Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p>On the 30 October 2020, <a href="https://www.smartkarma.com/entities/tonly-electronics-holdings-ltd" target="_blank" data-smartkarma-citation="entities:1320:1" rel="noopener">Tonly Electronics Holdings (1249 HK)</a> (TEH) <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1030/2020103002084.pdf" target="_blank" rel="noopener">announced</a> a proposed privatisation from T.C.L. Industries Holdings (H.K.) Limited. (TCLH), a wholly-owned subsidiary of TCL Industries (TCLI), by way of a Scheme.</p>
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<p>The Scheme consideration is HK$12.00/share, a 19% premium to last close and 28% above the 30-day average close. The price will NOT be increased. No dividends have been declared, nor are any expected to be declared.</p>
<p>The <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0128/2021012801516.pdf" target="_blank" rel="noopener">Scheme Document</a> is now out. The Court Meeting/EGM is scheduled for the 23 February, and assuming the Scheme is approved by shareholders, payment under the Offer will be made on or before the 15 March.</p>
<p>The IFA (Somerley) considers the Offer to be fair and reasonable.</p>
<p>Although the headline premium to last close appears okay, TEH spiked 55% on the 13 August, on decent volume, to close coincidentally at $12/share.</p>
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<p>This looks done.</p>
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<p>As always, more below the fold.</p>
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On the 30 October 2020, Tonly Electronics Holdings (1249 HK) (TEH) announced a proposed privatisation from T.C.L. Industries Holdings (H.K.) Limited. (TCLH), a wholly-owned subsidiary of TCL Industries (TCLI), by way of a Scheme.


The Scheme consideration is HK$12.00/share, a 19% premium to last close and 28% above the 30-day average close. The price will NOT be increased. No dividends have been declared, nor are any expected to be declared.
The Scheme Document is now out. The Court Meeting/EGM is scheduled for the 23 February, and assuming the Scheme is approved by shareholders, payment under the Offer will be made on or before the 15 March.
The IFA (Somerley) considers the Offer to be fair and reasonable.
Although the headline premium to last close appears okay, TEH spiked 55% on the 13 August, on decent volume, to close coincidentally at $12/share.

This looks done.


As always, more below the fold.



Tonly Electronics (1249 HK): Scheme Doc Out. IFA Says Fair

<p>Back on the 2 October 2019, via a <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/1002/ltn201910021175.pdf" target="_blank" rel="noopener">restructuring agreement</a>, T.C.L. Industries Holdings (H.K.) Limited. (TCLH), a wholly-owned subsidiary of TCL Industries (TCLI) acquired all of the issued capital in the "Divested Segment", a segment spun-off from  <a href="https://www.smartkarma.com/entities/tcl-corp-a" target="_blank" data-smartkarma-citation="entities:13497:1" rel="noopener">TCL Corp (A) (000100 CH)</a>. As this Segment held 48.68% of issued shares in <a href="https://www.smartkarma.com/entities/tonly-electronics-holdings-ltd" target="_blank" data-smartkarma-citation="entities:1320:1" rel="noopener">Tonly Electronics Holdings (1249 HK)</a> (TEH), TCLH was obligated to make a conditional MGO for all other shares not held. The Offer Price was HK$5.89/share, a 7.1% premium to last close. </p>
<p>The Composite Document was <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/1122/2019112200005.pdf" target="_blank" rel="noopener">despatched</a> on the 22 November 2019. The IFA (Somerley)  concluded the Offer Price was fair and reasonable (which just goes to show that IFAs can be quite useless, given the Offer Price 12 months later). The Offer became unconditional on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/1212/2019121201125.pdf" target="_blank" rel="noopener">12 December</a>.</p>
<p>The Offer <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/1227/2019122701263.pdf" target="_blank" rel="noopener">closed</a> on the 27 December 2019 with the free float of 22.06%, breaching the public float requirement under Rule 8.08(1)(a) of the Listing Rules. The float was <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0313/2020031300960.pdf" target="_blank" rel="noopener">restored</a> (25.1%) on the 13 March this year after TCLH placed out some shares.</p>
<h3>The New News</h3>
<p>After shares were <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1030/2020103000210.pdf" target="_blank" rel="noopener">suspended</a> ahead of trading on the 30 October "<em>in relation to the Code on Takeovers and Mergers</em>", that evening TEH <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1030/2020103002084.pdf" target="_blank" rel="noopener">announced</a> a proposed privatisation from TCLH by way of a Scheme.</p>
<p>The Scheme consideration is HK$12/share, a 19% premium to last close and 28% above the 30-day average close. The price will NOT be increased. No dividends have been declared, nor are any expected to be declared.</p>
<p>Conditions to the Scheme are standard - at a Court Meeting, at least 75% of Independent Shares vote FOR the Scheme &amp; not more than 10% of ALL Independent Shares against, or 2.531% of shares out. The headcount applies as TEH is Cayman incorporated.</p>
<p>Under a rollover agreement., shareholders (compromising senior management of TEH)  holding 11.81% of share out - and 30.5% of the total Scheme shares - have entered into an agreement affording these shareholders a subscription into an unlisted backend company. </p>
<p>The rollover agreement requires independent shareholder approval, by way of a simple majority vote, <em>and</em> the IFA concluding the agreement is fair and reasonable.</p>
<p>The headline premium to last close appears <em>okay</em>. But TEH spiked 55% on the 13 August, on decent volume, to close coincidentally at $12/share.</p>
<p>There looks like enough here for the deal to get up.</p>
<p>More below the fold.</p>

Back on the 2 October 2019, via a restructuring agreement, T.C.L. Industries Holdings (H.K.) Limited. (TCLH), a wholly-owned subsidiary of TCL Industries (TCLI) acquired all of the issued capital in the "Divested Segment", a segment spun-off from  TCL Corp (A) (000100 CH). As this Segment held 48.68% of issued shares in Tonly Electronics Holdings (1249 HK) (TEH), TCLH was obligated to make a conditional MGO for all other shares not held. The Offer Price was HK$5.89/share, a 7.1% premium to last close. 
The Composite Document was despatched on the 22 November 2019. The IFA (Somerley)  concluded the Offer Price was fair and reasonable (which just goes to show that IFAs can be quite useless, given the Offer Price 12 months later). The Offer became unconditional on the 12 December.
The Offer closed on the 27 December 2019 with the free float of 22.06%, breaching the public float requirement under Rule 8.08(1)(a) of the Listing Rules. The float was restored (25.1%) on the 13 March this year after TCLH placed out some shares.
The New News
After shares were suspended ahead of trading on the 30 October "in relation to the Code on Takeovers and Mergers", that evening TEH announced a proposed privatisation from TCLH by way of a Scheme.
The Scheme consideration is HK$12/share, a 19% premium to last close and 28% above the 30-day average close. The price will NOT be increased. No dividends have been declared, nor are any expected to be declared.
Conditions to the Scheme are standard - at a Court Meeting, at least 75% of Independent Shares vote FOR the Scheme &amp; not more than 10% of ALL Independent Shares against, or 2.531% of shares out. The headcount applies as TEH is Cayman incorporated.
Under a rollover agreement., shareholders (compromising senior management of TEH)  holding 11.81% of share out - and 30.5% of the total Scheme shares - have entered into an agreement affording these shareholders a subscription into an unlisted backend company. 
The rollover agreement requires independent shareholder approval, by way of a simple majority vote, and the IFA concluding the agreement is fair and reasonable.
The headline premium to last close appears okay. But TEH spiked 55% on the 13 August, on decent volume, to close coincidentally at $12/share.
There looks like enough here for the deal to get up.
More below the fold.

Tonly Electronics (1249 HK): Fair Scheme Offer

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/tonly-electronics-holdings-ltd" target="_blank" data-smartkarma-citation="entities:1320:1" rel="noopener">Tonly Electronics Holdings (1249 HK)</a> is engaged in the sales of audio-visual products (excluding TV sets) for third parties’ brands on an original design manufacture basis. Tonly has received a privatisation offer at HK$12.00 in cash per share. The offeror is its largest shareholder, T.C.L. Industries Holdings, which is wholly-owned by TCL Holdings. The Offeror also has a significant investment in <a href="https://www.smartkarma.com/entities/tcl-multimedia-technology" target="_blank" data-smartkarma-citation="entities:15654:1" rel="noopener">Tcl Multimedia Technology (1070 HK)</a>. The privatisation price is a 19.0% premium to the share price of HK$10.08 on the last trading day (29 October).</p><div class="content-highlight"><p>The key conditions precedent are the headcount test and the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). The offeror and concert parties represent 204.2 million shares or 74.69% of shares outstanding. Disinterested scheme shareholders represent 69.2 million shares or 25.31% of shares outstanding which implies the 10% blocking stake is 6.9 million shares or 2.53% of shares outstanding. Overall, we believe that the privatisation price is attractive, and the bid will succeed. </p></div>

Tonly Electronics Holdings (1249 HK) is engaged in the sales of audio-visual products (excluding TV sets) for third parties’ brands on an original design manufacture basis. Tonly has received a privatisation offer at HK$12.00 in cash per share. The offeror is its largest shareholder, T.C.L. Industries Holdings, which is wholly-owned by TCL Holdings. The Offeror also has a significant investment in Tcl Multimedia Technology (1070 HK). The privatisation price is a 19.0% premium to the share price of HK$10.08 on the last trading day (29 October).The key conditions precedent are the headcount test and the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). The offeror and concert parties represent 204.2 million shares or 74.69% of shares outstanding. Disinterested scheme shareholders represent 69.2 million shares or 25.31% of shares outstanding which implies the 10% blocking stake is 6.9 million shares or 2.53% of shares outstanding. Overall, we believe that the privatisation price is attractive, and the bid will succeed. 

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

<p>Late Wednesday, <a href="https://www.smartkarma.com/entities/tcl-multimedia-technology" target="_blank" data-smartkarma-citation="entities:15654:1" rel="noopener">Tcl Multimedia Technology (1070 HK)</a>/TCL said it had received an MGO. The MGO price was set at HK$3.23 per share, an 18% discount to the last close price of HK$3.95 per share. The MGO was triggered due to an astonishing oversight related to the divestiture of TCL Industries Holdings, a former wholly-owned subsidiary of <a href="https://www.smartkarma.com/entities/tcl-corp-a" target="_blank" data-smartkarma-citation="entities:13497:1" rel="noopener">TCL Corp (A) (000100 CH)</a>.</p><div class="content-highlight"><p>The MGO price was based on a formula linked to an appraiser’s value of TCL. Setting aside that the MGO is purely a belated regulatory box-ticking exercise, we believe that the appraiser’s valuation methodology is questionable.</p></div>

Late Wednesday, Tcl Multimedia Technology (1070 HK)/TCL said it had received an MGO. The MGO price was set at HK$3.23 per share, an 18% discount to the last close price of HK$3.95 per share. The MGO was triggered due to an astonishing oversight related to the divestiture of TCL Industries Holdings, a former wholly-owned subsidiary of TCL Corp (A) (000100 CH).The MGO price was based on a formula linked to an appraiser’s value of TCL. Setting aside that the MGO is purely a belated regulatory box-ticking exercise, we believe that the appraiser’s valuation methodology is questionable.

Hong Kong

Tonly Electronics is an investment holding company primarily engaged in the research, development, manufacturing, and sales of audio-visual products, components, and smart devices. The company's offerings include audio products like smart speakers and headphones, video disc players, wearable devices, and AIoT products. Tonly Electronics was founded in 2000 and is headquartered in Huizhou, China.

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Tonly Electronics (1249 HK)