In this briefing:
- Singapore Air’s Massive Rights Issue
- Konami ToSTNeT-3 Buyback
- Takeover Defenses, MACs & Deal Breaks
- Softbank’s Stake Sale Will Be a Good Litmus Test of Alibaba’s Valuation
- Leyou’s Weak Results Unlikely to Deter IDreamSky
SIA is seeking to raise S$5.3bn via a renounceable rights issue and an additional S$3.5bn via 10-year mandatory convertible bonds (MCBs).
1,777,692,487 rights will be issued at S$3.00/share – a 53.8% discount to last (S$6.50) and a 31.8% discount to TERP of S$4.40 – on a three rights for every two existing ordinary share basis.
Rights MCBs will be issued on the basis of 295 Rights MCBs for every 100 existing ordinary shares held by shareholders. The rights MCBs are convertible into fully paid-up new shares based on the conversion price of S$4.84, which is a 10% premium to the theoretical ex-rights price of S$4.40/share.
The rights issue is subject to approval by shareholders at an EGM – yet to be confirmed. At the EGM, SIA will seek be seeking shareholders approval for the further issuance of up to ~S$6.2bn additional MCB, “on terms that are substantially similar to the terms of the Rights MCBs and to be offered by the Company to Shareholders on a pro-rata basis by way of one or more further rights issues at such future dates and times as may be determined by the Company at its sole discretion. … any such further rights issues of Additional MCBs will be undertaken within a period of 15 months commencing from the date of the approval by Shareholders for the issue of the Rights MCBs at the EGM”
Temasek, with 55.46% of SIA, has given an irrevocable undertaking to vote in favour of all resolutions at a forthcoming EGM; and to subscribe for its entitlement to the rights issue and rights MCBs; and to take up any unsubscribed rights shares and rights MCBs.
Separately, SIA has also arranged
an S$4bn bridge loan facility with DBS Bank to support SIA’s near-term liquidity requirements.
Entitlements for the rights shares and rights MCBs will be renounceable and expected to trade on the SGX.
A rundown of terms and an indicative timetable below.
Konami Holdings (9766 JP) announced a ToSTNeT-3 buyback after the close today.
It will repurchase up to 2,800,000 shares for up to JPY 8 billion tomorrow morning before the open at JPY 3,225/share. That’s 2.07% of shares outstanding, but the real number is actually capped at 2,480,600 shares, which is 1.83%.
There is a seller coming in with 2,017,000 shares of that.
It will happen once. There is no indication that there will be more buying in the market afterwards. It is not planned to reduce float, but it will have a small impact on EPS.
You too can participate tomorrow morning at today’s closing price. If the US market is down several percent from the close, what would you want to do? Tomorrow morning, you might look at yesterday’s (currently today’s) closing price and decide “Hmmm, that was a good price.” If you look at things before the Japan market opens, you will have that chance.
If this interests you at all, read on.
Holdcos behaving badly is unusual, but it happens, as it is happening now, for one reason or another.
Firm Offers behaving badly, outside the realms of opportunistic/takeunder situations, are rare under normal circumstances.
Clearly we are not living under normal circumstances.
Augusta Capital (AUG NZ) is the latest in a string of firm offers to lapse with the Bidco (Centuria Capital (CNI AU) walking after invoking its right to a material adverse change (MAC) being triggered under their respective agreement (the scheme implementation agreement here).
Bumrungrad Hospital Pub Co (BH TB) declined 11.67% (it also went ex-div today) on news Bangkok Dusit Med Service (BDMS TB) have delayed their AGM to evaluate the impact of COVID-19 and consider and evaluate whether it is still appropriate to make the offer for BH TB.
Abano Healthcare (ABA NZ) has warned Corvid-19 may trigger a MAC.
Australian Unity Office Fund (AOF AU)‘s Offer has lapsed, ostensibly to a technical breach of its SIA, but probably virus-related. Metlifecare Ltd (MET NZ) is all but broken, despite repeated announcements assuring the Offer is (sort of) still on.
As always, more below the fold.
- If Alibaba believes that its stock is under-priced, it is highly likely that the company would be interested in buying-back a larger portion of the stake sale.
- Moreover, if Softbank also believes that Alibaba is under-priced, it’s likely that they would consider selling Alibaba’s shares through a forward contract, as they did four years ago.
In our previous note, we stated that iDreamsky Technology Limited (1119 HK)’s determined pursuit of Leyou Technologies (1089 HK) despite the market turmoil (and the corresponding challenge to secure financing), suggests that iDreamSky is not averse to paying a healthy premium and confident of securing a co-investor. On 19 March, Reuters suggested that iDreamSky is roping in CVC Capital Partners to help finance the acquisition at a $1.3 billion (HK$3.31 per share) valuation.
Leyou reported its 2019 annual results after market close on 25 March. The results were expected to be poor as Leyou released a profit warning statement on 17 March. While the results are disappointing, we believe that the results still offer justification (and encouragement) for iDreamSky to maintain its interest in Leyou. Consequently, we remain inclined to build a position in Leyou (last close implies a gross spread of 46% to the rumoured bid price).