Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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

Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Thematic (Sector/Industry)

<div class="content-highlight">
<h2>What's Original?</h2>
This insight is an in-depth research on the Asian solar energy industry, covering the value chain and related companies in each key stage of the value chain. Our research includes the following:
<ul>
<li>
Industry Background: This includes an in-depth analysis on the solar energy sector, which includes an overview on the key types of solar technologies (Photovoltaic-PV, Concentrated Solar Power-CSP and Solar Heating and Cooling- SHC), and the leading Asian countries (India, Japan and China) in the sector. We provide our thoughts on which solar technology looks promising and compare the technology used across the leading Asian countries. </li>
<li>
Value Chain Analysis: We detail the value chain for PV, highlighting the critical stages of the value chain (system integration assembly and installation, and manufacturing of cells, modules, polysilicon ingot, and wafer) and the leading players in those stages (includes listed and unlisted companies).</li>
<li>
Background Analysis on Key Players- This includes researching the key Asian listed/unlisted solar energy companies and analysing the key contributing factor/product to each of them in the sector. </li>
<li>
Investment opportunities and risk – We compare and contrast the investment opportunities for each of the key players in the sector, to understand if the companies follow a similar strategy or otherwise. </li>
<li>
Analysis on the key revenue and margin drivers– We compare and contrast the key revenue growth and profitability drivers for the listed companies. We have also provided a short investment thesis on the key listed players and looked at their valuation.</li>
</ul>
</div><div></div>The Insight is structured as follows:A. Solar Energy Industry Background B. A Deep Dive into the Three Key Solar TechnologiesC. A Look at the Leading Asian Countries in the Solar Market: China, Japan, and IndiaD. Value Chain AnalysisE. A Look at the Key Asian Solar Players


What's Original?
This insight is an in-depth research on the Asian solar energy industry, covering the value chain and related companies in each key stage of the value chain. Our research includes the following:


Industry Background: This includes an in-depth analysis on the solar energy sector, which includes an overview on the key types of solar technologies (Photovoltaic-PV, Concentrated Solar Power-CSP and Solar Heating and Cooling- SHC), and the leading Asian countries (India, Japan and China) in the sector. We provide our thoughts on which solar technology looks promising and compare the technology used across the leading Asian countries. 

Value Chain Analysis: We detail the value chain for PV, highlighting the critical stages of the value chain (system integration assembly and installation, and manufacturing of cells, modules, polysilicon ingot, and wafer) and the leading players in those stages (includes listed and unlisted companies).

Background Analysis on Key Players- This includes researching the key Asian listed/unlisted solar energy companies and analysing the key contributing factor/product to each of them in the sector. 

Investment opportunities and risk – We compare and contrast the investment opportunities for each of the key players in the sector, to understand if the companies follow a similar strategy or otherwise. 

Analysis on the key revenue and margin drivers– We compare and contrast the key revenue growth and profitability drivers for the listed companies. We have also provided a short investment thesis on the key listed players and looked at their valuation.

The Insight is structured as follows:A. Solar Energy Industry Background B. A Deep Dive into the Three Key Solar TechnologiesC. A Look at the Leading Asian Countries in the Solar Market: China, Japan, and IndiaD. Value Chain AnalysisE. A Look at the Key Asian Solar Players

Asian Solar Energy Sector: Powered by Subsidies and Moving Downstream

Award-winning Financial Journalist

Ashish Saxena

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/686" target="_blank" data-smartkarma-citation="entities:686:1">Trina Solar Limited</a> would adjourn the extraordinary general meeting in the event that there are insufficient proxies received to pass the special resolution relating to the privatisation offer made by its Chairman Jifan Gao.For the offer to sail through, the special resolution requires an affirmative vote of such shareholders representing two-thirds or more of the shares (including shares represented by American Depository Shares) present and voting in person or by proxy as a single class at the EGM.Mr Gao, with about 5.5% stake, has undertaken to vote in favor at the EGM.Assuming all remaining shareholders will be present and voting in person or by proxy at the EGM, at least 61.2% of the total outstanding shares must be voted in favor of the resolution.Franklin Resources, Inc is the largest public shareholder with a 14.8% stake, followed by Platinum Investment Management Limited with a 12.9% stake and Oaktree Funds with a 5.8% stake.Put together, all three investors have the strength to block the passage of a resolution at the EGM and can squeeze out a better deal from the consortium led by Mr Gao.Now, that brings the focus on the attractiveness of the offer.

Trina Solar Limited would adjourn the extraordinary general meeting in the event that there are insufficient proxies received to pass the special resolution relating to the privatisation offer made by its Chairman Jifan Gao.For the offer to sail through, the special resolution requires an affirmative vote of such shareholders representing two-thirds or more of the shares (including shares represented by American Depository Shares) present and voting in person or by proxy as a single class at the EGM.Mr Gao, with about 5.5% stake, has undertaken to vote in favor at the EGM.Assuming all remaining shareholders will be present and voting in person or by proxy at the EGM, at least 61.2% of the total outstanding shares must be voted in favor of the resolution.Franklin Resources, Inc is the largest public shareholder with a 14.8% stake, followed by Platinum Investment Management Limited with a 12.9% stake and Oaktree Funds with a 5.8% stake.Put together, all three investors have the strength to block the passage of a resolution at the EGM and can squeeze out a better deal from the consortium led by Mr Gao.Now, that brings the focus on the attractiveness of the offer.

Trina Solar: Top 3 Shareholders Hold the Key to a Successful Privatisation

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Since its shares peaked just before Christmas 2015, Taiwanese conductive paste maker <a href="https://www.smartkarma.com/entities/4507" target="_blank" data-smartkarma-citation="entities:4507">Gigasolar Materials Corp</a> ('GSM', 3691:TT) has endured a difficult six months.First there were concerns about the scale of Chinese solar feed-in-tariff (FIT) reductions later this year, which could potentially hurt medium-term Chinese solar demand. Next, an industrial accident at a Japanese supplier of raw materials in early January led to fears of reduced sales of silver paste for GSM. We believe both of these issues have been adequately resolved, and that slower Sales and earnings momentum in 2016 has been priced in as GSM's shares fell from NT$750 on December 21st to as low as NT$449 earlier this month.We now view GSM as an inexpensive play on the rising adoption of solar energy. Investors should seek to accumulate shares below NT$480 per share on the expectation of a bottoming of Sales growth in H2 2016e and improved earnings growth in 2017e. Our price target is NT$660, based on 15x 2017e EPS.

Since its shares peaked just before Christmas 2015, Taiwanese conductive paste maker Gigasolar Materials Corp ('GSM', 3691:TT) has endured a difficult six months.First there were concerns about the scale of Chinese solar feed-in-tariff (FIT) reductions later this year, which could potentially hurt medium-term Chinese solar demand. Next, an industrial accident at a Japanese supplier of raw materials in early January led to fears of reduced sales of silver paste for GSM. We believe both of these issues have been adequately resolved, and that slower Sales and earnings momentum in 2016 has been priced in as GSM's shares fell from NT$750 on December 21st to as low as NT$449 earlier this month.We now view GSM as an inexpensive play on the rising adoption of solar energy. Investors should seek to accumulate shares below NT$480 per share on the expectation of a bottoming of Sales growth in H2 2016e and improved earnings growth in 2017e. Our price target is NT$660, based on 15x 2017e EPS. 

Accumulate Giga Solar Materials Below NT$480; Inexpensive Play on Solar Growth

China

Trina Solar Limited manufactures solar power products. The Company offers photovoltaic wafers, ingots, cells, and modules. Trina Solar serves residential, commercial, industrial, and other industries worldwide.

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

Trina Solar (TSL US)

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

Asian Solar Energy Sector: Powered by Subsidies and Moving Downstream

The Insight is structured as follows: A. Solar Energy Industry Background – Introduction to the Solar energy Industry B. A Deep Dive into the Three...

Aqila Ali

Trina Solar: Top 3 Shareholders Hold the Key to a Successful Privatisation

Trina Solar Limited would adjourn the extraordinary general meeting in the event that there are insufficient proxies received to pass the special...

Ashish Saxena

Accumulate Giga Solar Materials Below NT$480; Inexpensive Play on Solar Growth

Since its shares peaked just before Christmas 2015, Taiwanese conductive paste maker Gigasolar Materials Corp ('GSM', 3691:TT) has endured a...

Daniel Hellberg

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)