Event-Driven

Today after the close, Benefit One Inc (2412 JP) amended its Tender Offer Target Opinion Statement to note that Dai Ichi Life had made a proposal to acquire 100%.
To allow the Board time to evaluate this proposal, the Company requested a Tender extension. Bidder M3 Inc (2413 JP) was obliged to extend 10 days. They extended 20 days.
This tells us a bunch of things. It is worth thinking about what happened to get here.

JIC Consortium Possibly In Line to Win Shinko At “¥800bn”, Which Makes You Go …

A Nikkei article today suggested that Fujitsu had granted preferential negotiating rights to buy Shinko Electric Industries (6967 JP) to a JIC-led consortium (including DNP and Mitsui Chem) for ~¥800bn.
This happened late in the afternoon session. Shares spiked 5+%, then were halted. A gray market ensued.
A Bloomberg article provided more info, and the same info nuanced slightly differently. The wording in yet other articles was interesting enough that it is worth discussing.

Shinko Electric (6967 JP): JIC’s Pre-Conditional Tender Offer at JPY5,920

After months of speculation, Shinko Electric Industries (6967 JP) has recommended the JIC alliance’s preconditional tender offer of JPY5,920 per share, an 18.9% premium to the undisturbed price (31 May).
The pre-condition relates to regulatory approvals in Japan, China, Korea, and possibly Vietnam. The offeror may waive the pre-condition. The offer is long-dated and expected to start in August 2024.
The minimum acceptance condition requires a 33.3% minority acceptance rate. Despite the low 7.1% premium to the last close, the offer resulted from a competing bidding process.

CPMC (906 HK): SASAC Usurper?

In what I viewed as one of the cleaner deals, CPMC Holdings (906 HK) announced a pre-conditional Offer from SASAC and the National Council for Social Security Fund of China.
A decent premium to undisturbed, a low tendering threshold, and a large shareholder giving an irrevocable – this looked done.
Now ORG Development Limited/ORG Technology Co., Ltd. A (002701 CH), holding 24.4% of shares out, is mulling a competing conditional general cash Offer. One of these Offers will get up.

CPMC Holdings (906 HK): Possible Scenarios as ORG Mulls a Competing Offer

CPMC Holdings (906 HK) disclosed that ORG Technology Co., Ltd. A (002701 CH), the second-largest shareholder, is considering a competing voluntary conditional general cash offer.
It is rare to bid against an SOE bidder. ORG likely has implicit SOE support to launch a competing offer due to the need for Chinese regulatory approvals.
The possible scenarios suggest Mr Zhang Wei is the winning bid’s kingmaker. Mr Wei sold down 260K shares at HK$6.35 on 8 December, indicating a willingness to exit.

Hollysys Gives Ascendent Capital The Nod. Agnostic Shareholders Will Approve

Hollysys Automation Technologies (HOLI US)‘s board persistent stonewalling was effectively terminated after the its court injunction was dismissed last month. An SGM will now take place sometime next month.
A firm merger agreement was expected this month, and Hollysys announced yesterday Ascendent Capital has emerged as the preferred suitor with a (revised) US$26.50/share Offer.
This looks to be (finally) all stitched up. Trading wide-ish to terms. Get involved.

HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)

Tongcheng Travel Holdings (780 HK) is expected to replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the March review.
Constituent changes and capping changes will result in a one-way turnover of 2.32% and that will result in a round-trip trade of US$628m.
Short interest on Tongcheng Travel Holdings (780 HK) is near its lows while there has been some recent short covering in GDS Holdings (9698 HK).

Identifying KOSPI Size Migration Candidates & Assessing Proactive Setup Feasibility

EcoPro Materials and Doosan Robotics, recent IPOs, join the Large category. Their inclusion signals at least two Large stocks, CS Wind Corp and BGF Retail, shifting to Mid.
There’s a chance three Mid-stocks will transition to Large: Ssangyong Cement, Hyundai Electric, and LOTTE Corp. Conversely, LS Corp, Hotel Shilla, and Kepco E&C will move from Large to Mid.
With ample time left in the screening period, cautious monitoring is essential. Still, Large→Mid candidates, with a notable gap from the ₩2.95T cutoff, warrant a focus on proactive setups.

MarketVector Vietnam Local Index Rebalance: One Add & Other Changes

CEO Group JSC (CEO VN) will be added to the MarketVector Vietnam Local Index at the close on 15 December.
Estimated one-way turnover is 5.24% and that results in a one-way trade of US$30m. There are a couple of stocks with more than 1x ADV to buy from passives.
The largest passive inflows will be in Vingroup Jsc (VIC VN), Vietnam Dairy Products JSC (VNM VN), CEO Group JSC (CEO VN) and Vinhomes (VHM VN).

The Week Ahead: US Inflation, Fed, Quarterly Rebalancing

By Charlotte van Tiddens, CFA

JSE indices get rebalanced in the closing auction on Thursday.
No constituent changes will be made to the ALSI, Top 40, Top 40 SWIX, FINI, FINDI or INDI. HAR will enter the RESI and AMS will fall out.
Largest buys: BTI, MNP, BHG, APN.

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Dec 12

Daily Brief Event-Driven: Denso Corp Placement – Quick Update – In Better Shape Now and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Denso Corp Placement – Quick Update – In Better Shape Now, Size Concern Remains
A Review of Tender Offers of Korean Companies in 2023
Exploring the Possibility of an LG Energy Solution Block Deal
Softbank (9984 JP): Adding a Strengthening JPY to the Mix
SIG/CWG Merger: Back Door Entry to the ASX200; Other Index Implications
Sigma Healthcare (SIG AU): Chemist Warehouse’s Reverse Takeover
Costa Group (CGC AU): Wide Spread Ahead of the 30 January Vote
Hollysys (HOLI US): Questionable Process Results in Ascendent’s Winning US$26.50 Bid
Costa Group’s Shareholder Vote Set. Get Involved
KKR/Smart Metering Systems: Agreed Cheap Offer

Denso Corp Placement – Quick Update – In Better Shape Now, Size Concern Remains

By Sumeet Singh

On 28th Nov 2023, Toyota Motor (7203 JP) announced that it would sell around 9.4% of Denso Corp (6902 JP) in order to reduce its cross-shareholding.
The shares hadn’t corrected much till our last note on 7th Dec 2023, they have since corrected by 6% .
We have covered the deal background and deal dynamics in our earlier notes. In this note, we talk about the recent share price movement, as compared to prior deals.

A Review of Tender Offers of Korean Companies in 2023

We review the major tender offers of Korean companies in 2023. Some of the major M&A tender offers that have closed this year include Osstem Implant and SM Entertainment.
Among the 15 companies targeted for tender offers, there are 5 companies including Osstem Implant, SM Entertainment, Lutronic Corp where the purpose of the tender offers is for M&A.
There were a total of 18 companies that submitted tender offer results announcements in 2023 (as of 11 December), up 157% YoY.

Exploring the Possibility of an LG Energy Solution Block Deal

The prevailing sentiment in Yeouido signals a shift of companies, originally preparing for EB issuances, toward block deals. Local brokerages are competing to identify potential block deals involving major issuers.
The local market anticipates LG Chem opting for a short-term block deal, considering the potential reduction of the LG Energy stake below 80% to alleviate global minimum corporate tax burdens.
Timing is a challenge, but based on corrections before July’s EB issuance, we could proactively plan for January. Abundant liquidity in LG Energy’s futures eases trading instrument concerns.

Softbank (9984 JP): Adding a Strengthening JPY to the Mix

By Victor Galliano

In 1HFY23, a weak JPY – with it having depreciated from JPY132 to JPY149 to the USD – has actively supported the group’s valuation, contributing 12% to SoftBank group’s NAV
The BoJ is looking to tighten monetary policy, whilst all other major central banks are set to cut rates; under this scenario, it is likely for the JPY to strengthen
Softbank shares trade at a 51%+ stated NAV discount yet we believe that there is downside risk to at least Arm’s high valuations, which could tighten the discount significantly

SIG/CWG Merger: Back Door Entry to the ASX200; Other Index Implications

Sigma Healthcare (SIG AU) has announced a potential merger with Chemist Warehouse Group (CWG) to create a leading healthcare wholesaler, distributor and retail pharmacy franchisor.
With a market cap of ~A$8.5bn and a free float market cap of ~A$4bn, the merged company will make the cut for inclusion in the S&P/ASX 200 (AS51 INDEX).
Inclusion in the S&P/ASX 100 Index looks just out of reach at the moment as does inclusion in some large global indices.

Sigma Healthcare (SIG AU): Chemist Warehouse’s Reverse Takeover

Privately-Held Chemist Warehouse’s (CWG) “transformational merger” with pharmaceutical wholesaler and franchisor Sigma Healthcare (SIG AU) will result in CWG’s shareholders holding 85.75% of the merged company.
CWG shareholders will receive A$700mn in cash plus new Sigma shares. Sigma will also undertake a $400mn equity raising to fund working capital needs.
Sigma has the backing of its largest shareholder HMC. The risk to completion pivots off ACCC approval.

Costa Group (CGC AU): Wide Spread Ahead of the 30 January Vote

The Costa Group Holdings (CGC AU) IE considers Paine Schwartz Partners’ A$3.20 offer fair and reasonable as it is towards the upper end of its A$2.62-3.28 valuation range.
The scheme requires China SAMR and European Commission approvals. SAMR approval poses a timing risk but the scheduling of the scheme meeting reflects PSP’s confidence in securing the approvals.
While not a knockout bid, the profit warning should help sway the retail vote in favour of the scheme. At the last close, the gross spread was 8.1%.

Hollysys (HOLI US): Questionable Process Results in Ascendent’s Winning US$26.50 Bid

Hollysys Automation Technologies (HOLI US) has agreed to be acquired by Ascendent Capital, the largest shareholder, for US$26.50, a 16.7% premium to the last close.
The Board’s claims of realising the highest shareholder value are not credible. The Board fails to explain why Ascendent’s offer is superior to Recco’s, although both have the same value.
Deal fatigue (the process first started in December 2020) and the 42% premium to the undisturbed price suggests meeting the simple majority threshold for a statutory merger is achievable.

Costa Group’s Shareholder Vote Set. Get Involved

On the 22 September, Costa Group Holdings (CGC AU) backed Paine Schwartz Partners’ (PSP) revised (and reduced) A$3.20/share best and final Offer.
Costa’s Scheme Meeting has now been tabled for the 30 December, with implementation expected on the 26 February. The IE is supportive and Costa’s board unanimously recommends the transaction.
This appears done. Key conditions are Costa’s shareholder vote and SAMR approval. I can’t see SAMR getting into a bind over berries.

KKR/Smart Metering Systems: Agreed Cheap Offer

By Jesus Rodriguez Aguilar

KKR takes advantage of a the depressed share price of Smart Metering Systems (SMS LN) that operates a stable, cash generating and misunderstood defensive business with revenues linked to inflation.
KKR offers 955p (+8.31875p/share declared divi), a 40% premium 40%, 15x EV/24e EBITDA. 0.1% irrevocable undertakings is negligible (top ten shareholders own c.54%). A counteroffer and/or sweetening is possible.
Spread is 0.45%/1.52% (gross/annualised, assuming settlement by 29 March, including declared dividend). Turnover has been high since announcement. Risk/return seems attractive. Recommendation is long SMS LN.

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Dec 11

Daily Brief Event-Driven: Outsourcing (2427 JP): Bain-Backed Preconditional MBO Tender Offer at JPY1 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Outsourcing (2427 JP): Bain-Backed Preconditional MBO Tender Offer at JPY1,755
TOPIX Inclusions: Who Is Ready (Dec 2023)
MVIS Global Junior Gold Miners Index Rebalance: Few Large Weight Changes
MVIS US Listed Semiconductor 25 Index Rebalance: TSMC Is the Big Sell
MVIS Global Rare Earth/Strategic Metals Index Rebalance: Albermarle (ALB US) Finally Added
Merger Arb Mondays (11 Dec) – Benefit One, Outsourcing, Tokyo Rakutenchi, CPMC, Weiqiao Textile
HK Connect SOUTHBOUND Flows (To 8Dec23); CNOOC & China Mobile Both Now To The Buy Side, Tencent Not
A/H Premium Tracker (To 8 Dec 23): H Down Vs A, Again, Despite SOUTHBOUND Buying; Pharmas Weak
Bain Deal for Outsourcing (2427): Cheeky, Opportunistic, Too Low
MVIS Australia Equal Weight Index Rebalance: Three Deletions & Other Changes

Outsourcing (2427 JP): Bain-Backed Preconditional MBO Tender Offer at JPY1,755

Outsourcing Inc (2427 JP) has recommended a Bain-backed preconditional MBO tender offer of JPY1,755 per share, a 52.1% premium to the undisturbed (8 December).
The offer is light vs. peer and historical multiples and opportunistically takes advantage of the 20% price fall due to the disclosure of employment adjustment subsidies issues on 1 August.
Based on the irrevocables, the minimum acceptance condition requires a 61.9% minority acceptance rate. The acceptance rate could prove challenging. The tender offer is to start by late January 2024.

TOPIX Inclusions: Who Is Ready (Dec 2023)

By Janaghan Jeyakumar, CFA

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
One of our TOPIX Inclusion Pre-event names Visional (4194 JP) confirmed it has received approval to move to the Prime Market in December 2023.
Currently, we are expecting one TOPIX Inclusion at the end of December 2023 and two more at the end of January 2024 (including Visional).

MVIS Global Junior Gold Miners Index Rebalance: Few Large Weight Changes

There are no constituent changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in December, but there are float and capping changes for some stocks.
Estimated one-way turnover is 2.8% and that leads to a one-way trade of US$122m.
There are 13 stocks with over US$5m to trade from passive trackers, though the impact is not very big on the stocks.

MVIS US Listed Semiconductor 25 Index Rebalance: TSMC Is the Big Sell

There are no constituent changes for the VanEck Vectors Semiconductor (SMH US) in December but there are a lot of float and capping changes.
Taiwan Semiconductor (TSMC) – ADR (TSM US) is the biggest sell while NVIDIA Corp (NVDA US) is the biggest buy.
Estimated one-way turnover is 6.6% resulting in a one-way trade of US$682m. Couple of stocks have greater than 0.2x ADV to trade.

MVIS Global Rare Earth/Strategic Metals Index Rebalance: Albermarle (ALB US) Finally Added

Albemarle Corp (ALB US) will replace ioneer (INR AU) in the VanEck Rare Earth/Strategic Me (REMX US) at the close on 15 December.
Constituent changes, float changes and capping changes result in an estimated one-way turnover is 13.4% and in a one-way trade of US$50m.
The mainland China stocks in the index have been the biggest laggards and this rebalance will reduce their weight in the index significantly.

Merger Arb Mondays (11 Dec) – Benefit One, Outsourcing, Tokyo Rakutenchi, CPMC, Weiqiao Textile

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – Outsourcing Inc (2427 JP), Healius (HLS AU), Irc Ltd (1029 HK), Orecorp Ltd (ORR AU), Hollysys Automation Technologies (HOLI US), Tokyo Rakutenchi (8842 JP).
Lowest spreads Toyo Construction (1890 JP), IJTT Co., Ltd. (7315 JP), Tietto Minerals Ltd (TIE AU), Azure Minerals (AZS AU), T&K Toka Co Ltd (4636 JP), Benesse Holdings (9783 JP).

HK Connect SOUTHBOUND Flows (To 8Dec23); CNOOC & China Mobile Both Now To The Buy Side, Tencent Not

SOUTHBOUND flows showing reversion tendencies continues for a second or third week after weeks of momentum.
SOUTHBOUND saw HK$11.2bn of INFLOWS on the week, a chunk of which was net buys on HK-listed ETFs, but Hs underperformed their A counterparts in the H/A pairs once again.
High-Div SOEs again saw action. This time with both CNOOC Ltd (883 HK)andChina Mobile (941 HK) seeing strong net buying as a percentage of volume. Tech was sold.

A/H Premium Tracker (To 8 Dec 23): H Down Vs A, Again, Despite SOUTHBOUND Buying; Pharmas Weak

The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
Hs with H/A pairs under-perform their As on average by 70+bp. Liquid HK H/A Pairs saw H/As -66bp. H/A Pair intracorrelation is down but it feels like liquidation.
SOUTHBOUND and NORTHBOUND flows were buys, and sells, respectively, but Hs have had two bad weeks in a row, and high premia A/H pairs have seen premia rise significantly.

Bain Deal for Outsourcing (2427): Cheeky, Opportunistic, Too Low

On Friday 8 December, Bain announced an MBO with Outsourcing Inc (2427 JP) Chair Haruhiko Doi to take the company private at a 51% premium. Looks good at first glance.
It is, however, an offer at ~6.6x Management Forecast derived Dec 2024 EBITDA. This for a top player in a fast-growing market where Street/mgmt both see up-and-to-the-right results from here.
This is a delayed start (late-Jan) for regulatory approvals. It is too cheap. It is blockable. But Doi-san is young at 64yrs old and he could come back years later.

MVIS Australia Equal Weight Index Rebalance: Three Deletions & Other Changes

A2 Milk Co Ltd (A2M AU), AMP Ltd (AMP AU) and Charter Hall (CHC AU) will be deleted from the MVIS Australia Equal Weight Index at the close 15 December.
Constituent changes plus capping and float changes result in a one-way turnover of 5.05% and will result in a one-way trade of A$99m.
There is a fair amount of short interest on the deletions and shorts could look to cover against the passive flow.

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Dec 10

Daily Brief Event-Driven: Benefit One (2412 JP): Thoughts on the Potential Minority Offer Price and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Benefit One (2412 JP): Thoughts on the Potential Minority Offer Price
Last Week in Event SPACE: Pasona/Benefit One, EOFlow, Swire Pacific, Hankook & Co, Toyo Construction
Index Rebalance & ETF Flow Recap: NKY, TW Div+, ASX200, NZX50, Mom30, Top10EW, MVW, Rakuten Bank
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Perpetual, Weiqiao Textile,Tokyo Rakutenchi,Toyo, Chindata
Weekly Deals Digest (10 Dec) – CPMC, Weiqiao, Benefit One, Tokyo Rakutenchi, Eoflow, Rept Battero

Benefit One (2412 JP): Thoughts on the Potential Minority Offer Price

Dai Ichi Life Insurance (8750 JP)‘s pre-conditional tender offer for Benefit One Inc (2412 JP) has a total value of JPY285,733 million (JPY1,800 per share).
The offer structure is that Pasona Group (2168 JP) will receive JPY1,800 less TOB tax benefits. Minorities will receive JPY1,800 plus the proportionate share of Pasona’s TOB tax benefits.
Our estimated minority offer price is JPY2,086 per share, which is 15.9% higher than the JPY1,800 floor price and 9.1% higher than the last close price.

Last Week in Event SPACE: Pasona/Benefit One, EOFlow, Swire Pacific, Hankook & Co, Toyo Construction

Dai Ichi Life (8750 JP)‘s proposal suggests more upside to Benefit One (2412 JP)‘s minorities than originally thought, and less upside (but still a chunk) to Pasona Group (2168 JP).
It’s all over for EOFlow (294090 KS), as Medtronic Plc (MDT US) folds it tent.
Cho Hyun-Sik (eldest son of Cho Yang-Rae, Chairman of Hankook & Company (000240 KS) has joined MBK Partners in making a partial Tender Offer for Hankook & Co.

Index Rebalance & ETF Flow Recap: NKY, TW Div+, ASX200, NZX50, Mom30, Top10EW, MVW, Rakuten Bank

There were a lot of rebalance implementations in China on Friday, plus a few upcoming index changes that were announced during the week.
There are a lot of implementations this week, with KOSPI 200 and KOSDAQ 150 on Thursday and then others across a bunch of countries on Friday.
There were big inflows to Tracker Fund of Hong Kong (2800 HK) during the week taking units outstanding to a new high. ETF inflows continue even as the market drops.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Perpetual, Weiqiao Textile,Tokyo Rakutenchi,Toyo, Chindata

I tally 42 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Four new deals discussed this week: WashSoul‘s tilt for Perpetual (PPT AU); CPMC (906 HK)‘s SASAC Offer; Weiqiao Textile (2698 HK)‘s Offer; and Tokyo Rakutenchi (8842 JP)‘s Tender Offer.
Key updates took place on: Origin Energy (ORG AU), Healius (HLS AU), Toyo Construction (1890 JP), Eoflow (294090 KS), and Chindata Group (CD US).

Weekly Deals Digest (10 Dec) – CPMC, Weiqiao, Benefit One, Tokyo Rakutenchi, Eoflow, Rept Battero

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – REPT BATTERO Energy (1998104D CH) IPO and Denso Corp (6902 JP)‘s US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback.
Event-Driven developments – Benefit One Inc (2412 JP), Tokyo Rakutenchi (8842 JP), CPMC Holdings (906 HK), Weiqiao Textile Co (2698 HK), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US).

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Dec 09

Daily Brief Event-Driven: Pasona Is Up Bigly. More To Come and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Pasona Is Up Bigly. More To Come
EQD | Nikkei 225 WEEKLY Analysis
Itausa (ITSA4 BZ) – Big NAV Discount Provides Attractive Indirect Exposure to Brazilian Bank Itaú

Pasona Is Up Bigly. More To Come

After M3 Inc (2413 JP) announced an intention to buy 51.16%-55.00% of Benefit One Inc (2412 JP) via a partial Tender Offer at ¥1,600, Pasona Group (2168 JP) took off.
Now Dai Ichi Life Insurance (8750 JP) has countered with an unsolicited ¥1,800/share Offer of Equity Value; TOB followed by a Benefit One buyback to mop up Pasona’s stake.
The big news is how tax would be applied under Dai Ichi’s deal structure, which should see Pasona’s net proceeds significantly exceed those under M3’s Offer.

EQD | Nikkei 225 WEEKLY Analysis

By Nico Rosti

The Nikkei 225 (NKY INDEX) closed the week down (CC=-2) at 32307.86, it’s OVERSOLD, WEEKLY and MONTHLY.
Our hypothesis is that this pullback is about to end (it could last maybe another week, or maybe it’s already over…), and will be followed by higher prices.
Go LONG the Nikkei 225 in the support area between 31000 and 32000, this coming week.

Itausa (ITSA4 BZ) – Big NAV Discount Provides Attractive Indirect Exposure to Brazilian Bank Itaú

By Victor Galliano

Itausa’s equity value is predominantly composed of its core holding stake in big cap Latin American bank Itaú Unibanco whilst it has actively reduced its exposure to wealth tech XP
Yet these two financials together account for over 90% of Itausa’s total equity value, with Itaú accounting for almost the entirety of that value
Itausa is trading at a HoldCo NAV discount of over 25%, which is historically high; currently, Itausa is an excellent vehicle that provides indirect and discounted exposure to Itaú

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Dec 08

Daily Brief Event-Driven: Dai-Ichi Life (8750) Proposes a Full Takeover of Benefit One (2412) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Dai-Ichi Life (8750) Proposes a Full Takeover of Benefit One (2412), Overbidding M3
New Deal for Benefit One (2168) Could Mean Lots More Money for Pasona (2168)
Benefit One (2412 JP): Dai-Ichi Life Counters M3 with a Privatisation Offer
KOSPI 200 Futures Calendar Spread Trading: Latest on Year-End Dividend Record Date Changes
Hankyu Hanshin Takeout of OS Corp
Oh, The Irony! Perpetual Rejects Soul Patts’ “Fair” Offer
Quiddity HSCEI Mar 24 Rebalance: Same Rankings; Same Questions
Quiddity HSTECH Mar 24 Leaderboard: Third Time’s A Charm?
NIFTY200 Momentum30 Index Rebalance: 18 Changes a Side, 58% Turnover, Momentum Intact
Focus on Leverage Reduction

Dai-Ichi Life (8750) Proposes a Full Takeover of Benefit One (2412), Overbidding M3

Today post-close, life insurer Dai Ichi Life Insurance (8750 JP) announced plans to launch a Tender Offer to buy out all minorities in Benefit One Inc (2412 JP) at ¥1,800/share.
M3’s Partial (55%) Tender at ¥1,600/share ending next week is obviously a question.
This is GREAT news for M&A in Japan. It’s good for holders of Benefit One and Pasona Group (2168 JP) too.

New Deal for Benefit One (2168) Could Mean Lots More Money for Pasona (2168)

Today, Dai Ichi Life Insurance (8750 JP) announced a proposed counter/over-bid for Benefit One Inc (2412 JP). ¥1800/share for minorities and a better (undefined) outcome for Pasona Group (2168 JP).
This throws the cat amongst the pigeons as it is unsolicited, for 100% not just to get Pasona’s stake, and it will require Benefit One recommend or not.
For Pasona, this deal structure would likely increase the net result from the stake sale, possibly substantially so. It’s in the details.

Benefit One (2412 JP): Dai-Ichi Life Counters M3 with a Privatisation Offer

Dai Ichi Life Insurance (8750 JP)‘s pre-conditional tender offer for Benefit One Inc (2412 JP) is JPY1,800 (floor price) + share of Pasona Group (2168 JP)’s TOB tax benefits.
The pre-conditions relate to the Board recommendation, Pasona support, and M3 Inc (2413 JP) offer not completing its partial offer. The tender offer starts in mid-January 2024 (20 business days).
While the Dai-ichi Life offer is light, M3’s engagement in a bidding war is low. The proposed minimum acceptance condition (15.51% ownership ratio) requires a 32% minority acceptance rate.

KOSPI 200 Futures Calendar Spread Trading: Latest on Year-End Dividend Record Date Changes

It would be prudent to anticipate that a considerable portion of these 636 companies will indeed adjust their dividend record dates, effective from this year’s year-end dividends.
One notable setup gaining attention is calendar spread trading for the KOSPI 200 futures in anticipation of an upward trend in the KOSPI 200 futures market towards the year’s end.
This entails buying the near-month and selling the far-month, liquidating when the price difference reverts. Traders pay attention to potential far-month divergence due to the shift in dividend record dates.

Hankyu Hanshin Takeout of OS Corp

The flip-side of the Toho Takeout of Rakutenchi – Buying a Real Estate Portfolio at a 50% Premium but 0.7x NAV. is the Hankyu-Hanshin deal to buy OS Corp (9637).
Tokyo-Based Toho buys out Kansai-based Hankyu-Hanshin’s stake in Tokyo-based Rakutenchi. HH buys out Toho’s stake in Kobe-based OS Corp. This is a “TOB Swap”. HH owns 21.7% of Toho too.
Like Rakutenchi, it is being done at a PBR higher than 1, but a decent discount to NAV. But this one is horribly, horribly illiquid (1,000 shs/day)

Oh, The Irony! Perpetual Rejects Soul Patts’ “Fair” Offer

Yesterday, Washington H. Soul Pattinson and Co. Ltd (SOL AU) made a $3bn scrip offer Aussie-listed equities manager Perpetual Ltd (PPT AU).
Under the indicative terms, PPT shareholders receive one-third of the Offer in SOL shares, and two-thirds in PPT’s asset management arm via an in-specie spin-off.
PPT rejected the proposal as it undervalues PPT, its corporate trust and wealth management businesses; and it offers SOL shares as consideration. But the Offer is not without merit.

Quiddity HSCEI Mar 24 Rebalance: Same Rankings; Same Questions

By Janaghan Jeyakumar, CFA

The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI in March 2024.
Based on the current data, I see only one low-conviction ADD and one low-conviction DEL.

Quiddity HSTECH Mar 24 Leaderboard: Third Time’s A Charm?

By Janaghan Jeyakumar, CFA

The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
In this insight, we take a look at the rankings of potential ADDs and potential DELs for the March 2024 index rebalance.
Based on the current numbers, our estimate shows there could be one ADD and one DEL but there are some question marks due to the past index review outcomes.

NIFTY200 Momentum30 Index Rebalance: 18 Changes a Side, 58% Turnover, Momentum Intact

There are 18 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 28 December. We had forecast all the index changes.
Estimated one-way turnover is 57.7% resulting in a one-way trade of INR 21.75bn (US$261m). 8 stocks have over 1x ADV to trade; 21 stocks have atleast 0.5x ADV to trade.
The adds have continued to outperform the deletes and the index and there could be further outperformance heading into year-end and buying from passive trackers.

Focus on Leverage Reduction

By Jesus Rodriguez Aguilar

Cellnex Telecom Sau (CLNX SM) plans to divest non-strategic assets in Ireland (for around €1.1 billion) and later in Austria in order to reduce its debt.
The new strategy focuses on portfolio rationalisation due to the higher debt costs. Cellnex seeks expansion in certain markets, but without taking on too much debt.
Using multiples EV/EBITDA, my base-case fair value estimate (pro-forma Ireland divestment) is €48.73; a reduction in leverage should drive multiple expansion. Long.

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Dec 07

Daily Brief Event-Driven: Swire (19 HK / 87 HK) Announces NEW and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Swire (19 HK / 87 HK) Announces NEW, Bigger, Better Buyback
StubWorld: Swire’s Latest Buyback
Rakuten Bank (5838 JP) Placement: Index Inclusion Will Absorb Some Stock
Eoflow Vs Insulet: Round II
CPMC Holdings (906 HK): Pre-Conditional Voluntary Offer at HK$6.87
Toho Takeout of Rakutenchi – Buying a Real Estate Portfolio at a 50% Premium but 0.7x NAV.
WHSP’s Non-Binding Indicative Offer for Perpetual Turned Down
China: Consolidated Flows at the Close Tomorrow
Tokyo Rakutenchi (8842 JP): Toho’s Tender Offer at JPY6,720
CPMC (906 HK): SASAC Takeover

Swire (19 HK / 87 HK) Announces NEW, Bigger, Better Buyback

Yesterday afternoon, Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK) announced a new buyback program. The last one was announced August 2022 and ran until the AGM.
That was HK$4bn. In the meantime the company paid an HK$8.12 special div on the Swire As (14%) in September (on top of the HK$1.20 regular div).
Now they have announced a new HK$6bn buyback buying both A Shares and B shares. Details, index impact, historical B/A trading patterns, etc, below.

StubWorld: Swire’s Latest Buyback

Yesterday afternoon (5th Dec), Swire Pacific (A) (19 HK) (and Swire Pacific (B) (87 HK)) announced a large (HK$6bn) buyback.
The response this morning sees Swire A up 14.4% (as I type), and 11.8% for Swire Bs.
I still like the idea of buying Swire A and Swire B outright here.

Rakuten Bank (5838 JP) Placement: Index Inclusion Will Absorb Some Stock

Rakuten Group (4755 JP) is looking to sell 25.5m shares of Rakuten Bank (5838 JP) via a secondary offering at a discount of between 8.7%-12.3%.
The offering will raise a maximum of US$433m and Rakuten Group (4755 JP) will use the funds to reduce its interest-bearing debt by the early repayment of its bonds.
There will be limited passive buying at the time of settlement of the stock but there is an index inclusion coming up that will result in passives buying.

Eoflow Vs Insulet: Round II

This insight provides a detailed analysis of Eoflow’s appellant brief (released on 4 December) on Insulet Corp (PODD US)’s lawsuit.
We provide the following three major reasons why we believe Eoflow will win versus Insulet in this lawsuit.
One of the most important arguments on Eoflow’s appellant brief is the DTSA three years statute of limitations.

CPMC Holdings (906 HK): Pre-Conditional Voluntary Offer at HK$6.87

CPMC Holdings (906 HK) has announced a pre-conditional voluntary offer from Changping Industrial at HK$6.87 per share, a 32.1% premium to the undisturbed price (16 August).
The pre-condition mainly relates to Chinese approvals. The offer is conditional on the offeror and concert parties representing more than 50% of voting rights.
The 50% minimum acceptance condition should be met due to COFCO’s irrevocable and the second-largest shareholders’ past dealings with COFCO. At the last close, the gross spread was 6.0%.

Toho Takeout of Rakutenchi – Buying a Real Estate Portfolio at a 50% Premium but 0.7x NAV.

Yesterday, Tokyo Rakutenchi (8842 JP)‘s #1 shareholder Toho Co Ltd (9602 JP) agreed to buy out the rest of Tokyo Rakutenchi from its #2 and #3 shareholders and minorities.
The Takeover Price is a 51% premium. Which is nice. But the asset is a real estate portfolio, and it was sold as a company, not a real estate portfolio.
The revaluation surplus to market value for the real estate assets is more than net equity, so Takeover PBR >1.0, but Price/NAV of the takeover is 0.7x, without synergies included.

WHSP’s Non-Binding Indicative Offer for Perpetual Turned Down

On 21 November, Washington H. Soul Pattinson and Co. Ltd (SOL AU) submitted a non-binding, indicative offer to acquire Perpetual Ltd (PPT AU) at ~A$27/share.
A few hours ago, that offer was rejected by Perpetual Ltd (PPT AU)‘s Board citing a material undervaluation, conditional on demerger of the Asset Management business and execution risk.
If the deal goes through, there will be small passive buying in Washington H. Soul Pattinson and Co. Ltd (SOL AU). No major index changes expected.

China: Consolidated Flows at the Close Tomorrow

Local indices in China including the CSI 300 Index, CSI 500 Index, STAR50 Index and SSE50 Index will rebalance at the close tomorrow.
There are many changes for the indices and there are stocks that are adds and/or deletes from multiple indices which results in cumulative or offsetting flows.
We estimate turnover at the close tomorrow in China will be around US$7.5bn with big impact on a lot of stocks.

Tokyo Rakutenchi (8842 JP): Toho’s Tender Offer at JPY6,720

Tokyo Rakutenchi (8842 JP) has recommended Toho Co Ltd (9602 JP)’s tender offer of JPY6,720 per share, a 51.5% premium to the undisturbed (6 December).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 24.29% ownership ratio.
Based on the irrevocables, the minimum acceptance condition requires a 30.2% minority acceptance rate. This acceptance rate is doable as the offer represents a ten-year high.

CPMC (906 HK): SASAC Takeover

Packaging play CPMC Holdings (906 HK) has announced a pre-conditional Offer from SASAC and the National Council for Social Security Fund of China.
The joint offerors have offered $6.87/share, an okay 32.1% premium to last close. Pre-cons involve the standard PRC regulators. The Offer itself is contingent on a 50% acceptance hurdle.
China Foods (506 HK) has given an irrevocable for its 29.7% stake. This will turn unconditional. The timing of the Offer is interesting as a VP is under graft investigation.

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Dec 06

Daily Brief Event-Driven: P.S.Mitsubishi Contruction (1871 JP) – Pro-Ration Expectations Update and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

P.S.Mitsubishi Contruction (1871 JP) – Pro-Ration Expectations Update
Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Other Changes
EOFLOW/Medtronic Tender: Appeals Brief Is All Bark, No Bite
Dissenters Mobilise As Chindata (CD US)’s Shareholders Approve Bain’s Offer
Navigating the Potential of Hankook & Company’s Revised Tender Offer
Medikit (7749 JP) Below Market Tender Offer Buyback
JETS US Equity: Takeoff Accomplished, Time to Return to Base
EQD | Nikkei 225 MONTHLY Analysis

P.S.Mitsubishi Contruction (1871 JP) – Pro-Ration Expectations Update

The Partial Offer launched last month by Taisei Corp (1801 JP) to take a 50.2% stake in Ps Mitsubishi Construction (1871 JP) ends at the beginning of next week.
This hasn’t been a very “exciting” trade. Small, boring sector. One big company selling to another. But it has traded cheap. However, volume has been high.
Volume has been so high it causes me to revisit my pro-ration expectations, so I have updated estimates and tables below.

Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
Depending on the changes, passives trackers will need to buy 2.4-22.5x ADV (10-24% of real float) on the inclusions and sell between 3.5-42.5x ADV on the deletions.
Fast Retailing (9983 JP) capping, Nitori Holdings (9843 JP) increase in PAF, a big funding trade, and potentially new stocks being added in two-steps.

EOFLOW/Medtronic Tender: Appeals Brief Is All Bark, No Bite

Eoflow (294090 KS) filed a 117-page appeal against the amended preliminary injunction (PI), sparking a 16% share price rally. Insulet Corp (PODD US) is required to respond by 14 December.
Eoflow argues that the Massachusetts District Court committed legal errors. However, Eoflow’s arguments are rehashed from those that the district court has already dismissed with balanced counterarguments.
The appeal is Eoflow’s last roll of the dice. Eoflow’s appeal brief worryingly notes that the PI profoundly imperils both the Medtronic transaction and its status as a going concern.

Dissenters Mobilise As Chindata (CD US)’s Shareholders Approve Bain’s Offer

Back on the 11 August, Chinese data center provider Chindata Group (CD US) and major shareholder Bain Capital entered into a definitive agreement at US$8.60/ADS.
The EGM was held yesterday, the 4 December, and the merger was approved by 97.75% of the total votes cast. No specific PRC regulatory approval is needed for this merger.
All good right? Not quite. There’s still the nagging issue involving 22.79% of shares out objecting to the deal, exceeding the 12% dissenting threshold, a condition to the merger.

Navigating the Potential of Hankook & Company’s Revised Tender Offer

With the price almost 10% above ₩20,000, it’s practically fair to regard MBK’s tender offer as effectively canceled, raising the question of the proxy battle’s potential continuation.
There is a significant likelihood that MBK has prepared a next-phase plan involving an upward adjustment of the offering price, considering the tight situation of successfully securing the target volume.
Essentially, there’s a high likelihood that the situation will resemble the earlier battle between HYBE and Kakao Corp over S.M. Entertainment Co at the start of this year.

Medikit (7749 JP) Below Market Tender Offer Buyback

Japanese medical products maker Medikit Co Ltd (7749 JP) Tuesday announced a buyback of ~12% of its shares from the founder’s company.
The stock is extraordinarily illiquid. 12mo ADV is <US$40k/day. But Medikit runs 40% gross margins, 20% EBIT margins, and trades at an EV/revenue ratio of ~0.8x. It’s cash-rich, and cheap.
But it’s an interesting situation. The buyback (and its reason) combined with the shareholder structure allow me to idly speculate this is an MBO candidate.

JETS US Equity: Takeoff Accomplished, Time to Return to Base

By Mohshin Aziz

The surprise US$1.9 billion acquisition of Hawaiian Holdings (HA US) by Alaska Air Group (ALK US) could potentially rerate the U.S. airline sector
US Global Jets ETF (JETS US) is up 16% from our initiation on 13 November, a mere 5% to our target price of US$19
We advocate to take profits and square this trade in the upcoming days

EQD | Nikkei 225 MONTHLY Analysis

By Nico Rosti

After a strong rally in November, the Nikkei is currently in a temporary corrective phase, reaching between the Q1 and Q2 support levels of the MRM LONG chart.
There are 2 possible paths from here: 1) a modest pullback, followed by a rally into the end of December, 2) a dive to <= 31672, and December closes down.
Both these scenarios offer very good seasonal LONG odds for January closing up (based on our SRM model), so we suggest going LONG the Nikkei 225 on the pullback.

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Dec 05

Daily Brief Event-Driven: Benefit One (2412) – Pro-Ration Expectations Update and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Benefit One (2412) – Pro-Ration Expectations Update
NIFTY200 Momentum30 Index Rebalance Preview: 58% Turnover & Strong Momentum
Korean Government Launches a Tender Offer to Sell a 29.3% Stake in NXC Corp for US$3.6 Billion
Weiqiao Textile (2698 HK): Pre-Conditional Privatisation Offer at HK$3.50
A/H Premium Tracker (To 1 Dec 23): H Down Vs A, SOUTHBOUND Selling Continues, Tech Still Sold
MVIS Australia Equal Weight Index Rebalance Preview: Stocks Close to Deletion Zone
Weiqiao Textile (2698 HK)’s Pre-Conditional Merger By Absorption
HK Connect SOUTHBOUND Flows (To 1 Dec 23); Meituan Dip-Buyings Leads Inflows; CNOOC Vs 941 on SOEs
Seven & I Ventures Down Under with 7-Eleven Australia Acquisition
Elder Brother Cho Hyun-Sik Joins Hands With MBK Partners to Tender Offer Hankook & Co. Shares

Benefit One (2412) – Pro-Ration Expectations Update

Since the announcement of the Benefit One Inc (2412 JP) partial offer, the stock has traded 16+mm shares in the market, which is about 40% of Real World Float.
Some of that has been traded multiple times. Looking only at that data would suggest a higher pro-ration, but I expect there is other data one must take into account.
Benefit One shares are currently trading at a level suggesting either lower participation OR higher back-end despite the earnings guidance downgrade at announcement.

NIFTY200 Momentum30 Index Rebalance Preview: 58% Turnover & Strong Momentum

There could be 18 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 28 December.
If all changes are on expected lines, one-way turnover is estimated at 58.2% and that will result in a one-way trade of INR 20bn (US$240m).
Since July, the potential adds to the index have outperformed the index and the potential deletes by a big margin. Momentum could keep the outperformance going till implementation date.

Korean Government Launches a Tender Offer to Sell a 29.3% Stake in NXC Corp for US$3.6 Billion

On 4 December, the South Korean government announced that it will launch a tender offer to sell a 29.3% stake in NXC Corp for about US$3.6 billion.
The two daughters of ex-Chairman Kim Jung-Ju handed over a 29.3% stake in NXC Corp to the Korean government as payment-in-kind in May 2023 to pay for inheritance taxes.
The tender offer sale of the Korean government’s 29.3% stake in NXC Corp (worth nearly 4.7 trillion won) is a positive catalyst for Nexon (3659 JP).

Weiqiao Textile (2698 HK): Pre-Conditional Privatisation Offer at HK$3.50

Weiqiao Textile Co (2698 HK) announced a pre-conditional privatisation offer from Weiqiao Chuangye at HK$3.50 per H Share, a 104.7% premium to the undisturbed price.
The pre-condition of regulatory approvals from the NDRC, MOC and SAFE. The key condition is approval by at least 75% independent H Shareholders (<10% of all independent H Shareholders rejection).
The offer price is final. Despite the premium, the offer is struck materially below net cash. Nevertheless, the irrevocable from the largest H Shareholder should help the offer get up.

A/H Premium Tracker (To 1 Dec 23): H Down Vs A, SOUTHBOUND Selling Continues, Tech Still Sold

The New and Better (17 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
Hs with H/A pairs under-perform their As on average by 220+bp. Liquid HK H/A Pairs saw H/As -244bp. H/A Pair intracorrelation is up and A premia continue to trend better.
SOUTHBOUND and NORTHBOUND were net buys overall but Hs had a VERY BAD WEEK vs their A-Shares where pairs were concerned.

MVIS Australia Equal Weight Index Rebalance Preview: Stocks Close to Deletion Zone

AMP Ltd (AMP AU) and A2 Milk Co Ltd (A2M AU) could be deleted as the lowest ranked current index constituents.
There are three other stocks that are close to the deletion threshold and a change in the free float could result in the stocks being deleted.
With the exception of A2 Milk Co Ltd (A2M AU), shorts have been increasing on nearly all the potential and close deletions.

Weiqiao Textile (2698 HK)’s Pre-Conditional Merger By Absorption

After shares were suspended on the 27 November, Weiqiao Textile Co (2698 HK) has now announced a pre-conditional privatisation at HK$3.50 per H-share.
This Offer, from its parent, is by way of a Merger by Absorption, which incorporates a Scheme-like vote. There is no tendering condition.
The Offer Price is a premium to last close is a hefty 104.68%. and around a six-year high. This is done.

HK Connect SOUTHBOUND Flows (To 1 Dec 23); Meituan Dip-Buyings Leads Inflows; CNOOC Vs 941 on SOEs

SOUTHBOUND flows the last several weeks clearly indicated a momentum move. The top net sells were all down. The top buys were all up. This week saw reversion.
SOUTHBOUND saw net buys of HK$3.5bn this week, breaking a nascent sell streak. Meituan dip-buying Wednesday to Friday was worth the entire net buy.
High-Div SOEs remain mixed. CNOOC (883) saw decent net buying, and China Mobile saw decent net selling. Again.

Seven & I Ventures Down Under with 7-Eleven Australia Acquisition

By Oshadhi Kumarasiri

Seven & I Holdings (3382 JP) announced last week that it had agreed to buy the 7-Eleven convenience store chain in Australia for A$1.71bn ($1.1bn).
The acquisition may not immediately impact Seven & I’s stock price like Speedway did, given its smaller scale, lack of synergies, and less favorable macroeconomic conditions.
The main positive takeaway from this news is that the acquisition price for 7-Eleven Australia is not as extravagant as the amount Seven & I paid for the Speedway acquisition.

Elder Brother Cho Hyun-Sik Joins Hands With MBK Partners to Tender Offer Hankook & Co. Shares

Cho Hyun-Sik has joined hands with MBK Partners to make a tender offer for shares of Hankook & Co for a minimum of 20.35% and maximum of 27.32% stake.
The tender offer price is 20,000 won which is 18.9% higher than the closing price of 16,820 won on Monday.
Chairman Cho Hyun-Bum may try to find a strategic ally to launch his own tender offer of Hankook & Co shares at even higher tender offer price than 20,000 won.

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Dec 04

Daily Brief Event-Driven: March 2024 Nikkei 225 Rebal – Socionext and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade
Taisho Pharmaceutical (4581 JP): Japan Catalyst Pushes for a Bump
S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough
Yuanta/P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover
FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M
Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea
Merger Arb Mondays (4 Dec) – Origin, OreCorp, Healius, CIMC Vehicles, T&K Toka, Eoflow, Hollysys
S&P/NZX 50 Index Rebalance: Two High Impact Changes Coming Up
Selected European HoldCos and DLC: November’23 Report

March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade

Minimal changes in the rankings since last time. Socionext (6526), Disco (6146), and a Consumer Goods stock (Zozo (3092) top-ranked, Ryohin Keikaku (7453) a better choice) are ADDs.
The DELETEs are still Takara Holdings (2531), Pacific Metals (5541), Sumitomo Osaka Cement (5232) with a dark horse candidate in Hitachi Zosen (7004) to replace Takara.
There is the upweight to Nitori (9843) AND funkiness with Fast Retailing (9983) to consider. We are right on the threshold. The question is whether it gets “help” in January.

Taisho Pharmaceutical (4581 JP): Japan Catalyst Pushes for a Bump

Japan Catalyst’s press release supports the idea of a Taisho Pharmaceutical Holdin (4581 JP) MBO but not the proposed offer price as it implies a P/B less than 1.0x.
The press release is a discovery exercise encouraging other like-minded shareholders to show their hand. The shares are trading marginally above the JPY8,620 offer.
While justifiable, a bump is unlikely due to the lack of a substantial activist shareholder, irrevocables, no competing bid and the offer’s 55.5% premium to the undisturbed price.

S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough

There are 3 changes for the S&P/ASX 200 (AS51 INDEX) that will be implemented at the close on 15 December. One name is a relative surprise.
There will be 8-15 days of ADV to buy on the inclusions and there will be 12-18 days of ADV to sell on the deletions.
Cumulative excess volume and changes in short interest indicate there will be positioning in most stocks. But it may not yet be enough to cover the passive trade.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover

There are 5 adds and 4 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in December with implementation taking place from 15-21 December.
The constituent changes and capping changes result in an estimated one-way turnover of 16.1% resulting in a one-way trade of US$1.26bn.
There will be positioning in a lot of the adds/deletes and the real action could be in the other stocks with capping and/or funding flows.

FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M

The Samsung KODEX Fn Top10 Equal Weight ETF (395170 KS) tracks the FnGuide Top 10 Index and has an AUM of US$264m.
We expect Kia Corp (000270 KS) to replace Posco Future M (003670 KS) in the index at the December rebalance.
There will be 0.4x ADV to buy in Kia Corp (000270 KS) while passives will need to sell 0.1x ADV of Posco Future M (003670 KS).

Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea

Korea’s financial authorities prompted LPs to refrain from providing liquidity to ETFs through short-selling. This has resulted in a significant increase in both the frequency and magnitude of tracking errors.
Therefore, it’s time to actively explore this from an arbitrage trading standpoint. ETF arbitrage involves straightforward steps: purchasing and redeeming ETFs, followed by selling the underlying shares in the market.
The focus should be particularly directed towards sector ETFs that include a select few large-cap stocks carrying single-stock futures.

Merger Arb Mondays (4 Dec) – Origin, OreCorp, Healius, CIMC Vehicles, T&K Toka, Eoflow, Hollysys

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – Eoflow (294090 KS), 111 Inc (YI US), Irc Ltd (1029 HK), Orecorp Ltd (ORR AU), Healius (HLS AU), Hollysys Automation Technologies (HOLI US), Origin Energy (ORG AU).
Lowest spreads – Azure Minerals (AZS AU), Tietto Minerals Ltd (TIE AU), Toyo Construction (1890 JP), T&K Toka Co Ltd (4636 JP), Pact Group Holdings (PGH AU), Taisho.

S&P/NZX 50 Index Rebalance: Two High Impact Changes Coming Up