inclusion

Sandfire Resources is buying the MATSA mine in Spain and conducting a placement and entitlement offer to raise funds. This will lead to a big jump...

Brian Freitas

AusNet (AST AU): APA Elevates Tussle With Brookfield And Taps Takeover Panel

Entering here at $2.56 (as I type) - halfway between the two Offers - appears a reasonable entry point. If using the EV/RCAB for Transurban last...

David Blennerhassett

AusNet’s in a Contested Takeover Battle Between Brookfield and APA

AusNet is this year’s first large Australian M&A deal to be contested. We think that there is another round to this contested takeover battle...

Arun George

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