Daily BriefsEvent-Driven

Event-Driven: Japan Post Insurance, China Machinery Engineering and more

In today’s briefing:

  • Japan Post Insurance Update – Three Reasons To Buy. Any Overhang Slightly Higher
  • China Machinery Engineering (1829 HK): Possible Offer

Japan Post Insurance Update – Three Reasons To Buy. Any Overhang Slightly Higher

By Travis Lundy

In December, it was reported that Japan Post Insurance (7181 JP) was considering an enormous buyback of its own shares from Japan Post Holdings (6178 JP) so that JPI can get JPH under 50% ownership.

I wrote about it VERY bullishly in Huge Japan Post Insurance Buyback Mooted – Decks Cleared. Time To Buy.

A couple of days later on the 25th of December, news emerged that the JPI Board of Directors had decided to postpone the consideration/decision of buying back shares from “by year end” to a later date because of the market reaction to the news leak. 

The key here is that apparently, if the stake held by Japan Post Holdings drops below 50%, new product launches move from an “Approval System” to an “Advance Notification System” under the complex rules which govern the Japan Post Insurance product offering suite, the Japan Post Holding post-privatisation management by regulators, and the insurance business in general. 

The shares, which had popped 10% on the original news, fell back somewhat. Those who contacted me about this situation know that I have continued to be bullish. The shares are up 6.2% from the close of that first day’s news.

I think it was a mistake for JPI to not decide to buy back the shares as of their 23 December board meeting. 

There are other dynamics at play.

China Machinery Engineering (1829 HK): Possible Offer

By David Blennerhassett

China Machinery Engineering (1829 HK)‘s (CMEC) shares were suspended ahead of trading this morning  “pursuant to The Codes on Takeovers and Mergers which constitute inside information of the Company“.

CMEC is incorporated in the PRC, and as such, there are no rights to compulsorily acquire shares or to require an Offeror do so. The only mechanism available to privatise is via Merger by Absorption, incorporating a Scheme-like vote (≥ 75% for, ≤10% against) for the H shares. Such an Offer may or may not require an additional tendering acceptance condition.

CMEC’s ultimate controlling shareholder is state-owned Chinese National Machinery Industry Corporation, also known as SINOMACH, which holds 77.99% of shares out, via CMEC’s domestic shares. SINOMACH holds no H shares. 

CMEC is up 56.4% since the 29 December, on larger-than-average volume.

Funny that.

The most interesting facet attached to CMEC is that it has (adjusted) net cash of HK$8.8bn as at 30 June 2020, compared to market cap of HK$10.5bn.  Should a firm offer unfold, it is doubtful it will fully reflect the underlying business in addition to that cash pile.

More below the fold.

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