IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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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.

Event-Driven

Australian Pharmaceutical Industries / Event-Driven

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<a href="https://www.smartkarma.com/entities/australian-pharmaceutical-industries-limited" target="_blank" data-smartkarma-citation="entities:19399:1" rel="noopener">Australian Pharmaceutical Industries (API AU)</a> announced a non-binding indicative offer from <a href="https://www.smartkarma.com/entities/woolworths-ltd" target="_blank" data-smartkarma-citation="entities:500:1" rel="noopener">Woolworths Ltd (WOW AU)</a> for A$1.75 per share, a 12.9% premium to <a href="https://www.smartkarma.com/entities/wesfarmers-ltd" target="_blank" data-smartkarma-citation="entities:1104:1" rel="noopener">Wesfarmers Ltd (WES AU)</a>’ offer of A$1.55. </li>
<li>Woolworths notes that there is the potential to improve the offer price with the benefit of due diligence, which has been granted. </li>
<li>Wesfarmers has matching rights. We think that the presence of two deep-pocketed suitors, suggests at least another round of bidding.  </li>
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Australian Pharmaceutical Industries (API AU) announced a non-binding indicative offer from Woolworths Ltd (WOW AU) for A$1.75 per share, a 12.9% premium to Wesfarmers Ltd (WES AU)’ offer of A$1.55. 
Woolworths notes that there is the potential to improve the offer price with the benefit of due diligence, which has been granted. 
Wesfarmers has matching rights. We think that the presence of two deep-pocketed suitors, suggests at least another round of bidding.  


Woolworths' API Bid Likely to Kick off a Bidding War with Wesfarmers

<p><a href="https://www.smartkarma.com/entities/australian-pharmaceutical-industries-limited" target="_blank" data-smartkarma-citation="entities:19399:1" rel="noopener">Australian Pharmaceutical Industries (API AU)</a> is a vertically integrated wholesaler, franchise owner and retailer. API has received a binding proposal and entered a scheme implementation deed (SID) with <a href="https://www.smartkarma.com/entities/wesfarmers-ltd" target="_blank" data-smartkarma-citation="entities:1104:1" rel="noopener">Wesfarmers Ltd (WES AU)</a>. The offer price of A$1.55 per share (unchanged from the 16 September revised indicative offer) is a 35.4% premium to the unaffected price of A$1.145 (9 July).</p><p>In its full-year results announced on 28 October, API declared a fully franked final dividend of A$0.02 per share to be paid out on 15 December. API will also pay a fully franked special dividend of A$0.03 per share as part of the scheme. The offer price will be reduced by these dividend payouts. </p><p>As a reminder, API was subject to a contested bid between Wesfarmers and <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>. On 27 September, API revealed a non-binding indicative offer from Sigma comprising A$0.35 cash and 2.05 Sigma shares per API share. However, on 7 October, Wesfarmers exercised a call option over Washington H Soul Pattinson’s 19.3% stake in API. Subsequently, Sigma withdrew its offer on 5 November “<em>after further assessment and in the context of the competitive bid process with its changing transaction and economic considerations.</em>”</p><p>The scheme is conditional on API shareholder approval and ACCC approval. The scheme meeting and completion are targeted for the first quarter of 2022.  </p><div class="content-highlight"><p>We think that Wesfarmers’ offer is reasonable in the context of historical multiples and share prices. Wesfarmers aims to make API the foundation of its new Healthcare division, which will be used as the springboard to grow its presence in the health, wealth and beauty sectors. At the last close price of A$1.54, the gross spread is 0.6% and the annualised spread to the implementation date (end of 1Q) is 1.6%.</p></div>

Australian Pharmaceutical Industries (API AU) is a vertically integrated wholesaler, franchise owner and retailer. API has received a binding proposal and entered a scheme implementation deed (SID) with Wesfarmers Ltd (WES AU). The offer price of A$1.55 per share (unchanged from the 16 September revised indicative offer) is a 35.4% premium to the unaffected price of A$1.145 (9 July).In its full-year results announced on 28 October, API declared a fully franked final dividend of A$0.02 per share to be paid out on 15 December. API will also pay a fully franked special dividend of A$0.03 per share as part of the scheme. The offer price will be reduced by these dividend payouts. As a reminder, API was subject to a contested bid between Wesfarmers and Sigma Healthcare (SIG AU). On 27 September, API revealed a non-binding indicative offer from Sigma comprising A$0.35 cash and 2.05 Sigma shares per API share. However, on 7 October, Wesfarmers exercised a call option over Washington H Soul Pattinson’s 19.3% stake in API. Subsequently, Sigma withdrew its offer on 5 November “after further assessment and in the context of the competitive bid process with its changing transaction and economic considerations.”The scheme is conditional on API shareholder approval and ACCC approval. The scheme meeting and completion are targeted for the first quarter of 2022.  We think that Wesfarmers’ offer is reasonable in the context of historical multiples and share prices. Wesfarmers aims to make API the foundation of its new Healthcare division, which will be used as the springboard to grow its presence in the health, wealth and beauty sectors. At the last close price of A$1.54, the gross spread is 0.6% and the annualised spread to the implementation date (end of 1Q) is 1.6%.

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

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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>
</div>


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

Last Week in Event SPACE: Japan Post, Chinese Estates, NIPPO Corp, Hopson/Evergrande, PICC

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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 39, 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 39, mostly firm, deals around the region.


More below the fold.


Asia-Pac Weekly Risk Arb Summary: Chinese Estates, Pipedo, Intega, Dragon Crown

Australia

Wesfarmers Ltd. owns retail chains, operates mines, writes insurance, manufactures and distributes industrial products, manufactures fertilizers and chemicals, and distributes liquefied petroleum gas and medical and industrial gases.

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Wesfarmers Ltd (WES AU)

Woolworths' API Bid Likely to Kick off a Bidding War with Wesfarmers

API announced an offer from Woolworths for A$1.75 per share, a 12.9% premium to Wesfarmers offer of A$1.55. The presence of two deep-pocketed...

Arun George

API Enters a SID with Wesfarmers

API has entered a SID with Wesfarmers at an offer price of A$1.55 cash per share. We think that Wesfarmers’ offer is reasonable in the context of...

Arun George

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

Last Week in Event SPACE: Japan Post, Chinese Estates, NIPPO Corp, Hopson/Evergrande, PICC

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: Chinese Estates, Pipedo, Intega, Dragon Crown

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

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