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Most Read

Dec 21
0

Most Read: Allkem Ltd, Livent, Shanghai Junshi Biosciences , LG Display, Kurabo Industries, Toyo Construction, Pan Ocean, Tsuruha Holdings, United States Steel, Taisho Pharmaceutical Holdin and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Allkem/Livent (AKE AU | LTHM US) Merger Of Lithium Equals Has Index Surprises
  • Allkem+Livent=Arcadium : Expected Index Flows
  • A/H Premium Tracker (To 15 Dec 23): Time To Go Long Hs Vs As.
  • Arb Trading with Stock Rights in Korea: A Basic Guide Featuring LG Display Offering
  • Kurabo (3106) – Bigly Buyback And Share Cancellation for A Valueful Value Trap With Hidden Value
  • Toyo Construction (1890) – Everyone Hits Pause
  • Pan Ocean Considering on a Rights Offering Capital Raise of Nearly 3 Trillion Won for the HMM Deal
  • Tsuruha: What Next: Go Private or Aeon?
  • Nippon Steel/United States Steel Corp: Knock-Out Offer
  • Japan Bumpitrage Potential: T&K Toka, IJTT, Taisho, Shidax, Benesse, Tokyo Rakutenchi

Allkem/Livent (AKE AU | LTHM US) Merger Of Lithium Equals Has Index Surprises

By Travis Lundy

  • Today, after the close, ASX-listed Allkem Ltd (AKE AU) (formerly known as Orocobre, which merged with Galaxy Resources in 2021) announced it would merge with Livent (LTHM US). 
  • At US$10bn, this “merger-of-equals” NEWCO (pro-forma US$1.9bn revenue, US$1.2bn EBITDA), with NYSE primary listing and foreign entity listing on the ASX, would be a global lithium player. Deal closing end-2023.
  • The doc (243 pages) and presentation (42p) are worth reading. There are interesting index effects, and there may be “Lithium Risk” in this deal for arbs, but it looks good.

Allkem+Livent=Arcadium : Expected Index Flows

By Travis Lundy

  • Yesterday during the day, Allkem Ltd (AKE AU) shareholders approved the Scheme and Livent (LTHM US) shareholders approved the merger. The deal is done. Allkem last trades 21 Dec.
  • NEWCO starts trading 4 January in the US but the Arcadium Lithium CDIs start trading 22 Dec in Australia. S&P/ASX announced they will replace Allkem in the ASX200.
  • But I have been asked for a breakdown of flows and timing again, so I have put it into a handy table which I hope makes it less confusing.

A/H Premium Tracker (To 15 Dec 23): Time To Go Long Hs Vs As.

By Travis Lundy

  • 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.
  • SOUTHBOUND and NORTHBOUND flows were both sells, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 100+bp. Liquidation by overseas investors feels finished. 
  • Time to go long Hs vs As for the new year at 52wk wide discounts. 3 Short H/A pairs now switched to long. 3 new pairs long this week. 

Arb Trading with Stock Rights in Korea: A Basic Guide Featuring LG Display Offering

By Sanghyun Park

  • Unlike typical Korean stock rights arbitrage, LG Display’s significant equity offering and active stock futures trading anticipate a spread opening, akin to the recent Hanwha Ocean scenario.
  • In contrast to Hanwha Ocean, the absence of major sellers, like KDB, sets this event apart. LG Electronics, the major shareholder with a 37.9% stake, intends to participate.
  • Despite differences from Hanwha Ocean, LG Display’s high retail shareholder presence implies a substantial likelihood of stock rights overhang, even without players like KDB.

Kurabo (3106) – Bigly Buyback And Share Cancellation for A Valueful Value Trap With Hidden Value

By Travis Lundy

  • Kurabo announced a bigly buyback on Tuesday. At last price it is equivalent to 8+% of shares out. Most likely to target buybacks from cross-holders. 
  • The company is not cash-rich, but it is financial asset and real estate-rich. And it trades at cheap multiples without even thinking about those assets (themselves worth the market cap).
  • The TSE’s “PBR1 OR BUST” movement combined with starting low valuation, high payout, excess assets, mean this value trap has room to move. 

Toyo Construction (1890) – Everyone Hits Pause

By Travis Lundy

  • In September, YFO (Yamauchi Family Office) upped its Tender Offer proposal to ¥1,255/share. YFO presented. The Toyo Special Committee met, interviewed, examined, deliberated, then last week rejected YFO’s proposal. 
  • The rejection was a three-parter. First, they rejected YFO for not bringing management/ownership experience. Second, they said the proposal didn’t add enough value. Third, the price was too low.
  • There were no metrics against which to measure anything. And now Toyo has apparently decided to withdraw its Tender Offer Proposal.

Pan Ocean Considering on a Rights Offering Capital Raise of Nearly 3 Trillion Won for the HMM Deal

By Douglas Kim

  • A consortium led by the Harim Group and JKL Partners has been chosen as the preferred bidder to acquire a 57.9% stake in HMM.
  • Korea Development Bank (KDB) and the Korea Ocean Business Corporation (KOBC) are the main creditors of HMM, which is the largest shipping company in Korea.
  • Pan Ocean is expected to complete a rights offering of nearly 3 trillion won which is 136% of its current market cap. This is excessive and negative for Pan Ocean.

Tsuruha: What Next: Go Private or Aeon?

By Michael Causton

  • Tsuruha sees itself as another recent victim of activist fund pressure. 
  • The No. 2 drugstore chain has grown successfully over the past decade and today has the widest store coverage of any chain in its sector.
  • This summer Aeon supported activists’ demand for strategic change. Tsuruha thinks the only way it can keep its independence may be to take the company private – Aeon probably agrees.

Nippon Steel/United States Steel Corp: Knock-Out Offer

By Jesus Rodriguez Aguilar

  • Nippon Steel Corporation (5401 JP) and United States Steel (X US) have agreed an all-cash $55.00/share offer, 142% premium to where X traded before Cliff’s approach, a very generous 7x EV/24e EBITDA.
  • A determined buyer seeks market share in the lucrative US market, with no meaningful synergies expected and willingness to keep all US Steel jobs and (greener) growth projects.
  • Although unions and some lawmakers are voicing concerns, CFIUS shouldn’t pose a big hurdle. Spread is 12.04%/17.93% (gross/annualised, assuming late settlement by end of Q3 2024). Long.

Japan Bumpitrage Potential: T&K Toka, IJTT, Taisho, Shidax, Benesse, Tokyo Rakutenchi

By Arun George

  • Japan’s merger arb is facing an unusual situation: six merger arb situations (>US$100 million market cap) where the shares have consistently traded through terms.
  • We evaluate the bumpitrage potential of these six Japanese merger arb situations on qualitative and quantitative metrics.
  • Based on our analysis, the ranking as measured by the highest bumpitrage potential in descending order are T&K Toka, IJTT, Taisho, Shidax, Benesse and Tokyo Rakutenchi.

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Dec 20
0

Most Read: Allkem Ltd, JSR Corp, Shinhan Financial, Taiwan Semiconductor (TSMC), Oriental Land, Pan Ocean, Taihan Electric Wire, Azure Minerals and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Allkem/Livent (AKE AU | LTHM US) Merger Update:  MUCH More Than Meets The Eye
  • Allkem/Livent (AKE AU | LTHM US) Merger Of Lithium Equals Has Index Surprises
  • Allkem/Livent Merger Vote Tomorrow: Will Vote Get Past?
  • JSR (4185) – Deal Approval Unexpectedly Delayed, As Expected
  • Comprehensive List: 359 Companies on KOSPI & KOSDAQ Deferring Yearend Dividend Record Dates
  • TSMC Chairman to Retire, + or — Impacts to Shareholders
  • Oriental Land: Approaching the Tipping Point
  • Pan Ocean Considering on a Rights Offering Capital Raise of Nearly 3 Trillion Won for the HMM Deal
  • Taihan Electric Wire: Rights Offering of 50% of Outstanding Shares
  • Gina Joins SQM In Bid For Azure (AZS AU)

Allkem/Livent (AKE AU | LTHM US) Merger Update:  MUCH More Than Meets The Eye

By Travis Lundy

Allkem/Livent (AKE AU | LTHM US) Merger Of Lithium Equals Has Index Surprises

By Travis Lundy

  • Today, after the close, ASX-listed Allkem Ltd (AKE AU) (formerly known as Orocobre, which merged with Galaxy Resources in 2021) announced it would merge with Livent (LTHM US). 
  • At US$10bn, this “merger-of-equals” NEWCO (pro-forma US$1.9bn revenue, US$1.2bn EBITDA), with NYSE primary listing and foreign entity listing on the ASX, would be a global lithium player. Deal closing end-2023.
  • The doc (243 pages) and presentation (42p) are worth reading. There are interesting index effects, and there may be “Lithium Risk” in this deal for arbs, but it looks good.

Allkem/Livent Merger Vote Tomorrow: Will Vote Get Past?

By Travis Lundy

  • The vote is tomorrow. It is slightly contested. Shareholder proxies have recommended approving. Some others say Allkem is going too cheap. 
  • It probably should get done because of scale benefits, and if it breaks, it might be good for Allkem, which is “good risk arb risk”
  • But the trade here is some combination of lithium rebound and index event, with index impact details here.

JSR (4185) – Deal Approval Unexpectedly Delayed, As Expected

By Travis Lundy

  • Today after the close, JSR Corp (4185 JP) announced that the expected “end-December” commencement of JIC’s Tender Offer to take the company private would be delayed. 
  • This was somewhat expected to widely expected based on initial FUD which then gave way to “specialised reporting” a couple of weeks ago which indicated as much.
  • Here I look at potential implications, spreads, and risks. And it still looks like one has to let it run (and buy a dip).

Comprehensive List: 359 Companies on KOSPI & KOSDAQ Deferring Yearend Dividend Record Dates

By Sanghyun Park

  • The data is crucial for year-end dividend arbitrage. We can strategically target Single-stock futures’ spread basis widening due to information timeliness disparities, focusing on companies with high dividend yields.
  • Furthermore, it offers valuable insights into assessing the December-March spread levels, potentially leading to a rollover distortion in KOSPI 200 futures’ calendar spread trading.
  • Postponed yearend dividend record dates to March may clash with first-quarter dividends, offering a new trading opportunity. this unique situation could significantly impact spot and futures prices.

TSMC Chairman to Retire, + or — Impacts to Shareholders

By Andrew Lu

  • Chairman 69 years old Dr. Liu will retire and 70 years old CEO Dr. Wei will step up. What story do we believe? Will TSMC to regain its strong outperperformance?
  • Positive impacts: we expect Arizona fab equipment move-in and ramp up might be further delayed if no subsidies are granted; two teams competing to one voice/team/direction.
  • Three risks: 1. Dr. Wei at his age of 70 without a strong management backup; 2. Dr. Wei might make a wrong decision deeply; 3. absolute power corrupts.

Oriental Land: Approaching the Tipping Point

By Oshadhi Kumarasiri

  • Google Search trends for Tokyo Disneyland and DisneySea in recent months point to potential vulnerabilities in Oriental Land’s FQ3 performance.
  • Tokyo Disneyland’s rising ticket prices have narrowed the cost gap with Shanghai and Hong Kong Disneyland, potentially leading to a loss of customers to its counterparts.
  • Should Oriental Land (4661 JP) shares fail to surpass its recent peak in January next year, we think shares could undergo a rather substantial correction.

Pan Ocean Considering on a Rights Offering Capital Raise of Nearly 3 Trillion Won for the HMM Deal

By Douglas Kim

  • A consortium led by the Harim Group and JKL Partners has been chosen as the preferred bidder to acquire a 57.9% stake in HMM.
  • Korea Development Bank (KDB) and the Korea Ocean Business Corporation (KOBC) are the main creditors of HMM, which is the largest shipping company in Korea.
  • Pan Ocean is expected to complete a rights offering of nearly 3 trillion won which is 136% of its current market cap. This is excessive and negative for Pan Ocean.

Taihan Electric Wire: Rights Offering of 50% of Outstanding Shares

By Douglas Kim

  • Last week, Taihan Electric Wire announced a rights offering of 50% of its outstanding shares.  The company is expected to raise 526 billion won. 
  • Taihan Electric Wire is expected to use the rights offering proceeds to mostly expand its submarine cable production.
  • With the share price falling 21% since the announcement of the rights offering last week, Taihan Electric Wire looks more attractive.

Gina Joins SQM In Bid For Azure (AZS AU)

By David Blennerhassett

  • This makes life a lot simpler. Gina Rinehart’s Hancock Prospecting will now team up with Chile’s SQM to take control of lithium play Azure Minerals (AZS AU).
  • In a binding Offer, by way of a Scheme, the joint bidders (collectively holding ~37.79%) are offering A$3.70/share, a 5.1% bump in terms to SQM’s prior Scheme Offer. 
  • An off-market takeover at A$3.65/share unfolds IF this Scheme were to fail. If both fail/lapse,  SQM will, “in certain circumstances”, be required to proceed with its off-market transaction of A$3.50/share.

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Dec 19
0

Most Read: Allkem Ltd, Walsin Lihwa, Tongcheng Travel Holdings , NIO , WuXi AppTec, Hankook & Company, Link Administration, LG Display and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Allkem/Livent Merger Vote Tomorrow: Will Vote Get Past?
  • Yuanta/​P-Shares Taiwan Div+ ETF: Day 1 Flows & Stock Moves
  • Index Rebalance & ETF Flow Recap: HSTECH, SIG/CWG, KQ150, REPT BATTERO
  • China Consumption Weekly: East Buy, NIO, Tencent, PDD, Alibaba, JD.com
  • WuXi AppTec (2359.HK/603259.CH) – How Bad Things Could Be?
  • Hankook & Company (000240 KS): MBK Raises Partial Offer to KRW24,000
  • Link Admin (LNK AU): Mitsubishi UFJ’s Bittersweet Scheme
  • LG Display: Announces a Rights Offering Capital Raise of 1.36 Trillion Won
  • Link Admin (LNK AU): MUFG’s Underwhelming Binding Offer
  • Ohayo Japan | Nippon Steel Forges Ahead with Deal for U.S. Steel

Allkem/Livent Merger Vote Tomorrow: Will Vote Get Past?

By Travis Lundy

  • The vote is tomorrow. It is slightly contested. Shareholder proxies have recommended approving. Some others say Allkem is going too cheap. 
  • It probably should get done because of scale benefits, and if it breaks, it might be good for Allkem, which is “good risk arb risk”
  • But the trade here is some combination of lithium rebound and index event, with index impact details here.

Yuanta/​P-Shares Taiwan Div+ ETF: Day 1 Flows & Stock Moves

By Brian Freitas

  • The Yuanta/P-shares Dividend Plus ETF (0056 TT) started to rebalance its holdings on Friday and will continue to do so for the next 4 trading days.
  • Stocks with buy flows dropped 0.51% on average on Friday while the stocks with sell flows dropped 0.92%. On a flow weighted basis, the numbers were -0.21% vs -0.75%.
  • Since the start of November, the adds have outperformed the deletes and the TWSE INDEX. There has been significant outperformance in just the last week.

Index Rebalance & ETF Flow Recap: HSTECH, SIG/CWG, KQ150, REPT BATTERO

By Brian Freitas

  • It was a busy week with rebalance implementations at the close of trading on Thursday in Korea and then across the region on Friday.
  • The SET 50 Index changes should be announced this week and the Yuanta TW Div+ ETF will continue to implement the changes till Thursday.
  • There were inflows to China ETFs during the week while there were big outflows from Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) ETFs.

China Consumption Weekly: East Buy, NIO, Tencent, PDD, Alibaba, JD.com

By Ming Lu

  • East Buy’s stock price plunged after a conflict broke out between the top broadcaster and the management team.
  • NIO will launch another brand for low price products, following BYD’s low price and Li Auto’s price reduction.
  • Tencent will move its unimportant assets to China Literature again.

WuXi AppTec (2359.HK/603259.CH) – How Bad Things Could Be?

By Xinyao (Criss) Wang

  • Recent business updates of WuXi Bio led to a decline in WuXi AppTec’s share price and changed investors’ expectations for CXO. Now is the time to adjust forecasts.
  • We analyzed the growth rate of various business of WuXi AppTec in 2024. In a neutral scenario, growth next year could fall short of management’s guidance.Reversal in 2025 is uncertain.
  • If WuXi AppTec “unexpectedly” receives blockbuster orders, which are large enough to hedge against the downward trend of WuXi AppTec’s other businesses, then it will help to change performance expectations.

Hankook & Company (000240 KS): MBK Raises Partial Offer to KRW24,000

By Arun George

  • MBK Partners has increased its Hankook & Company (000240 KS) partial tender offer to KRW24,000 per share, 20.0% and 51.4% above its previous offer and the last close, respectively.
  • While the offer is attractive, we estimate that the minimum acceptance condition of 19.3 million shares (20.35% of outstanding shares) requires an 84.3% minority acceptance rate. 
  • The minority acceptance rate is challenging unless MBK can secure a ruling preventing share purchases from Cho Yang-rai, who disclosed a 2.72% stake on 14 December and opposes the tender. 

Link Admin (LNK AU): Mitsubishi UFJ’s Bittersweet Scheme

By David Blennerhassett

  • Link Administration (LNK AU), the largest provider of services in Australia’s superannuation administration industry, has entered into a Scheme with Mitsubishi UFJ Financial Group.
  • MUFJ is offering long-suffering Link shareholders A$2.10/share (in cash) plus a A$0.16/share dividend (25% franked), or a 32.9% premium, all-in, to the undisturbed price. It has not been declared final. 
  • The Offer has the board’s backing. A Scheme Meeting is expected to be held in May with possible completion in June 2024. 

LG Display: Announces a Rights Offering Capital Raise of 1.36 Trillion Won

By Douglas Kim

  • LG Display announced today that it will conduct a rights offering capital raise worth 1.36 trillion won. 
  • The rights offering capital raise involves 142 million shares, which represent 39.7% of its existing outstanding shares. 
  • We believe this rights offering will have a negative impact on LG Display’s share price as it will significantly dilute existing shareholders. 

Link Admin (LNK AU): MUFG’s Underwhelming Binding Offer

By Arun George

  • Link Administration (LNK AU) has entered a SID with Mitsubishi UFJ Financial (MUFG) (8306 JP) at A$2.26 (A$2.10 scheme consideration + A$0.16 dividend), a 32.9% premium to the undisturbed price.
  • The presence of several substantial shareholders, lack of irrevocables, a light offer, recent derisking of the business and a long-dated offer pose a challenge for the scheme to get up. 
  • MUFG’s offer could spark a rival offer, but Link’s long-suffering shareholders have endured a history of failed bids. At the last close, the risk/reward is unfavourable.

Ohayo Japan | Nippon Steel Forges Ahead with Deal for U.S. Steel

By Mark Chadwick

  • Overseas: SPX +0.5%, M&A action drives market higher. Fed talks down interest rate cuts.
  • Today: NKY Futs -0.1% v cash. JPY 142.9; Japan’s FSA wants to overhaul tender offer rules; Mit Elec to step up cross-share unwind
  • Japan: Nippon Steel’s $15bn acquisition of U.S. Steel is a bold move; it secures a top-three global position & substantial share in the EV e-steel market.

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Dec 18
0

Most Read: Vinda International, Shanghai Junshi Biosciences , Hankook & Company, Tongcheng Travel Holdings , Tomony Holdings, Walsin Lihwa, Shinko Electric Industries, Meituan and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Vinda (3331 HK): Tanoto’s Firm Offer
  • A/H Premium Tracker (To 15 Dec 23): Time To Go Long Hs Vs As.
  • The Psychology of Money: A Book Review
  • MBK Partners Raises Tender Offer Price of Hankook and Co to 24,000 Won
  • Index Rebalance & ETF Flow Recap: HSTECH, SIG/CWG, KQ150, REPT BATTERO
  • Tomony Holdings (8600 JP) – Regional Bank NEW SHARE Issue – Not What You Want To See, But Buy Anyway
  • Yuanta/​P-Shares Taiwan Div+ ETF: Day 1 Flows & Stock Moves
  • Merger Arb Mondays (18 Dec) – Shinko Electric, Benefit One, Toyo, CPMC, Vinda, Costa, Volpara
  • 2024 High Conviction Idea: More Downside for Meituan
  • Hankook & Co Tender: Clues to Gauge Cancellation Risk Obtained Through Local Channels So Far

Vinda (3331 HK): Tanoto’s Firm Offer

By David Blennerhassett

  • Back on the 27 April, personal hygiene play Vinda International (3331 HK) announced its controlling shareholder Essity (ESSITYB SS) would commence a strategic review of its 51.59% ownership.
  • That spurred, allegedly, a variety of suitors including Brazil’s Suzano, the world’s largest hardwood pulp producer, Bain Capital, CVC Capital, DCP Capital, and Indonesia’s Tanoto family.
  • And the Tanoto’s have now emerged with a HK$23.50 pre-conditional Offer. The key risk is PRC regulatory approval . Elsewhere, this is a done deal. 

A/H Premium Tracker (To 15 Dec 23): Time To Go Long Hs Vs As.

By Travis Lundy

  • 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.
  • SOUTHBOUND and NORTHBOUND flows were both sells, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 100+bp. Liquidation by overseas investors feels finished. 
  • Time to go long Hs vs As for the new year at 52wk wide discounts. 3 Short H/A pairs now switched to long. 3 new pairs long this week. 

The Psychology of Money: A Book Review

By Douglas Kim

  • In this insight, I review a fantastic book written by Morgan Housel called The Psychology of Money (published in 2020). 
  • “The most important part of every plan is planning on your plan not going according to the plan.” 
  • Three parts of the book were particularly outstanding including letter to author’s son, the story of Rick Guerin, and how mice helped the Russians to defeat the mighty German army. 

MBK Partners Raises Tender Offer Price of Hankook and Co to 24,000 Won

By Douglas Kim

  • After market close on 15 December, MBK Partners raised the tender offer price of Hankook & Company by 20% to 24,000 won, which is now 51.4% higher than current price. 
  • With Cho Yang-Rae’s recent acquisition of shares, Cho Hyun-beom, Cho Yang-rae, and related parties now own about 45.6% of Hankook & Co, up from 42.9% previously. 
  • MBK Partners has requested an official investigation by the FSS, claiming that Cho Yang-rae and HY have violated the Capital Markets Act by recently purchasing shares of Hankook & Co.

Index Rebalance & ETF Flow Recap: HSTECH, SIG/CWG, KQ150, REPT BATTERO

By Brian Freitas

  • It was a busy week with rebalance implementations at the close of trading on Thursday in Korea and then across the region on Friday.
  • The SET 50 Index changes should be announced this week and the Yuanta TW Div+ ETF will continue to implement the changes till Thursday.
  • There were inflows to China ETFs during the week while there were big outflows from Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) ETFs.

Tomony Holdings (8600 JP) – Regional Bank NEW SHARE Issue – Not What You Want To See, But Buy Anyway

By Travis Lundy

  • On 5 December, Tomony Holdings (8600 JP) – a holding company for two regional banks based in Tokushima Prefecture and Kagawa Prefecture – announced (gasp!) a NEW SHARE OFFERING. 
  • It offered 28mm shares + 4.2mm greenshoe – a share count increase of 20%. At 0.27x book. This IS unusual. Especially when banks are being asked to produce better ROC. 
  • The deal priced at ¥366. We’re there now. Banks have been sold. It is worth looking at where we are and what could happen next. It’s cheap.

Yuanta/​P-Shares Taiwan Div+ ETF: Day 1 Flows & Stock Moves

By Brian Freitas

  • The Yuanta/P-shares Dividend Plus ETF (0056 TT) started to rebalance its holdings on Friday and will continue to do so for the next 4 trading days.
  • Stocks with buy flows dropped 0.51% on average on Friday while the stocks with sell flows dropped 0.92%. On a flow weighted basis, the numbers were -0.21% vs -0.75%.
  • Since the start of November, the adds have outperformed the deletes and the TWSE INDEX. There has been significant outperformance in just the last week.

Merger Arb Mondays (18 Dec) – Shinko Electric, Benefit One, Toyo, CPMC, Vinda, Costa, Volpara

By Arun George

2024 High Conviction Idea: More Downside for Meituan

By Eric Chen

  • We don’t consider Douyin an existential threat to Meituan, but we see the company’s growth increasingly be constrained by its business model itself.
  • We believe Meituan will disappoint the market with regard to its bottom line growth in 2024, barring major overhaul of its new initiative businesses.
  • Meituan will have to make tough choice between growth and profitability and either scenario won’t bode well for its valuation. We value the company at RMB410 billion, meaning 18% downside.

Hankook & Co Tender: Clues to Gauge Cancellation Risk Obtained Through Local Channels So Far

By Sanghyun Park

  • Critical now is estimating MBK’s achievable volume in the tender offer, a key indicator for assessing cancellation risk. Evidence suggests few allies for Cho Hyun-beom, prompting MBK’s strategic persistence.
  • MBK can secure 23.58%, but NPS’s involvement is pivotal. If neutral, MBK aims for 19.55%, below the minimum. MBK proceeds with a revised offering price, anticipating NPS participation.
  • Though the FSS investigation may favor MBK, a successful tender offer depends on achieving 87% participation. The higher-than-expected likelihood of success hints at a strong upward stock adjustment from Monday.

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Dec 17
0

Most Read: Bharat Heavy Electricals, DISCO Corp, Tongcheng Travel Holdings , Posco DX, Abacus Storage King, Vietnam Dairy Products JSC, Hankook & Company, Vinda International and more

By | Daily Briefs, Most Read

In today’s briefing:

  • NIFTY200 Momentum30 Index Rebalance: 18 Changes a Side, 58% Turnover, Momentum Intact
  • Index Rebalance & ETF Flow Recap: NKY, TW Div+, ASX200, NZX50, Mom30, Top10EW, MVW, Rakuten Bank
  • HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)
  • KOSDAQ150 Index Rebalance Preview: Posco DX Listing Transfer
  • MVIS Australia A-REITs Index Rebalance: ASKing for a Reversal
  • MarketVector Vietnam Local Index Rebalance: One Add & Other Changes
  • The Psychology of Money: A Book Review
  • MBK Partners Raises Tender Offer Price of Hankook and Co to 24,000 Won
  • Japan Weekly | Advantest, Ibiden, Recruit, Infroneer, Glosel
  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Sigma Health, Vinda, Outsourcing, Allkem, Costa, Hollysys

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

By Brian Freitas

  • 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.

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

By Brian Freitas

  • 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.

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

By Brian Freitas

KOSDAQ150 Index Rebalance Preview: Posco DX Listing Transfer

By Brian Freitas

MVIS Australia A-REITs Index Rebalance: ASKing for a Reversal

By Brian Freitas

  • There are no constituent changes for the Vaneck Vectors Australian Property ETF (MVA AU) in December but there are float and capping changes.
  • Abacus Storage King (ASK AU) is the biggest sell and is due to a drop in float, a reversal of the excessively high float assigned at the September rebalance.
  • Estimated one-way turnover is 4.5% and will result in a one-way trade of A$26m. There are a few stocks with over 1x ADV to trade.

MarketVector Vietnam Local Index Rebalance: One Add & Other Changes

By Brian Freitas

  • 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 Psychology of Money: A Book Review

By Douglas Kim

  • In this insight, I review a fantastic book written by Morgan Housel called The Psychology of Money (published in 2020). 
  • “The most important part of every plan is planning on your plan not going according to the plan.” 
  • Three parts of the book were particularly outstanding including letter to author’s son, the story of Rick Guerin, and how mice helped the Russians to defeat the mighty German army. 

MBK Partners Raises Tender Offer Price of Hankook and Co to 24,000 Won

By Douglas Kim

  • After market close on 15 December, MBK Partners raised the tender offer price of Hankook & Company by 20% to 24,000 won, which is now 51.4% higher than current price. 
  • With Cho Yang-Rae’s recent acquisition of shares, Cho Hyun-beom, Cho Yang-rae, and related parties now own about 45.6% of Hankook & Co, up from 42.9% previously. 
  • MBK Partners has requested an official investigation by the FSS, claiming that Cho Yang-rae and HY have violated the Capital Markets Act by recently purchasing shares of Hankook & Co.

Japan Weekly | Advantest, Ibiden, Recruit, Infroneer, Glosel

By Mark Chadwick

  • Market Watch: Japanese equities made minor gains as US Fed indicated potential rate cuts in 2024. BOJ next week, but no changes anticipated
  • Major Movers: Outsourcing leaps on MBO; Advantest +15% as Semicon Japan gets underway; Ibiden beneficiary of improved tech sentiment
  • Activist Watch: New positions for Murakami in Glosel; Nippon Active Value watching Fuji Media more closely; fresh interest in Goodspeed, the car dealer

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Sigma Health, Vinda, Outsourcing, Allkem, Costa, Hollysys

By David Blennerhassett

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Dec 16
0

Most Read: JD.com Inc (ADR), Hankook & Company, Bharat Heavy Electricals, Shinko Electric Industries, Vinda International, Posco DX, Sands China, Doosan Robotics , Samsung C&T and more

By | Daily Briefs, Most Read

In today’s briefing:

  • NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade
  • Elder Brother Cho Hyun-Sik Joins Hands With MBK Partners to Tender Offer Hankook & Co. Shares
  • NIFTY200 Momentum30 Index Rebalance: 18 Changes a Side, 58% Turnover, Momentum Intact
  • Shinko Electric (6967) Takeover:  Initial Break/Gap Risk Analysis
  • Vinda (3331 HK): Tanoto’s Firm Offer
  • KOSDAQ150 Index Rebalance Preview: Posco DX Listing Transfer
  • StubWorld: LVS To Up Stake In Sands. Melco Back To Square One
  • Investigating Float Rate Issues of Ecopro Materials & Doosan Robotics for Global Index Feb Review
  • Whitebox Goes Activist on Samsung C&T
  • Vinda International (3331 HK): Pre-Conditional Voluntary Offer at HK$23.50

NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade

By Brian Freitas

  • There were 6 inclusions and 6 exclusions for the Nasdaq-100 Stock Index (NDX INDEX) at the annual December reconstitution. Then another ad hoc change was added on top of that.
  • Impact on the inclusions ranges from 1-8 days of ADV to buy, while the impact on the deletions varies from 0.7-2.6 days of ADV to sell.
  • Apart from the constituent changes, there are expected to be inflows in Tesla Motors and Broadcom and outflows from Apple, Microsoft, Amazon.com and NVIDIA.

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

By Douglas Kim

  • 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.

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

By Brian Freitas

  • 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.

Shinko Electric (6967) Takeover:  Initial Break/Gap Risk Analysis

By Travis Lundy

  • The JIC Deal for Shinko Electric Industries (6967 JP) has been announced and is, as expected, trading wide. 
  • There is FUD. There are Flows. Just like JSR (4185). Some of that FUD can be explained by “gap risk” on deal break…. or can it? We look at risks.
  • There’s more positioning risk than fundamental risk at this point. And the FUD and Flows have specific timing in this case which makes thing different than JSR. Worth thinking about.

Vinda (3331 HK): Tanoto’s Firm Offer

By David Blennerhassett

  • Back on the 27 April, personal hygiene play Vinda International (3331 HK) announced its controlling shareholder Essity (ESSITYB SS) would commence a strategic review of its 51.59% ownership.
  • That spurred, allegedly, a variety of suitors including Brazil’s Suzano, the world’s largest hardwood pulp producer, Bain Capital, CVC Capital, DCP Capital, and Indonesia’s Tanoto family.
  • And the Tanoto’s have now emerged with a HK$23.50 pre-conditional Offer. The key risk is PRC regulatory approval . Elsewhere, this is a done deal. 

KOSDAQ150 Index Rebalance Preview: Posco DX Listing Transfer

By Brian Freitas

StubWorld: LVS To Up Stake In Sands. Melco Back To Square One

By David Blennerhassett

Investigating Float Rate Issues of Ecopro Materials & Doosan Robotics for Global Index Feb Review

By Sanghyun Park

  • With recent surges in EcoPro Materials and Doosan Robotics, it’s crucial for their potential inclusion in the February Global Index review. No other names approach the threshold.
  • Depending on classification, Ecopro Materials may get a free-float rate from 15% to 20%, while Doosan Robotics may receive a rate from 20% to 30%.
  • With max free-float rates (20% and 30%), both meet Cutoffs. At minimum rates, Doosan Robotics needs over a 20% increase, while Ecopro Materials slightly exceeds Cutoffs.

Whitebox Goes Activist on Samsung C&T

By Douglas Kim

  • On 14 December, it was reported that US based Whitebox Advisors has started an activist campaign on Samsung C&T (028260 KS).
  • Whitebox estimates that Samsung C&T’s stock price is about 68% undervalued compared to its NAV.
  • In addition to Whitebox, there are two other foreign investors including Palliser Capital and City of London Investment Management that have requested Samsung C&T to improve corporate governance.

Vinda International (3331 HK): Pre-Conditional Voluntary Offer at HK$23.50

By Arun George

  • Vinda International (3331 HK) has announced a pre-conditional voluntary offer from Sukanto Tanoto at HK$23.50 per scheme share, a 7.8% premium to the undisturbed price (26 April). 
  • The pre-condition relates to China SAMR and Japan Fair Trade Commission approval. The offer is conditional on the offeror and concert parties representing more than 50% of voting rights.
  • Irrevocables ensure the satisfaction of the minimum acceptance condition but also rule out a competing proposal. The timing of China SAMR approval is the key risk. 

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Dec 15
0

Most Read: Allkem Ltd, JD.com Inc (ADR), Toyota Motor, Shinko Electric Industries, Posco DX, Samsung C&T, Vinda International, yutori , Hunan Changyuan Lico and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Allkem/Livent (AKE AU | LTHM US) Merger Update:  MUCH More Than Meets The Eye
  • JIC Deal For Shinko Electric Is LIGHT, and There’s Room To Complain, But Will Trade Wide
  • NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade
  • Toyota Cross-Shareholding – To Say a Whole Lot Is Left Would Be a US$26bn Understatement
  • Shinko Electric (6967) Takeover:  Initial Break/Gap Risk Analysis
  • KOSDAQ150 Index Rebalance Preview: Posco DX Listing Transfer
  • Whitebox Goes Activist on Samsung C&T
  • Vinda (3331 HK): Tanoto’s Firm Offer
  • Zozo-Owned Yutori IPO This Month
  • Quiddity Leaderboard STAR 50 Mar 24: Four High-Impact Changes Likely; Some Interesting Trade Ideas

Allkem/Livent (AKE AU | LTHM US) Merger Update:  MUCH More Than Meets The Eye

By Travis Lundy

JIC Deal For Shinko Electric Is LIGHT, and There’s Room To Complain, But Will Trade Wide

By Travis Lundy

  • 29 minutes after I published a long, musing piece on the possibilities of structure and announcement later this week, JIC and Shinko Electric announced 5 minutes before midnight.
  • A warning for the future: The Nikkei and every other media outlet got the number wrong. It is NOT a total acquisition cost of “around ¥800bn”. It is under ¥700bn. 
  • It IS a split deal. And if JIC won with that price, it tells you something about the state of the market and future deals in the space.

NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade

By Brian Freitas

  • There were 6 inclusions and 6 exclusions for the Nasdaq-100 Stock Index (NDX INDEX) at the annual December reconstitution. Then another ad hoc change was added on top of that.
  • Impact on the inclusions ranges from 1-8 days of ADV to buy, while the impact on the deletions varies from 0.7-2.6 days of ADV to sell.
  • Apart from the constituent changes, there are expected to be inflows in Tesla Motors and Broadcom and outflows from Apple, Microsoft, Amazon.com and NVIDIA.

Toyota Cross-Shareholding – To Say a Whole Lot Is Left Would Be a US$26bn Understatement

By Sumeet Singh

  • With Toyota (7203 JP) having sold some of its stake in Denso, KDDI and Harmonic Drive this year, it has firmly set the ball rolling for unwinding some of its cross-shareholding.
  • Toyota has a shareholding in around 60 listed companies, with its combined disposable stake worth over US$26bn.
  • In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

Shinko Electric (6967) Takeover:  Initial Break/Gap Risk Analysis

By Travis Lundy

  • The JIC Deal for Shinko Electric Industries (6967 JP) has been announced and is, as expected, trading wide. 
  • There is FUD. There are Flows. Just like JSR (4185). Some of that FUD can be explained by “gap risk” on deal break…. or can it? We look at risks.
  • There’s more positioning risk than fundamental risk at this point. And the FUD and Flows have specific timing in this case which makes thing different than JSR. Worth thinking about.

KOSDAQ150 Index Rebalance Preview: Posco DX Listing Transfer

By Brian Freitas

Whitebox Goes Activist on Samsung C&T

By Douglas Kim

  • On 14 December, it was reported that US based Whitebox Advisors has started an activist campaign on Samsung C&T (028260 KS).
  • Whitebox estimates that Samsung C&T’s stock price is about 68% undervalued compared to its NAV.
  • In addition to Whitebox, there are two other foreign investors including Palliser Capital and City of London Investment Management that have requested Samsung C&T to improve corporate governance.

Vinda (3331 HK): Tanoto’s Firm Offer

By David Blennerhassett

  • Back on the 27 April, personal hygiene play Vinda International (3331 HK) announced its controlling shareholder Essity (ESSITYB SS) would commence a strategic review of its 51.59% ownership.
  • That spurred, allegedly, a variety of suitors including Brazil’s Suzano, the world’s largest hardwood pulp producer, Bain Capital, CVC Capital, DCP Capital, and Indonesia’s Tanoto family.
  • And the Tanoto’s have now emerged with a HK$23.50 pre-conditional Offer. The key risk is PRC regulatory approval . Elsewhere, this is a done deal. 

Zozo-Owned Yutori IPO This Month

By Michael Causton

  • Zozo may lead in online fashion malls but its customer base, while young, is getting older.
  • In 2020, it acquired a majority stake in Yutori, a fledgling fashion mall targeting the young, which will now list this month.
  • Yutori has grown sales to ¥2.47 billion since launching five years ago. As well as Japan, it sees a major opportunity across Asia given Japanese street fashion popularity there.

Quiddity Leaderboard STAR 50 Mar 24: Four High-Impact Changes Likely; Some Interesting Trade Ideas

By Janaghan Jeyakumar, CFA

  • STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
  • In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the March 2024 index rebal event.
  • There could be up to four index changes. Some of these are high-conviction changes and some are low-conviction changes.

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Dec 14
0

Most Read: Denso Corp, Benefit One Inc, Shinko Electric Industries, JD.com Inc (ADR), Tongcheng Travel Holdings , Recruit Holdings, Hollysys Automation Technologies and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying
  • JIC Consortium Possibly In Line to Win Shinko At “¥800bn”, Which Makes You Go 🤔…
  • Benefit One (2412): M3 Extends For a Full Month
  • Shinko Electric (6967 JP): JIC’s Pre-Conditional Tender Offer at JPY5,920
  • JIC Deal For Shinko Electric Is LIGHT, and There’s Room To Complain, But Will Trade Wide
  • NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade
  • Hollysys Gives Ascendent Capital The Nod. “Agnostic” Shareholders Will Approve
  • HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)
  • Recruit (6098 JP) Buyback – It’s Big But Not THAT Big; Value Act Effect Vs Corp Selldown Vs Multiple
  • Hollysys (HOLI US): Merger Agreement Leaves the Door Ajar for a Higher Recco Offer

Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying

By Brian Freitas

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

By Travis Lundy

  • 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. 

Benefit One (2412): M3 Extends For a Full Month

By Travis Lundy

  • 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.

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

By Arun George

  • 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. 

JIC Deal For Shinko Electric Is LIGHT, and There’s Room To Complain, But Will Trade Wide

By Travis Lundy

  • 29 minutes after I published a long, musing piece on the possibilities of structure and announcement later this week, JIC and Shinko Electric announced 5 minutes before midnight.
  • A warning for the future: The Nikkei and every other media outlet got the number wrong. It is NOT a total acquisition cost of “around ¥800bn”. It is under ¥700bn. 
  • It IS a split deal. And if JIC won with that price, it tells you something about the state of the market and future deals in the space.

NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade

By Brian Freitas

  • There were 6 inclusions and 6 exclusions for the Nasdaq-100 Stock Index (NDX INDEX) at the annual December reconstitution. Then another ad hoc change was added on top of that.
  • Impact on the inclusions ranges from 1-8 days of ADV to buy, while the impact on the deletions varies from 0.7-2.6 days of ADV to sell.
  • Apart from the constituent changes, there are expected to be inflows in Tesla Motors and Broadcom and outflows from Apple, Microsoft, Amazon.com and NVIDIA.

Hollysys Gives Ascendent Capital The Nod. “Agnostic” Shareholders Will Approve

By David Blennerhassett

  • 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)

By Brian Freitas

Recruit (6098 JP) Buyback – It’s Big But Not THAT Big; Value Act Effect Vs Corp Selldown Vs Multiple

By Travis Lundy

  • Last month, Reuters reported that activist-ish investor Value Act Capital Management had bought a stake in Recruit Holdings (6098 JP) and separately in Expedia Group, Inc. (EXPE US)). 
  • It was “revealed” in a letter to its clients. And there were reasons stated why Value Act thought Recruit was worth a lot more than it was trading for. 
  • Today, Recruit announced an on-market buyback for ¥200bn. That’s nice. But it is not enormous, and it may signal other info, and it is worth understanding details and context.

Hollysys (HOLI US): Merger Agreement Leaves the Door Ajar for a Higher Recco Offer

By Arun George

  • Bloomberg reports that the Recco consortium is considering “a significantly higher” Hollysys Automation Technologies (HOLI US) offer than Ascendent’s US$26.50 binding offer.
  • The Hollysys 6-K filling outlines the closing conditions – a simple majority YES vote, regulatory approvals, minimum net cash (waivable) and a 10% maximum dissent condition (waivable).  
  • Recco is a committed suitor and will not easily give up. The merger agreement clauses point to a Recco offer floor of US$27.03 and a ceiling of US$30.48.

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Dec 13
0

Most Read: Benefit One Inc, Yamazen Corp, S.M.Entertainment Co, Shinko Electric Industries, Denso Corp, CPMC Holdings, Tongcheng Travel Holdings and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Denso Corp Placement – Quick Update – In Better Shape Now, Size Concern Remains
  • Benefit One (2412): M3 Extends For a Full Month
  • Yamazen Secondary Offer (8150 JP) – 5 Banks Sell To Make This a Future Activism Target
  • A Review of Tender Offers of Korean Companies in 2023
  • JIC Consortium Possibly In Line to Win Shinko At “¥800bn”, Which Makes You Go 🤔…
  • Shinko Electric (6967 JP): JIC’s Pre-Conditional Tender Offer at JPY5,920
  • Denso (6902 JP): The Current Playbook
  • CPMC (906 HK): SASAC Usurper?
  • CPMC Holdings (906 HK): Possible Scenarios as ORG Mulls a Competing Offer
  • HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)

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.

Benefit One (2412): M3 Extends For a Full Month

By Travis Lundy

  • 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.

Yamazen Secondary Offer (8150 JP) – 5 Banks Sell To Make This a Future Activism Target

By Travis Lundy

  • On Monday after the close, trading house Yamazen Corp (8051 JP) announced a secondary offering where five bank shareholders would sell ~6.7mm shares (including greenshoe). 
  • It appears as if most of the banks are selling everything, making it about US$50mm, 50 days of ADV, and about 7% of  shares out. 
  • But this should get swallowed pretty easily. The stock is DIRT CHEAP. The caveat? Crossholders and insiders will still own 45-48% post-offer. 

A Review of Tender Offers of Korean Companies in 2023

By Douglas Kim

  • 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.

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

By Travis Lundy

  • 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

By Arun George

  • 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. 

Denso (6902 JP): The Current Playbook

By Arun George

  • Since the US$4.0 billion secondary placement announcement, Denso Corp (6902 JP)’s shares are down 4.3% from the undisturbed price of JPY2,298 per share (28 November).
  • Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Denso’s shares have followed the pattern of previous large placements.
  • The offering will likely be priced on 13 December. Investors participating in previous large Japanese placements tend to secure positive returns.

CPMC (906 HK): SASAC Usurper?

By David Blennerhassett

  • 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

By Arun George

  • 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.

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

By Brian Freitas

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Dec 12
0

Most Read: Benefit One Inc, Outsourcing Inc, Taiwan Semiconductor (TSMC) – ADR, DISCO Corp, Denso Corp, S.M.Entertainment Co, LG Energy Solution, Yamazen Corp, Softbank Group, Sigma Healthcare and more

By | Daily Briefs, Most Read

In today’s briefing:

  • New Benefit One Deal Recalculated, More Benefit for All, Less for One
  • Bain Deal for Outsourcing (2427): Cheeky, Opportunistic, Too Low
  • MVIS US Listed Semiconductor 25 Index Rebalance: TSMC Is the Big Sell
  • Index Rebalance & ETF Flow Recap: NKY, TW Div+, ASX200, NZX50, Mom30, Top10EW, MVW, Rakuten Bank
  • 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
  • Yamazen Secondary Offer (8150 JP) – 5 Banks Sell To Make This a Future Activism Target
  • Softbank (9984 JP): Adding a Strengthening JPY to the Mix
  • Sigma Healthcare (SIG AU): Chemist Warehouse’s Reverse Takeover

New Benefit One Deal Recalculated, More Benefit for All, Less for One

By Travis Lundy

  • The deal from Dai-Ichi Life for Benefit One Inc (2412 JP) appears language I did not get the first time around. The JPY 1800/share price is a proposed combined value.
  • The deal would then lower the TOB price to Pasona, and share the benefits from that lower price to Benefit One minorities. 
  • That suggests more upside to Benefit One than I originally thought, and less upside (but still a chunk) to Pasona.

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

By Travis Lundy

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

By Brian Freitas

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

By Brian Freitas

  • 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.

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

By Douglas Kim

  • 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

By Sanghyun Park

  • 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.

Yamazen Secondary Offer (8150 JP) – 5 Banks Sell To Make This a Future Activism Target

By Travis Lundy

  • On Monday after the close, trading house Yamazen Corp (8051 JP) announced a secondary offering where five bank shareholders would sell ~6.7mm shares (including greenshoe). 
  • It appears as if most of the banks are selling everything, making it about US$50mm, 50 days of ADV, and about 7% of  shares out. 
  • But this should get swallowed pretty easily. The stock is DIRT CHEAP. The caveat? Crossholders and insiders will still own 45-48% post-offer. 

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

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

By David Blennerhassett

  • 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. 

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