In today’s briefing:
- HK Merger Arb: Opportunities Amidst the Market Selloff
- Aussie Arbs: Trump Tariffs And MACs
- MitCorp (8058) BIG Buyback – Share Demand Will Help Weather The Storm
- Suzuki Motor (7269 JP) Placement: Limited Index Buying & Weak Markets Could Pressure Stock
- Hong Kong Arbs: (Largely) Immune From Trump Tariffs
- Assura in the Crosshairs
HK Merger Arb: Opportunities Amidst the Market Selloff
- The gross spreads of large HK merger arb situations have increased due to the unfortunate fallout from Trump’s trade war. The HSI closed down 13.2%.
- We assess the widening spreads of HK’s merger arb situations based on offer structure, preconditions, conditions, and other factors.
- The deals, ranked in terms of increasing deal risk, are Tam Jai, Soundwill, Vesync, Goldlion, Canvest, ESR, OneConnect, HKBN, and ENN Energy.
Aussie Arbs: Trump Tariffs And MACs
- Travis Lundy succinctly summarised the Trump Tariffs in Trump Team’s Weird Tariff Math – Not Meant to Be Negotiated. Do read his note.
- From an arb standpoint, most (all?) NBIOs will likely see a downward revision in pricing. Vote risk should also be reduced.
- Such tariffs on predominantly domestic businesses should not trigger material adverse changes (MACs) Down Under. But it is still a worthwhile project to dig a little deeper.
MitCorp (8058) BIG Buyback – Share Demand Will Help Weather The Storm
- On 3 April mid-day, Mitsubishi Corp (8058 JP) announced its FY25 earnings guidance and new “Shareholder Return Strategy”, a ¥1 trillion buyback, and its “Corporate Strategy 2027” Mid-Term Management Plan.
- The FY25 forecast is for a third consecutive decline in underlying operating cashflow, but a hike in dividend from ¥100 to ¥110 and a ¥1trln share buyback, including ¥230bn tender.
- The combination of dividend and buyback should be 15% of market cap over the next 12mos. And I expect Warren Buffett will consider buying dips.
Suzuki Motor (7269 JP) Placement: Limited Index Buying & Weak Markets Could Pressure Stock
- Tokio Marine & Nichido Fire Insurance and Sompo Japan Insurance are looking to offload their entire stakes in Suzuki Motor (7269 JP) by way of a secondary offering.
- With the size of the secondary offering less than 5% of the number of shares, there could be no index buying in the short-term and that will pressure the stock.
- If the overallotment option is exercised and the seller of the shares is currently considered as non-float, there could be small passive buying in the short-term.
Hong Kong Arbs: (Largely) Immune From Trump Tariffs
- In Aussie Arbs: Trump Tariffs And MACs, I ran a ruler over the fifteen live deals Down Under, and how they may be affected by the Trump Tariffs.
- This insight canvasses the ongoing Hong Kong arbs and wording surrounding material adverse changes (MACs). Hong Kong MACs are typically less onerous, and lack specificity, versus Aussie arbs.
- Although the framework exists for an Offeror to enforce a MAC, I’m not aware of any evidence of this occurring under Hong Kong’s Takeovers Code.
Assura in the Crosshairs
- KKR’s 49.4p all-cash offer, cum-dividend and matching EPRA NTA, provides a 31.9% premium and ~12.3% gross spread, creating an attractive short-term arbitrage opportunity for investors.
- PHP could increase its cash component by 1–2p without breaching investment-grade leverage, supported by strong rental income, refinancing flexibility, and post-merger synergies that enable a credible deleveraging path.
- The estimated 2–2.5 month timeline from firm offer to cash settlement positions this deal within a standard UK M&A framework, offering risk arbitrageurs visibility and duration-limited exposure.
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