Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Washington H. Soul Pattinson and Co. Ltd / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/washington-h-soul-pattinson-and-co-ltd" target="_blank" data-smartkarma-citation="entities:6054:1" rel="noopener">Washington H. Soul Pattinson and Co. Ltd (SOL AU)</a> executed its merger with <a href="https://www.smartkarma.com/entities/milton-corp-ltd" target="_blank" data-smartkarma-citation="entities:29090:1" rel="noopener">Milton Corp Ltd (MLT AU)</a> in late September, with the delivered shares fungible in early October.</li>
<li>Since then, there has been steady selling of WHSP, possibly in the form of flowback, and the Combined Entity Premium to NAV has shrunk materially since then.</li>
<li>The next couple of days should see announcements of increased weightings in indices, which means a big buy later in December.</li>
</ul>



Washington H. Soul Pattinson and Co. Ltd (SOL AU) executed its merger with Milton Corp Ltd (MLT AU) in late September, with the delivered shares fungible in early October.
Since then, there has been steady selling of WHSP, possibly in the form of flowback, and the Combined Entity Premium to NAV has shrunk materially since then.
The next couple of days should see announcements of increased weightings in indices, which means a big buy later in December.


David Blennerhassett

Australian Pharmaceutical Industries / Event-Driven

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<p>On the 12 July, wholesale and retail pharmacy operator <a href="https://www.smartkarma.com/entities/19399" target="_blank" data-smartkarma-citation="entities:19399:1" rel="noopener">Australian Pharmaceutical Industries (API AU)</a> (API) <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02394187-3A570533?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> an indicative, non-binding Offer from <a href="https://www.smartkarma.com/entities/wesfarmers-ltd" target="_blank" data-smartkarma-citation="entities:1104:1" rel="noopener">Wesfarmers Ltd (WES AU)</a> by way of a Scheme at $1.38/share,  a 20.5% premium to last close. </p>
<p>Separately, Wesfarmers entered into an agreement with API's largest shareholder <a href="https://www.smartkarma.com/entities/washington-h-soul-pattinson-and-co-ltd" target="_blank" data-smartkarma-citation="entities:6054:1" rel="noopener">Washington H. Soul Pattinson and Co. Ltd (SOL AU)</a> (WHSP), such that WHSP will vote its 19.3% interest in favour of Wesfarmers' proposal, in the absence of a superior Offer. Additionally, the agreement also included an option for Wesfarmers to acquire WHSP’s shares in the event Wesfarmers intended to match or exceed any competing proposal which API received.</p>
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<p>The proposal appeared opportunistic and the API board agreed and rejected the proposed Offer on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02400478-3A571605?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">29 July</a> on grounds it undervalued API, was not compelling, and was not in the best interest of shareholders. </p>
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<p>On the 16 September Wesfarmers and API entered into a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02422163-3A575967?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">process deed</a> after Wesfarmers bumped the Offer by 12.3% to A$1.55/share. A fully franked dividend of A$0.05/share was permitted (including the A$0.02/share final dividend <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02442833-3A579494?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">declared</a> by API for the financial year ended 31 August 2021), which will reduce the cash consideration if paid. WHSP remained supportive. API granted Wesfarmers exclusive due diligence until the 16 October. The proposal was also subject to ACCC clearance.</p>
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<p>API then <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02426356-3A576689?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> on the 27 September it had received a non-binding proposal from <a href="https://www.smartkarma.com/entities/sigma-healthcare-ltd" target="_blank" data-smartkarma-citation="entities:15966:1" rel="noopener">Sigma Healthcare (SIG AU)</a>. API shareholders would receive an implied A$1.57/share under Sigma’s cash-and-stock proposal. A similar franked dividend, to the one in the Wesfarmers' proposal, was also permitted. Confirmatory due diligence was afforded. Of interest, this was the third attempt by Australia's two largest pharmaceutical distributors to merge: the first was rejected by the ACCC in 2002, and the second was rejected by Sigma (when API was the acquiror) in 2019 (<em><a href="https://skr.ma/araq7" target="_blank" rel="noopener">API Tilts at Sigma Healthcare: Expect More</a></em>).</p>
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<p>Pursuant to the undertaking agreement with WHSP, Wesfarmers acquired a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02432448-6A1054678?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">19.3% stake</a> in API on 7 October. Sigma subsequently dropped its proposal on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02448000-3A580348?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">5 November</a>. </p>
<p>That left Wesfarmers in the driving seat. DD was expected to expire on the 16 October.  In its FY21 results API <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02442841-3A579496?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">said</a> it not received and agreed to a final offer with Wesfarmers. But I couldn't see Wesfarmers simply sitting on a 19.3% stake. It's not their MO to make small acquisitions and sit tight. </p>
<p><strong>The New News</strong></p>
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<p>Today Wesfarmers entered into a Scheme Implementation Deed (SID) with API for a cash consideration of $1.55/share, including the payment of fully franked dividends up to a maximum of A$0.05/share per API share.</p>
<p>The transaction has unanimous API board support. The Scheme is subject to API shareholder approval, ACCC approval, no material adverse change, and no prescribed occurrences.</p>
<p>The Scheme is expected to be wrapped up in the 1Q22.</p>
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<p>More below the fold.</p>
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On the 12 July, wholesale and retail pharmacy operator Australian Pharmaceutical Industries (API AU) (API) announced an indicative, non-binding Offer from Wesfarmers Ltd (WES AU) by way of a Scheme at $1.38/share,  a 20.5% premium to last close. 
Separately, Wesfarmers entered into an agreement with API's largest shareholder Washington H. Soul Pattinson and Co. Ltd (SOL AU) (WHSP), such that WHSP will vote its 19.3% interest in favour of Wesfarmers' proposal, in the absence of a superior Offer. Additionally, the agreement also included an option for Wesfarmers to acquire WHSP’s shares in the event Wesfarmers intended to match or exceed any competing proposal which API received.


The proposal appeared opportunistic and the API board agreed and rejected the proposed Offer on the 29 July on grounds it undervalued API, was not compelling, and was not in the best interest of shareholders. 


On the 16 September Wesfarmers and API entered into a process deed after Wesfarmers bumped the Offer by 12.3% to A$1.55/share. A fully franked dividend of A$0.05/share was permitted (including the A$0.02/share final dividend declared by API for the financial year ended 31 August 2021), which will reduce the cash consideration if paid. WHSP remained supportive. API granted Wesfarmers exclusive due diligence until the 16 October. The proposal was also subject to ACCC clearance.

API then announced on the 27 September it had received a non-binding proposal from Sigma Healthcare (SIG AU). API shareholders would receive an implied A$1.57/share under Sigma’s cash-and-stock proposal. A similar franked dividend, to the one in the Wesfarmers' proposal, was also permitted. Confirmatory due diligence was afforded. Of interest, this was the third attempt by Australia's two largest pharmaceutical distributors to merge: the first was rejected by the ACCC in 2002, and the second was rejected by Sigma (when API was the acquiror) in 2019 (API Tilts at Sigma Healthcare: Expect More).





Pursuant to the undertaking agreement with WHSP, Wesfarmers acquired a 19.3% stake in API on 7 October. Sigma subsequently dropped its proposal on the 5 November. 
That left Wesfarmers in the driving seat. DD was expected to expire on the 16 October.  In its FY21 results API said it not received and agreed to a final offer with Wesfarmers. But I couldn't see Wesfarmers simply sitting on a 19.3% stake. It's not their MO to make small acquisitions and sit tight. 
The New News






Today Wesfarmers entered into a Scheme Implementation Deed (SID) with API for a cash consideration of $1.55/share, including the payment of fully franked dividends up to a maximum of A$0.05/share per API share.
The transaction has unanimous API board support. The Scheme is subject to API shareholder approval, ACCC approval, no material adverse change, and no prescribed occurrences.
The Scheme is expected to be wrapped up in the 1Q22.


More below the fold.


Aussie Pharm (API AU) Enters Into Scheme With Wesfarmers

<p>The two oldest listed investment companies in Australia - <a href="https://www.smartkarma.com/entities/washington-h-soul-pattinson-and-co-ltd" target="_blank" data-smartkarma-citation="entities:6054:1" rel="noopener">Washington H. Soul Pattinson and Co. Ltd (SOL AU)</a> ("WHSP") and <a href="https://www.smartkarma.com/entities/milton-corp-ltd" target="_blank" data-smartkarma-citation="entities:29090:1" rel="noopener">Milton Corp Ltd (MLT AU)</a> - decided in late Q2 to merge, and then they merged in Q3, with Milton shares delisting about a month ago and the deal becoming effective on 5 October - about two weeks ago. </p><p>That was accompanied by one major index change, which caused the stock to go up as those pre-positioning pushed WHSP shares higher, then down, and all the index inclusion volume traded below A$36/share, then they went back up in a post-inclusion squeeze, then they have slowly come back down in lower volume.  </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/236/420/original/Screenshot+2021-10-20+at+10.48.36+PM.png?1634741340" class="editor-image img-responsive" data-smartkarma-image-id="236420"></figure></section><p></p><p>There are, of course, more events to come.</p><p>And there have been other interesting developments too. And those are worth looking at.</p><p>More below the fold. </p>

The two oldest listed investment companies in Australia - Washington H. Soul Pattinson and Co. Ltd (SOL AU) ("WHSP") and Milton Corp Ltd (MLT AU) - decided in late Q2 to merge, and then they merged in Q3, with Milton shares delisting about a month ago and the deal becoming effective on 5 October - about two weeks ago. That was accompanied by one major index change, which caused the stock to go up as those pre-positioning pushed WHSP shares higher, then down, and all the index inclusion volume traded below A$36/share, then they went back up in a post-inclusion squeeze, then they have slowly come back down in lower volume.  There are, of course, more events to come.And there have been other interesting developments too. And those are worth looking at.More below the fold. 

Washington H Soul Pattinson - Flows, Valuations, and Next Steps

<p><a href="https://www.smartkarma.com/entities/smartgroup-corp-ltd" target="_blank" data-smartkarma-citation="entities:19954:1" rel="noopener">Smartgroup Corp (SIQ AU)</a>, a provider of employee management services, has <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02427457-2A1326453?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> an Indicative Offer by way of a Scheme from TPG Global and Australia-based Potential Capital, with superannuation fund Aware Super joining as a co-investor.</p>
<p>The consortium is Offering A$10.35/share, a 31.7% premium to the undisturbed price. </p>
<p>SIQ's board has backed the proposal and granted the consortium four weeks of exclusive due diligence.</p>
<p>This appears a full Offer. But as it remains non-binding, expect shares to trade wide to terms in the absence of a competing proposal.</p>
<p>More below the fold. </p>

Smartgroup Corp (SIQ AU), a provider of employee management services, has announced an Indicative Offer by way of a Scheme from TPG Global and Australia-based Potential Capital, with superannuation fund Aware Super joining as a co-investor.
The consortium is Offering A$10.35/share, a 31.7% premium to the undisturbed price. 
SIQ's board has backed the proposal and granted the consortium four weeks of exclusive due diligence.
This appears a full Offer. But as it remains non-binding, expect shares to trade wide to terms in the absence of a competing proposal.
More below the fold. 

Smartgroup (SIQ AU): Indicative Offer From TPG/Potential Capital/Aware Super

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<p>Back on the 12 July, wholesale and retail pharmacy operator <a href="https://www.smartkarma.com/entities/19399" target="_blank" data-smartkarma-citation="entities:19399:1" rel="noopener">Australian Pharmaceutical Industries (API AU)</a> (API) <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02394187-3A570533?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> an indicative, non-binding Offer from <a href="https://www.smartkarma.com/entities/wesfarmers-ltd" target="_blank" data-smartkarma-citation="entities:1104:1" rel="noopener">Wesfarmers Ltd (WES AU)</a> by way of a Scheme at $1.38/share,  a 20.5% premium to last close.  Separately, Wesfarmers entered into an agreement with API's largest shareholder <a href="https://www.smartkarma.com/entities/washington-h-soul-pattinson-and-co-ltd" target="_blank" data-smartkarma-citation="entities:6054:1" rel="noopener">Washington H. Soul Pattinson and Co. Ltd (SOL AU)</a> (WHSP), such that WHSP will vote its 19.3% interest in favour of Wesfarmers' proposal, in the absence of a superior Offer.</p>
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<p>The proposal appeared opportunistic and the API board agreed (with that idea) and rejected the proposed Offer on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02400478-3A571605?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">29 July</a> on grounds it undervalued API, was not compelling, and was not in the best interest of shareholders. </p>
</div>
<p>Wesfarmers and API subsequently entered into a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02422163-3A575967?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">process deed</a> on the 16 September after Wesfarmers bumped the Offer by 12.3% to A$1.55/share. A fully franked dividend of A$0.05/share is permitted, which will reduce the cash consideration if paid. WHSP remains supportive.</p>
<div>
<p>API granted Wesfarmers exclusive due diligence until the 16 October. The proposal is also subject to ACCC clearance.</p>
<h3>The New News</h3>
<p>API has now <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02426356-3A576689?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> it has received a non-binding proposal from <a href="https://www.smartkarma.com/entities/sigma-healthcare-ltd" target="_blank" data-smartkarma-citation="entities:15966:1" rel="noopener">Sigma Healthcare (SIG AU)</a>. API shareholders would receive an implied A$1.57/share under Sigma’s cash-and-stock proposal. A similar franked dividend, to the one in the Wesfermers' proposal, is also permitted. </p>
<p>This is the third attempt by Australia's two largest pharmaceutical distributors to merge: the first was shot down by the ACCC in 2002, and the second was rejected by Sigma (when API was the acquiror) in 2019.</p>
<p>Sigma has been afforded confirmatory due diligence - which appears will take place after Wesfarmers' exclusive due diligence, although the wording in today's announcement is unclear. </p>
<p>Wesfarmers proposal is cleaner as an all-cash proposal  - and WHSP is a willing seller. Yet an API/Sigma tie-in would amalgamate key pharmacy brands (Amcal, Guardian, and Priceline) into one entity. It remains to be seen whether the ACCC's stance has changed from 19 years ago.</p>
</div>
<div>
<p>More below the fold.</p>
</div>


Back on the 12 July, wholesale and retail pharmacy operator Australian Pharmaceutical Industries (API AU) (API) announced an indicative, non-binding Offer from Wesfarmers Ltd (WES AU) by way of a Scheme at $1.38/share,  a 20.5% premium to last close.  Separately, Wesfarmers entered into an agreement with API's largest shareholder Washington H. Soul Pattinson and Co. Ltd (SOL AU) (WHSP), such that WHSP will vote its 19.3% interest in favour of Wesfarmers' proposal, in the absence of a superior Offer.


The proposal appeared opportunistic and the API board agreed (with that idea) and rejected the proposed Offer on the 29 July on grounds it undervalued API, was not compelling, and was not in the best interest of shareholders. 

Wesfarmers and API subsequently entered into a process deed on the 16 September after Wesfarmers bumped the Offer by 12.3% to A$1.55/share. A fully franked dividend of A$0.05/share is permitted, which will reduce the cash consideration if paid. WHSP remains supportive.

API granted Wesfarmers exclusive due diligence until the 16 October. The proposal is also subject to ACCC clearance.
The New News
API has now announced it has received a non-binding proposal from Sigma Healthcare (SIG AU). API shareholders would receive an implied A$1.57/share under Sigma’s cash-and-stock proposal. A similar franked dividend, to the one in the Wesfermers' proposal, is also permitted. 
This is the third attempt by Australia's two largest pharmaceutical distributors to merge: the first was shot down by the ACCC in 2002, and the second was rejected by Sigma (when API was the acquiror) in 2019.
Sigma has been afforded confirmatory due diligence - which appears will take place after Wesfarmers' exclusive due diligence, although the wording in today's announcement is unclear. 
Wesfarmers proposal is cleaner as an all-cash proposal  - and WHSP is a willing seller. Yet an API/Sigma tie-in would amalgamate key pharmacy brands (Amcal, Guardian, and Priceline) into one entity. It remains to be seen whether the ACCC's stance has changed from 19 years ago.


More below the fold.


Aussie Pharma (API AU): Sigma's Rival Bid (Just) Edges Wesfarmers

Australia

Washington H. Soul Pattinson & Company Limited is an investment holding company. The Company owns shares and properties, coal mining, bulk handling, commercial television licensee, telecommunications carrier, merchant banking, funds management, pharmaceutical retailing, manufacture, processing and marketing of biscuits and cakes.

Washington H. Soul Pattinson and Co. Ltd (SOL AU)

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Washington H. Soul Pattinson and Co. Ltd (SOL AU)

Soul Patts Index Upweights Coming

WHSP merged with Milton and subsequently saw its PNAV drop relatively sharply. P/NAV is now at its lowest in over a year, helped by different...

Travis Lundy

Aussie Pharm (API AU) Enters Into Scheme With Wesfarmers

Trading at a 0.6%/2.3% gross/annualised spread, assuming late February completion. Unless you are a zero-rate or a low-rate taxpayer who can...

David Blennerhassett

Washington H Soul Pattinson - Flows, Valuations, and Next Steps

Washington H Soul Pattinson has absorbed the Milton Portfolio and issued new shares to Milton shareholders. The WHSP Premium to NTA has fallen to 9...

Travis Lundy

Smartgroup (SIQ AU): Indicative Offer From TPG/Potential Capital/Aware Super

Trading at 10.8%/28.4% gross/annualised spread, assuming five months to complete. That appears attractive. A competing bidder cannot be ruled out,...

David Blennerhassett

Aussie Pharma (API AU): Sigma's Rival Bid (Just) Edges Wesfarmers

Trading slightly below Wesfarmer's cash proposal. That looks like a reasonable place to enter. Wesfarmers can easily trump any tilt from Sigma.

David Blennerhassett

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