Category

Mergers and Acquisitions

Brief M&A: Maeda Road Starts Talks With Nippo (1881) As a White Knight. Not a Winner Yet. and more

By | Daily Briefs, Mergers and Acquisitions

In this briefing:

  1. Maeda Road Starts Talks With Nippo (1881) As a White Knight. Not a Winner Yet.

1. Maeda Road Starts Talks With Nippo (1881) As a White Knight. Not a Winner Yet.

Screenshot%202020 02 28%20at%2012.10.11%20am

Maeda Road Construction Co (1883 JP) today announced the start of talks with Nippo Corp (1881 JP) as a measure to counter Maeda Corp (1824 JP)‘s Tender Offer. 

It is a very hand-wave-y announcement with comments about cost pull, resource allocation, efficiencies, working towards the public good by constant improvement of social infrastructure, and then at the very end…

The two companies will proceed with the discussions on the specific terms of the alliance while complying with the antimonopoly law and other relevant laws and regulations.

The history here – the reason why that last line is needed – tells you something about what this announcement means. 

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Brief M&A: Maeda Road Starts Talks With Nippo (1881) As a White Knight. Not a Winner Yet. and more

By | Daily Briefs, Mergers and Acquisitions

In this briefing:

  1. Maeda Road Starts Talks With Nippo (1881) As a White Knight. Not a Winner Yet.
  2. Bumrungrad: Bangkok Dusit’s Poor Diagnosis
  3. Why Tesco Should Not Sell Its Thai Business

1. Maeda Road Starts Talks With Nippo (1881) As a White Knight. Not a Winner Yet.

Screenshot%202020 02 28%20at%2012.10.11%20am

Maeda Road Construction Co (1883 JP) today announced the start of talks with Nippo Corp (1881 JP) as a measure to counter Maeda Corp (1824 JP)‘s Tender Offer. 

It is a very hand-wave-y announcement with comments about cost pull, resource allocation, efficiencies, working towards the public good by constant improvement of social infrastructure, and then at the very end…

The two companies will proceed with the discussions on the specific terms of the alliance while complying with the antimonopoly law and other relevant laws and regulations.

The history here – the reason why that last line is needed – tells you something about what this announcement means. 

2. Bumrungrad: Bangkok Dusit’s Poor Diagnosis

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Bangkok Dusit Med Service (BDMS TB) has made a Conditional Voluntary Tender Offer (CVTO) for 24.99% held Bumrungrad Hospital Pub Co (BH TB) at THB125/share, an 11.6% premium to last close.

That Offer Price may increase by up to 20% – or up to THB150/share – depending on the “appropriateness of the market directions of the market of the Stock Exchange of Thailand and the trading price of BH at the time.”

In addition to requiring approval from BDMS’ shareholders, the key condition to the Offer will be the approval from the Trade Competition Commission (TCC). That is unlikely to be a defeating condition.

The initial headline price, and even the high end of this indicative range, appears highly opportunistic.

More below the fold.

3. Why Tesco Should Not Sell Its Thai Business

Margin

Tesco PLC (TSCO LN)‘s CEO Dave Lewis has done an admirable job turning around Tesco, despite a pretty muted share price reaction since his arrival in late 2014. Despite improving profitability and selling prized assets such as Korea to reduce debt, Tesco’s share price recovery has moved in-line with the FTSE 100 over the past five years whilst Tesco shares are worth half of their peak 13 years ago.

We argue the latest decision by Tesco to consider selling its Thai/Malaysian assets is misguided for three reasons; which are as follows:

  1. Tesco’s Thailand and Malaysian robust valuation are already broadly reflected in the group valuation.

  2. Tesco would heavily dilute its group margins and lose 12% of its EBIT whilst doubling down on a UK business that continues to lose market share.

  3. Tesco could see significant supply chain disruptions as it uses its Thai business as an importing hub. 

For more of our commentary over the years on Tesco and Thai retail, you can find our content here: 

Central Retail IPO: Trading Debut, Valuation Scenario Analysis 

Central Retail Corp IPO Initiation: Trouble at Till 

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Brief M&A: Maeda Road Starts Talks With Nippo (1881) As a White Knight. Not a Winner Yet. and more

By | Daily Briefs, Mergers and Acquisitions

In this briefing:

  1. Maeda Road Starts Talks With Nippo (1881) As a White Knight. Not a Winner Yet.
  2. Bumrungrad: Bangkok Dusit’s Poor Diagnosis
  3. Why Tesco Should Not Sell Its Thai Business
  4. Wheelock’s Unexpected Two-Step Privatisation Proposal

1. Maeda Road Starts Talks With Nippo (1881) As a White Knight. Not a Winner Yet.

Screenshot%202020 02 28%20at%2012.10.11%20am

Maeda Road Construction Co (1883 JP) today announced the start of talks with Nippo Corp (1881 JP) as a measure to counter Maeda Corp (1824 JP)‘s Tender Offer. 

It is a very hand-wave-y announcement with comments about cost pull, resource allocation, efficiencies, working towards the public good by constant improvement of social infrastructure, and then at the very end…

The two companies will proceed with the discussions on the specific terms of the alliance while complying with the antimonopoly law and other relevant laws and regulations.

The history here – the reason why that last line is needed – tells you something about what this announcement means. 

2. Bumrungrad: Bangkok Dusit’s Poor Diagnosis

Image 4689298321582770582330

Bangkok Dusit Med Service (BDMS TB) has made a Conditional Voluntary Tender Offer (CVTO) for 24.99% held Bumrungrad Hospital Pub Co (BH TB) at THB125/share, an 11.6% premium to last close.

That Offer Price may increase by up to 20% – or up to THB150/share – depending on the “appropriateness of the market directions of the market of the Stock Exchange of Thailand and the trading price of BH at the time.”

In addition to requiring approval from BDMS’ shareholders, the key condition to the Offer will be the approval from the Trade Competition Commission (TCC). That is unlikely to be a defeating condition.

The initial headline price, and even the high end of this indicative range, appears highly opportunistic.

More below the fold.

3. Why Tesco Should Not Sell Its Thai Business

Margin

Tesco PLC (TSCO LN)‘s CEO Dave Lewis has done an admirable job turning around Tesco, despite a pretty muted share price reaction since his arrival in late 2014. Despite improving profitability and selling prized assets such as Korea to reduce debt, Tesco’s share price recovery has moved in-line with the FTSE 100 over the past five years whilst Tesco shares are worth half of their peak 13 years ago.

We argue the latest decision by Tesco to consider selling its Thai/Malaysian assets is misguided for three reasons; which are as follows:

  1. Tesco’s Thailand and Malaysian robust valuation are already broadly reflected in the group valuation.

  2. Tesco would heavily dilute its group margins and lose 12% of its EBIT whilst doubling down on a UK business that continues to lose market share.

  3. Tesco could see significant supply chain disruptions as it uses its Thai business as an importing hub. 

For more of our commentary over the years on Tesco and Thai retail, you can find our content here: 

Central Retail IPO: Trading Debut, Valuation Scenario Analysis 

Central Retail Corp IPO Initiation: Trouble at Till 

4. Wheelock’s Unexpected Two-Step Privatisation Proposal

Precedents

Wheelock (20 HK) is one of the largest property developers in Hong Kong. On 27 February, its shares rose 40% on the back of a privatisation offer from the Woo family, its controlling shareholder. The Woo family is taking private Wheelock through a two-step transaction. First, Wheelock will distribute its equity holdings in Wharf Real Estate Investment (1997 HK) and Wharf Holdings (4 HK) by offering one share each of Wharf REIC and Wharf Holdings. Second, the Woo family will offer HK$12.00 cash per Wheelock scheme share. 

Overall, we believe that the offer is a reasonable but not a knockout bid. In combination with the bid’s small cash component, short-term investors/traders should lock in profits as we expect the value of the privatisation bid to creep downwards. 

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Brief M&A: Wheelock’s Privatisation Offer and more

By | Daily Briefs, Mergers and Acquisitions

In this briefing:

  1. Wheelock’s Privatisation Offer

1. Wheelock’s Privatisation Offer

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Wheelock (20 HK) has announced a privatisation Offer from Admiral Power (a wholly-owned vehicle of Peter Woo), by way of a Scheme, at an aggregate Scheme Offer Price of HK$71.90 (a 52.2% premium to last close), comprising one share in Wharf Holdings (4 HK), one share in Wharf Real Estate Investment (1997 HK) (WREIC) and HK$12, for every share of Wheelock.

The Offer price will not be increased. Apart from the distribution of any dividend for FY19, the Offer Price will be netted of any other distribution. A second interim dividend of HK$1.05/share was declared in FY18. 

There is no obligation to make a mandatory general offer for either Wharf or WREIC.

Disinterested shareholders comprise 624.9mn shares, or 30.44%. Therefore the blocking stake at the Scheme Meeting is 62.49mn shares or 3.044% of shares out. 

Wheelock is a Hong Kong-incorporated company, therefore the headcount test does not apply. 

This deal appears sufficiently structured to get up. 

As always, more below the fold.

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Brief M&A: Wheelock’s Privatisation Offer and more

By | Daily Briefs, Mergers and Acquisitions

In this briefing:

  1. Wheelock’s Privatisation Offer
  2. Hitachi Metals- Dressing Up For M&A With Mitsubishi Hitachi Tool Sale?

1. Wheelock’s Privatisation Offer

Image 33587937151582785130439

Wheelock (20 HK) has announced a privatisation Offer from Admiral Power (a wholly-owned vehicle of Peter Woo), by way of a Scheme, at an aggregate Scheme Offer Price of HK$71.90 (a 52.2% premium to last close), comprising one share in Wharf Holdings (4 HK), one share in Wharf Real Estate Investment (1997 HK) (WREIC) and HK$12, for every share of Wheelock.

The Offer price will not be increased. Apart from the distribution of any dividend for FY19, the Offer Price will be netted of any other distribution. A second interim dividend of HK$1.05/share was declared in FY18. 

There is no obligation to make a mandatory general offer for either Wharf or WREIC.

Disinterested shareholders comprise 624.9mn shares, or 30.44%. Therefore the blocking stake at the Scheme Meeting is 62.49mn shares or 3.044% of shares out. 

Wheelock is a Hong Kong-incorporated company, therefore the headcount test does not apply. 

This deal appears sufficiently structured to get up. 

As always, more below the fold.

2. Hitachi Metals- Dressing Up For M&A With Mitsubishi Hitachi Tool Sale?

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Yesterday on the 26th February, Mitsubishi Materials announced that it would be acquiring the remaining 49% stake in Mitsubishi Hitachi Tool Engineering from Hitachi Metals. The deal is set to complete on April 1st and value has not been disclosed but we wonder if this is a step towards a sale of Hitachi Metals by parent Hitachi.

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Brief M&A: Wheelock’s Privatisation Offer and more

By | Daily Briefs, Mergers and Acquisitions

In this briefing:

  1. Wheelock’s Privatisation Offer
  2. Hitachi Metals- Dressing Up For M&A With Mitsubishi Hitachi Tool Sale?
  3. Thai Banks: KBANK & BBL (With a Permata on the Side)

1. Wheelock’s Privatisation Offer

Image 33587937151582785130439

Wheelock (20 HK) has announced a privatisation Offer from Admiral Power (a wholly-owned vehicle of Peter Woo), by way of a Scheme, at an aggregate Scheme Offer Price of HK$71.90 (a 52.2% premium to last close), comprising one share in Wharf Holdings (4 HK), one share in Wharf Real Estate Investment (1997 HK) (WREIC) and HK$12, for every share of Wheelock.

The Offer price will not be increased. Apart from the distribution of any dividend for FY19, the Offer Price will be netted of any other distribution. A second interim dividend of HK$1.05/share was declared in FY18. 

There is no obligation to make a mandatory general offer for either Wharf or WREIC.

Disinterested shareholders comprise 624.9mn shares, or 30.44%. Therefore the blocking stake at the Scheme Meeting is 62.49mn shares or 3.044% of shares out. 

Wheelock is a Hong Kong-incorporated company, therefore the headcount test does not apply. 

This deal appears sufficiently structured to get up. 

As always, more below the fold.

2. Hitachi Metals- Dressing Up For M&A With Mitsubishi Hitachi Tool Sale?

Image 30634483751582775888628

Yesterday on the 26th February, Mitsubishi Materials announced that it would be acquiring the remaining 49% stake in Mitsubishi Hitachi Tool Engineering from Hitachi Metals. The deal is set to complete on April 1st and value has not been disclosed but we wonder if this is a step towards a sale of Hitachi Metals by parent Hitachi.

3. Thai Banks: KBANK & BBL (With a Permata on the Side)

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As Smartkarma contributor Brian Freitas has ably discussed in a couple of pieces on the Kasikornbank PCL (KBANK TB) buyback program which has been ongoing for the past two weeks, it has been a setup situation to play the pair against Bangkok Bank Public (BBL TB).

The normal way of things might be to get long the stock which was about to prospectively buy back a huge portion of its ADV after MSCI had announced a down-weight, and short the one which still had potential large overhang from a possible change in the NVDR limit 4-5 months out.

Indeed on the day of the announcement (30 Jan), KBANK shares rallied 6%. They rallied further the next day. What had been an 6-7% underperformance against BBL in the first week after the MSCI news turned into a 15% rebound against BBL to the day after the buyback announcement. 

In the next two weeks until the buyback started, KBANK gained 1.5%, but underperformed BBL by about 2%. Then the buyback started…

The first four days of the buyback KBANK averaged buybacks of 27.3% of daily volume, and KBANK gained ~2.3% vs BBL. The next day it was 15.5%, and BBL outperformed KBANK by 3.4%. And BBL has outperformed KBANK each day since that day as well. 

On Wednesday 26 Feb, the day before the last day of the buyback, KBANK was down a shocking 9.7% as the SET Index as a whole had its worst single day in 6 years at -5.05%. Surprisingly, KBANK did not execute nearly as much as they could have – a measly 1.05mm shares in the face of massive selling pressure.

That leaves up to 5,076,000 shares to buy today. It is a goodly amount, and it is possible that they left a fair bit for the last day so they could prove a point. They are certainly not in danger of breaching the limit of the upper limit (buybacks must not purchase shares at more than 115% of the average of the previous five closes (i.e. they’ll have to keep it below THB 147.55). 

But there is pushing and shoving today, there may be a setup opportunity. Today is a day to watch.

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Brief M&A: SBI Cards IPO – Hedge Basket for a Volatile Market and more

By | Daily Briefs, Mergers and Acquisitions

In this briefing:

  1. SBI Cards IPO – Hedge Basket for a Volatile Market

1. SBI Cards IPO – Hedge Basket for a Volatile Market

Image

SBI Cards (SBICARDS IN) is looking to raise INR 5bn through a fresh issue of shares and up to INR 98.54bn through an offer of existing shares at a price range of INR 750-755 per share. The issue opens on 2 March and closes on 5 March while the shares are expected to list on 16 March.

With an almost two week gap between application and listing, plus a 30 day lock in period for anchor investors, hedging the IPO allocation in these volatile markets would be prudent and would lower the downside risk to the portfolio.

In this Insight, we recommend a basket hedge to the SBI Cards (SBICARDS IN) allocation in the IPO and run through some of the numbers of why we believe this is a suitable hedge.

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Brief M&A: SBI Cards IPO – Hedge Basket for a Volatile Market and more

By | Daily Briefs, Mergers and Acquisitions

In this briefing:

  1. SBI Cards IPO – Hedge Basket for a Volatile Market
  2. Nagoya Bank’s Biggish Buyback

1. SBI Cards IPO – Hedge Basket for a Volatile Market

Image

SBI Cards (SBICARDS IN) is looking to raise INR 5bn through a fresh issue of shares and up to INR 98.54bn through an offer of existing shares at a price range of INR 750-755 per share. The issue opens on 2 March and closes on 5 March while the shares are expected to list on 16 March.

With an almost two week gap between application and listing, plus a 30 day lock in period for anchor investors, hedging the IPO allocation in these volatile markets would be prudent and would lower the downside risk to the portfolio.

In this Insight, we recommend a basket hedge to the SBI Cards (SBICARDS IN) allocation in the IPO and run through some of the numbers of why we believe this is a suitable hedge.

2. Nagoya Bank’s Biggish Buyback

Screenshot%202020 02 26%20at%205.24.19%20pm

Bank Of Nagoya (8522 JP), regionally and colloquially known as “Meigin”, is a regional bank with a low ROE (3.3%) and a low PBR (0.3x) and a JPY 60bn market cap, which puts it squarely in the “too-small-to-be-a-big-regional-but-not-actually-really-small” category.

Like other regional banks, revenues, recurring profits, and net profits will be down this year. The recent Q3 report on 5 February provided for no change to full year forecasts. 

Today, the company announced (Japanese) that it would move to a corporate system of Board and Audit & Supervisory Committee. The Audit and Supervisory Committee will have a majority of outside directors. This is aimed at improving governance, and speeding up business decision-making at the board level. To make the change (which would generally be seen as a positive in governance terms) will require a change to the bank’s Articles of Incorporation. That will require approval at the AGM in June, after which the change would become effective. 

The OTHER NEW News

Today the bank also announced (Japanese) that it would buy back up to 700,000 shares for up to JPY 2.5bn. That is 3.72% of shares outstanding (less treasury shares). The period of the buyback is from 27 February to 27 March and it expects to buy back on-market, including through ToSTNeT-3 transactions. To be able to buy back all 700,000 shares would require that the purchase price be less than ¥3571/share (vs last traded price of ¥3285). 

The accompanying information is that the bank will cancel 1.5mm shares (Meigin already has 946,687 shares as treasury shares). 

Both bits – the buyback and the cancellation – tell you something.

This is worth a look for short-term traders.

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Brief M&A: Singapore Air’s Massive Rights Issue and more

By | Daily Briefs, Mergers and Acquisitions

In this briefing:

  1. Singapore Air’s Massive Rights Issue
  2. Konami ToSTNeT-3 Buyback
  3. Takeover Defenses, MACs & Deal Breaks
  4. Softbank’s Stake Sale Will Be a Good Litmus Test of Alibaba’s Valuation
  5. Leyou’s Weak Results Unlikely to Deter IDreamSky

1. Singapore Air’s Massive Rights Issue

This is worth having some Singapore Airlines (SIA SP) borrow.

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.

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.

2. Konami ToSTNeT-3 Buyback

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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.

3. Takeover Defenses, MACs & Deal Breaks

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.

 

4. Softbank’s Stake Sale Will Be a Good Litmus Test of Alibaba’s Valuation

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  • 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. 

5. Leyou’s Weak Results Unlikely to Deter IDreamSky

Margin

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).  

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Brief M&A: Nagoya Bank’s Biggish Buyback and more

By | Daily Briefs, Mergers and Acquisitions

In this briefing:

  1. Nagoya Bank’s Biggish Buyback
  2. Healius: Jangho’s Preferential Option
  3. Northview REIT: A Good Arb and Optionality To Boot
  4. DP World Decides to Delist

1. Nagoya Bank’s Biggish Buyback

Screenshot%202020 02 26%20at%205.24.19%20pm

Bank Of Nagoya (8522 JP), regionally and colloquially known as “Meigin”, is a regional bank with a low ROE (3.3%) and a low PBR (0.3x) and a JPY 60bn market cap, which puts it squarely in the “too-small-to-be-a-big-regional-but-not-actually-really-small” category.

Like other regional banks, revenues, recurring profits, and net profits will be down this year. The recent Q3 report on 5 February provided for no change to full year forecasts. 

Today, the company announced (Japanese) that it would move to a corporate system of Board and Audit & Supervisory Committee. The Audit and Supervisory Committee will have a majority of outside directors. This is aimed at improving governance, and speeding up business decision-making at the board level. To make the change (which would generally be seen as a positive in governance terms) will require a change to the bank’s Articles of Incorporation. That will require approval at the AGM in June, after which the change would become effective. 

The OTHER NEW News

Today the bank also announced (Japanese) that it would buy back up to 700,000 shares for up to JPY 2.5bn. That is 3.72% of shares outstanding (less treasury shares). The period of the buyback is from 27 February to 27 March and it expects to buy back on-market, including through ToSTNeT-3 transactions. To be able to buy back all 700,000 shares would require that the purchase price be less than ¥3571/share (vs last traded price of ¥3285). 

The accompanying information is that the bank will cancel 1.5mm shares (Meigin already has 946,687 shares as treasury shares). 

Both bits – the buyback and the cancellation – tell you something.

This is worth a look for short-term traders.

2. Healius: Jangho’s Preferential Option

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Yesterday, PE outfit Partners Group announced it had acquired, via an option deed with Jangho, a relevant interest in 15.88% of the shares in Healius (HLS AU). This was followed by an announcement of a non-binding indicative proposal from Partners at $3.40/share, a 23% premium to last close, by way of a Scheme. 

This morning, Healius announced its 1H19 results. Revenue, EBIT and NPAT were up 7%, 4%, and 8% compared to the six-month period ending 31 Dec 2018.  A dividend of A$0.26/share (fully franked, 38% payout) was declared with an ex-date on the 26 March.

Healius also announced the sale process of part or all of the medical center business to “focus on a range of growth initiated in the diagnostic division and, in time, the day hospital businesses.” 

There are questions marks over the merits of offloading “part” of the medical centres. There is also possible pushback on the fairness of Partners’ indicative proposal.

But ASIC taking a closer look at the Partners/Jangho call option deed may frustrate the deal.

As always, more below the fold.

3. Northview REIT: A Good Arb and Optionality To Boot

Northview%20portfolio

On 20th Feb 2020, Canadian multi-family REIT Northview announced they have agreed to be acquired by a consortium of Acquirers consisting of their strategic partner Starlight Investments and another Canadian private equity real estate investment firm KingSett Capital. 

The Deal values Northview at an EV of CA$4.8bn and is conditional on receiving approval from Target unit holders and regulatory authorities. The transaction is expected to close in 3Q 2020. 

The Offer Price is CA$36.25/unit and both cash and scrip alternatives are available.

The stock last traded at CA$36.46/unit, slightly above the terms. However, monthly distributions and the 30-day go-shop period present interesting opportunities for traders. 

4. DP World Decides to Delist

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DP world has recently announced its intention to delist from Nasdaq Dubai citing the board’s decision that the disadvantages of remaining listed outweigh the advantages. Even though we share the company’s view, we believe the decision to delist will further deteriorate its already higher leverage. Moving forward, a lot will depends on the company’s ability to generate significant synergies from the recently concluded bolt-on acquisitions.

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