Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p>On the 30 April, aged-care Australian listed operator <a href="https://www.smartkarma.com/entities/japara-healthcare-ltd" target="_blank" data-smartkarma-citation="entities:14760:1" rel="noopener">Japara Healthcare (JHC AU)</a> announced it had received an unsolicited, indicative, conditional, and non-binding Offer from Little Company of Mary Health Care - otherwise known as Calvary - by way of a Scheme, at A$1.04/share.</p>
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<p>On the 5 June, Calvary <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02382224-3A568448?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">increased</a> the indicative Offer price to A$1.20/share.  JHC's board concluded it was appropriate to grant Calvary due diligence access.</p>
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<p>On the 15 June, the Bolton Clarke Group <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02384417-3A568803?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">made</a> a conditional, non-binding indicative proposal by way of a Scheme, at A$1.22/share. The Offer was subject to due diligence, financing, unanimous support from JHC's directors, and final approval from the Bolton Clarke board. </p>
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<p>Due diligence access, consistent with that afforded to Calvary, was also provided.</p>
<p>JHC has now <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02399332-3A571403?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> that it has entered into a Scheme Implementation Deed (SID) with Calvary, by way of a Scheme at A$1.40/share. The consideration will be reduced by any dividends paid. </p>
<p>JHC's board of directors have unanimously recommended the Scheme, in the absence of a superior proposal and subject to an independent expert concluding the Scheme is fair &amp; reasonable. </p>
<p>This looks done &amp; dusted. </p>
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On the 30 April, aged-care Australian listed operator Japara Healthcare (JHC AU) announced it had received an unsolicited, indicative, conditional, and non-binding Offer from Little Company of Mary Health Care - otherwise known as Calvary - by way of a Scheme, at A$1.04/share.


On the 5 June, Calvary increased the indicative Offer price to A$1.20/share.  JHC's board concluded it was appropriate to grant Calvary due diligence access.


On the 15 June, the Bolton Clarke Group made a conditional, non-binding indicative proposal by way of a Scheme, at A$1.22/share. The Offer was subject to due diligence, financing, unanimous support from JHC's directors, and final approval from the Bolton Clarke board. 


Due diligence access, consistent with that afforded to Calvary, was also provided.
JHC has now announced that it has entered into a Scheme Implementation Deed (SID) with Calvary, by way of a Scheme at A$1.40/share. The consideration will be reduced by any dividends paid. 
JHC's board of directors have unanimously recommended the Scheme, in the absence of a superior proposal and subject to an independent expert concluding the Scheme is fair &amp; reasonable. 
This looks done &amp; dusted. 


Japara Healthcare (JHC): Calvary Takes Charge

Travis Lundy

<p>In mid-late June, the two largest Listed Investment Corporations in Australia - <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> and <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> - announced plans to merge, with SOL (a.k.a. "WHSP") becoming the surviving entity. </p>
<p>This was discussed by <a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a> in <a href="https://www.smartkarma.com/insights/whsp-s-proposed-merger-with-milton-corp" target="_blank" data-smartkarma-citation="insights:53422" rel="noopener">WHSP's Proposed Merger With Milton Corp</a> and by myself in <a href="https://www.smartkarma.com/insights/milton-merger-is-a-most-marvelous-arb" target="_blank" data-smartkarma-citation="insights:53464" rel="noopener">Milton Merger Is A Most Marvelous Arb</a> and <a href="https://www.smartkarma.com/insights/milton-whsp-merger-index-implications-and-the-marvelous-arb" target="_blank" data-smartkarma-citation="insights:53551" rel="noopener">Milton-WHSP Merger Index Implications and the Marvelous Arb</a>. </p>
<p>It is a complicated deal. </p>
<p>Milton had been trading at a discount to NAV, where NAV was 97% or so listed stocks. WHSP had been trading at a premium to NAV. WHSP agreed to pay a premium to NAV for MLT shares, but the construct provided for some really interesting other optionality (some positive, a little negative) for MLT shareholders. </p>
<p>In early July, Milton announced its NAV at A$5.50/share and assuming it is exactly A$5.5000/share, the Quiddity Milton Model was off by 0.16%. When it released its top 20 stock and weights list which showed about A$50-60mm of adjustments to positions since 31 Dec 2020 within the top 20 names, that lowered the NAV miss to about 0.07% and that is probably a matter of timing and stray dividend income or a mark on its private assets.</p>
<p>Interestingly, as WHSP rose 10% then came back a bit, and Milton rose with it, but the Milton NAV did not rise much, the "spread to terms" has stayed reasonably stable except for some near-market-close shenanigans at times. </p>
<p>But it still feels like people don't get it. </p>
<p>There's some really interesting convexity here. Still.</p>
<p>And the supply/demand tilt is remarkable.</p>

In mid-late June, the two largest Listed Investment Corporations in Australia - Milton Corp Ltd (MLT AU) and Washington H. Soul Pattinson and Co. Ltd (SOL AU) - announced plans to merge, with SOL (a.k.a. "WHSP") becoming the surviving entity. 
This was discussed by David Blennerhassett in WHSP's Proposed Merger With Milton Corp and by myself in Milton Merger Is A Most Marvelous Arb and Milton-WHSP Merger Index Implications and the Marvelous Arb. 
It is a complicated deal. 
Milton had been trading at a discount to NAV, where NAV was 97% or so listed stocks. WHSP had been trading at a premium to NAV. WHSP agreed to pay a premium to NAV for MLT shares, but the construct provided for some really interesting other optionality (some positive, a little negative) for MLT shareholders. 
In early July, Milton announced its NAV at A$5.50/share and assuming it is exactly A$5.5000/share, the Quiddity Milton Model was off by 0.16%. When it released its top 20 stock and weights list which showed about A$50-60mm of adjustments to positions since 31 Dec 2020 within the top 20 names, that lowered the NAV miss to about 0.07% and that is probably a matter of timing and stray dividend income or a mark on its private assets.
Interestingly, as WHSP rose 10% then came back a bit, and Milton rose with it, but the Milton NAV did not rise much, the "spread to terms" has stayed reasonably stable except for some near-market-close shenanigans at times. 
But it still feels like people don't get it. 
There's some really interesting convexity here. Still.
And the supply/demand tilt is remarkable.

Milton's Marvelous Arb Meanders Along... Marvelously

Australian Pharmaceutical Industries / Event-Driven

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<p>Back on the 14 December 2018, wholesale and retail pharmacy health/beauty and lifestyle products operator <a href="https://www.smartkarma.com/entities/19399" target="_blank" data-smartkarma-citation="entities:19399:1" rel="noopener"><strong>Australian Pharmaceutical Industries (API AU)</strong></a> (API) <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2995-02059816-3A507826?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> that it had become a substantial shareholder in key competitor <a href="https://www.smartkarma.com/entities/15966" target="_blank" data-smartkarma-citation="entities:15966:1" rel="noopener">Sigma Healthcare Ltd (SIG AU)</a> by purchasing 137.26mm shares, or 12.95%.</p>
<p>On the same day, it was <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2995-02059834-3A507836?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">made public</a> that API had made an indicative non-binding proposal to Sigma through a Scheme of Arrangement whereby Sigma shareholders would receive 0.31 shares of API and A$0.23 in cash for each share of Sigma held. The proposal was first tabled to the board back on 11 October 2018.</p>
<p><a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25" rel="noopener">Travis Lundy</a> discussed the Offer in <em><a href="https://skr.ma/araq7" target="_blank" rel="noopener">API Tilts at Sigma Healthcare: Expect More</a></em> and <em><a href="https://skr.ma/szfi2" target="_blank" rel="noopener">Sigma Healthcare Market Update: Strategic Review Expects More</a>, </em>concluding the Offer was light. </p>
<p>Sigma thought so too and summarily <a href="https://www.asx.com.au/asxpdf/20190313/pdf/443fhtv2whrv40.pdf" target="_blank" rel="noopener">rejected</a> the Offer on the 13 March 2019 and terminated discussions. Sigma believed its future potential is on a standalone basis. Sigma also cited API's share price decline of &gt;15% since the 11 October announcement, implying a 12% decline in value for its shareholders; and also flagged the potential execution risk in regards to ACCC consent. $60mn in synergies from merging was, however, not disputed by Sigma.</p>
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<p>API said it had <a href="https://www.asx.com.au/asxpdf/20190313/pdf/443ftrffbvj16w.pdf" target="_blank" rel="noopener">closed its data room </a>and was reviewing its shareholding in Sigma.</p>
<p>API subsequently sold its stake in Sigma on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02185851-3A531484?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">16 December 2019</a>. </p>
<h3>The New News</h3>
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<p>API has now <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 has 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>This looks done, and is trading accordingly. </p>
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<p>More below the fold.</p>
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Back on the 14 December 2018, wholesale and retail pharmacy health/beauty and lifestyle products operator Australian Pharmaceutical Industries (API AU) (API) announced that it had become a substantial shareholder in key competitor Sigma Healthcare Ltd (SIG AU) by purchasing 137.26mm shares, or 12.95%.
On the same day, it was made public that API had made an indicative non-binding proposal to Sigma through a Scheme of Arrangement whereby Sigma shareholders would receive 0.31 shares of API and A$0.23 in cash for each share of Sigma held. The proposal was first tabled to the board back on 11 October 2018.
Travis Lundy discussed the Offer in API Tilts at Sigma Healthcare: Expect More and Sigma Healthcare Market Update: Strategic Review Expects More, concluding the Offer was light. 
Sigma thought so too and summarily rejected the Offer on the 13 March 2019 and terminated discussions. Sigma believed its future potential is on a standalone basis. Sigma also cited API's share price decline of &gt;15% since the 11 October announcement, implying a 12% decline in value for its shareholders; and also flagged the potential execution risk in regards to ACCC consent. $60mn in synergies from merging was, however, not disputed by Sigma.

API said it had closed its data room and was reviewing its shareholding in Sigma.
API subsequently sold its stake in Sigma on the 16 December 2019. 
The New News

API has now 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 has 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.

This looks done, and is trading accordingly. 


More below the fold.


API AU: The Hunter Turns The Hunted As Wesfarmers Makes A Move

<p>Despite a very large move in <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. (SOL AU)</a> ("WHSP") on Wednesday 23 June as people started to figure out the index implications on WHSP, the arb and the <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> ("MLT") leg appears under-appreciated, still. </p><p>The Marvelous Milton Arb still has much to offer. </p><p>And for those who care, it pays to build your model. </p><p>The fancy arithmetic in the Marvelous MLT Merger Model is described in <a href="https://www.smartkarma.com/insights/milton-merger-is-a-most-marvelous-arb" target="_blank" data-smartkarma-citation="insights:53464" rel="noopener">Milton Merger Is A Most Marvelous Arb</a> .</p><p>Much more below the fold. </p>

Despite a very large move in Washington H. Soul Pattinson and Co. (SOL AU) ("WHSP") on Wednesday 23 June as people started to figure out the index implications on WHSP, the arb and the Milton Corp Ltd (MLT AU) ("MLT") leg appears under-appreciated, still. The Marvelous Milton Arb still has much to offer. And for those who care, it pays to build your model. The fancy arithmetic in the Marvelous MLT Merger Model is described in Milton Merger Is A Most Marvelous Arb .Much more below the fold. 

Milton-WHSP Merger Index Implications and the Marvelous Arb

<p><a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a> covered the basics of the proposed merger between <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> and <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. (SOL AU)</a> as it was announced earlier this morning which would deliver Milton shareholders cash in the form of dividends, some franking credits, and then consideration in the form of WHSP shares. His insight is <a href="https://www.smartkarma.com/insights/whsp-s-proposed-merger-with-milton-corp" target="_blank" data-smartkarma-citation="insights:53422" rel="noopener">WHSP's Proposed Merger With Milton Corp</a>. </p><p>Today Milton closed up 16.00% at A$5.80 and WHSP closed 0.83% higher at A$30.50/share.</p><p>The basic concept is that two of the oldest listed investment companies in Australia would merge to form a A$11bn Listed Investment Company with a more diverse mandate. Some of the commentary surrounding the merger does not seem to make a lot of sense, but I expect allowances/excuses can be made. </p><p>What IS interesting is the contents (and risks) of the Consideration proposed.</p><p><em><strong>It is much more interesting and much more complex than it first appears. </strong></em></p><p><em><strong>It is as Fernando Lama might have said.... maahhvelous. </strong></em></p>

David Blennerhassett covered the basics of the proposed merger between Milton Corp Ltd (MLT AU) and Washington H. Soul Pattinson and Co. (SOL AU) as it was announced earlier this morning which would deliver Milton shareholders cash in the form of dividends, some franking credits, and then consideration in the form of WHSP shares. His insight is WHSP's Proposed Merger With Milton Corp. Today Milton closed up 16.00% at A$5.80 and WHSP closed 0.83% higher at A$30.50/share.The basic concept is that two of the oldest listed investment companies in Australia would merge to form a A$11bn Listed Investment Company with a more diverse mandate. Some of the commentary surrounding the merger does not seem to make a lot of sense, but I expect allowances/excuses can be made. What IS interesting is the contents (and risks) of the Consideration proposed.It is much more interesting and much more complex than it first appears. It is as Fernando Lama might have said.... maahhvelous. 

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)

Japara Healthcare (JHC): Calvary Takes Charge

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David Blennerhassett

Milton's Marvelous Arb Meanders Along... Marvelously

The Marvelous Milton Merger Arb is still trading slightly wide on a "straight arb" basis. On a "true arb" basis including optionality, it is...

Travis Lundy

API AU: The Hunter Turns The Hunted As Wesfarmers Makes A Move

With SOL's backing, you realistically have a $1.38/share floor, with the possibility of another bidder emerging. You could position yourself around...

David Blennerhassett

Milton-WHSP Merger Index Implications and the Marvelous Arb

The proposed Milton / WHSP Merger has some marvelous math. And some funky index effects. Milton is smaller but has higher "float" so index weights...

Travis Lundy

Milton Merger Is A Most Marvelous Arb

The Milton vs WHSP merger consideration construct offers interesting but complex arbitrage opportunities. There is long and short optionality. It...

Travis Lundy

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