In today’s briefing:
- Shinko Electric (6967) – All Approvals In, JIC Says “Mid-Feb” So Cash Is 19-21 March?
- Henlius (2696 HK): Deal Break as HKEx Merger Arb Rulebooks Are Rewritten
- GAPack (468 HK): Now What As XJF’s Offer Gets Up
- Profit Targets for SoftBank Group (9984 JP) After Stargate AI Project Announcement
- Henlius (2696)’s Fail Sets (Another) Bad Precedent
- StubWorld: Sun Corp (6736 JP) Trading Cheap to Cellebrite (CLBT US)
- [Quiddity Index Jan25] S&P500/600 Mar25 Rebal: Multiple Intra-Review Changes Possible
- Unpacking the Backstory of HMM’s Value-Up Disclosure Today: Dividend Arbitrage Still in Focus
- IDX30/LQ45/IDX80 Index Rebalance: Big Impact in Some Stocks with 4 Days to Implementation
- Korea Zinc: Cross Shareholding Limitation System Loophole
Shinko Electric (6967) – All Approvals In, JIC Says “Mid-Feb” So Cash Is 19-21 March?
- JIC gave an official statement yesteday about the expected start of its Shinko Electric Industries (6967 JP) Tender Offer. A later-than-expected start has people asking questions.
- It has traded tighter since the SAMR approval news (I warned on 16 Dec it was coming and the next day it closed 6.6% gross).
- Below I discuss the language of the Conditions Precedent which would allow a MAC.
Henlius (2696 HK): Deal Break as HKEx Merger Arb Rulebooks Are Rewritten
- Shanghai Henlius Biotech (2696 HK) shareholders have voted against Shanghai Fosun Pharmaceutical (Group) (2196 HK)’s HK$24.60 offer. The minority participation rate was high, and the NO vote comfortably cleared the threshold.
- The China Traditional Chinese Medicine (570 HK) and Henlius deal breaks have rewritten the HKEx merger arb rulebook. The Henlius deal break offers several lessons.
- The 27.5% share price decline since 9 January points to a well-flagged deal break. Nevertheless, precedent deal-breaks suggest that the shares remain vulnerable and could touch HK$15.
GAPack (468 HK): Now What As XJF’s Offer Gets Up
- Shandong Xinjufeng Technology Packaging (301296 CH)‘s (XJF) Offer for Greatview Aseptic Packaging (468 HK) (GAPack) turning unconditional was well telegraphed ahead of yesterday’s first close in light of CCASS movements.
- My bet is China Mengniu Dairy Co (2319 HK), after surprisingly selling below 5%, also tendered.
- With 73.51% now in the bag and the Offer extended to the 4th February, what happens now? What are Jeff Bi and/or Gong Hong’s options?
Profit Targets for SoftBank Group (9984 JP) After Stargate AI Project Announcement
- Softbank Group (9984 JP) went up >10% on Wednesday 22nd of January, after announcing a 500B USD venture with OpenAI and Oracle to build US AI infrastructure
- Based on our model reading, the stock is now overbought, but it could go higher rallying on the current frenzy
- Check the QUANTCHART below to find out how high the stock could go before stalling or pulling back.
Henlius (2696)’s Fail Sets (Another) Bad Precedent
- The question was asked in Henlius (2696 HK): So, When Was The Last Time A PE/VC Outfit Blocked A Deal? Well, now we have one as LVC inexplicably blocked.
- It didn’t appear to make economic rationale for LVC to crash the party – knowing they would do so, and not bother to reduce their position accordingly.
- In tandem with the TCM (570 HK) debacle, it sets another bad precedent for future/existing Hong Kong events. Expect spreads for HK arbs to widen. And Henlius to crater.
StubWorld: Sun Corp (6736 JP) Trading Cheap to Cellebrite (CLBT US)
- Sun Corp (6736 JP) has retraced ~15% in the past month. Its 43.8% stake in Cellebrite (CLBT US) is worth ~186% of its market cap, an all-time high.
- Preceding my comments on Sun Corp are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
[Quiddity Index Jan25] S&P500/600 Mar25 Rebal: Multiple Intra-Review Changes Possible
- The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
- In this insight, we take a look at the upcoming constituent changes in the run up to the March 2025 index rebal event.
- We expect two regular changes in March 2025. There are also several live spin-off and M&A events which are likely to trigger intra-review index changes before then.
Unpacking the Backstory of HMM’s Value-Up Disclosure Today: Dividend Arbitrage Still in Focus
- HMM’s aggressive short-term return strategy is driven by KDB’s BIS issue, explaining why they acted earlier and more aggressively than expected.
- HMM’s best move is boosting the 2024 div payout, keeping KDB happy by smoothing over KDB’s PR angle, and aligning with its June value-up index rebalance agenda.
- The 2024 year-end dividend is conservatively expected between KRW 850-1,200 per share, totaling KRW 750 billion to 1 trillion, with the record date likely in late February or early March.
IDX30/LQ45/IDX80 Index Rebalance: Big Impact in Some Stocks with 4 Days to Implementation
- There are 2 constituent changes for the IDX30 Index, and 3 changes each for the LQ45 Index and IDX80 Index to be implemented at the close on 31 January.
- The largest passive flows are expected in Bank Central Asia, Indosat, Japfa Comfeed Indonesia, Indocement Tunggal Prakarsa, Dayamitra Telekomunikasi, MAP Aktif Adiperkasa, Bank Mandiri Persero, Ciputra Development and XL Axiata.
- With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.
Korea Zinc: Cross Shareholding Limitation System Loophole
- The proxy battle at the EGM for the control of Korea Zinc (010130 KS) is scheduled for 23 January.
- One day prior to the EGM, Korea Zinc’s Chairman Choi is trying to capitalize on the “cross-shareholding limitation system” in order to retain control of the company.
- In our view, it appears that the legal case regarding the cross shareholding limitation system is in favor of MBK/Young Poong alliance.
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