Daily BriefsEvent-Driven

Event-Driven: Leyou Technologies, HUYA Inc, Bilfinger SE, Hanjin KAL Corp and more

In today’s briefing:

  • Leyou Tech (1089 HK): Offer Doc Despatched
  • Huya – As We Suspected, Huya Shareholders Probably Got a Raw Deal
  • Bilfinger SE: Private Equity Interest
  • Hanjin Kal Buying Asiana? KDB Dilution-Adj. Shareholding & Likely Market Impact

Leyou Tech (1089 HK): Offer Doc Despatched

By David Blennerhassett

Back on the 27 August, Leyou Technologies (1089 HK)  announced a take-private transaction by way of a Scheme from Tencent Holdings (700 HK) at $3.3219/share, a 30.27% premium over the closing price of HK$2.55/share on 19 September 2019, the last trading day prior to Leyou’s announcing it was in preliminary discussions with various independent potential investors.

70.02% of shares out – primarily comprising chairman Charles Yuk’s stake – have given irrevocables to vote in favour of the Scheme. Disinterested Shareholders comprise all shares out, therefore the blocking stake at the Scheme Meeting is 308.5mn shares or 10% of shares out. No single shareholder has such a stake. The headcount test applies. 

This is a very clean deal. 

Leyou’s shares wobbled a little in September after gaming companies were asked by Committee on Foreign Investment in the United States on their security protocols in handling Americans’ personal data. Those concerns were unfounded, and Canadian and US regulatory bodies signed off on the Offer on the 8 October.

The Scheme Document has now been despatched. The Court Meeting/EGM will be held on the 11 December. Assuming all falls into place, consideration under the Offer will be paid on or before the 31 December.

The IFA (Optima Capital) considers the Offer to be fair and reasonable.

More below the fold.

Huya – As We Suspected, Huya Shareholders Probably Got a Raw Deal

By Mio Kato

We commented previously that while a merger between Huya and Douyu made a lot of sense, we believed Huya was a noticeably superior company and that a merger of near equals situation seemed a poor deal for Huya shareholders. Comparing Huya and Douyu’s recent results reinforces that image.

Bilfinger SE: Private Equity Interest

By Jesus Rodriguez Aguilar

On 21 October, Bloomberg reported that Clayton Dubilier & Rice LLC and other undisclosed private equity firms expressed interest in acquiring German industrial service provider Bilfinger SE (GBF GR).

On 6 November, Bloomberg reported that Bilfinger launched a sale process and hired an adviser to formally gauge buyout interest. Certain prospective private equity buyers reportedly are looking to take over and expand Bilfinger through acquisitions and eventually take the larger entity public. Bilfinger has not yet finalized its plans and could still decide against a sale.

Bilfinger has released Q3 results, the shares have dropped 7.5%.

I value Bilfinger as a SOTP: using comparable companies, the average of the median implied EV/Forward EBITDA and Forward P/E is €20.62 per share, plus the BV of Apleona, €5.95 per share (€240 mn vs. Bilfinger’s market cap of €899 mn), gives a total of €26.57 per share.

  • So either the market is very pessimistic about the growth and margins recovery of Bilfinger (for a reason) or the stake in Apleona comes for free.
  • Both the ongoing takeover speculation and the potential sale of Apleona currently seem to be the main drivers for the share price, but both are factors beyond the control of Bilfinger’s management. Results remain challenging due to weakness in the markets where Bilfinger operates, but cost controls and higher FCF are positives.

Recommendation: BUY on SOTP higher than the current market value.

The Insight is marked bullish, although it comes with a health warning.

Hanjin Kal Buying Asiana? KDB Dilution-Adj. Shareholding & Likely Market Impact

By Sanghyun Park

Hanjin Kal and KDB are currently in talks over an Asiana Airlines takeover.

The widely reported deal structure is quite similar to the previous one proposed to the HDC Group.

The KDB will make a capital injection (in the form of 3rd party allocation rights offer) to Hanjin Kal, which will then use the money to buy a 30.77% stake in Asiana.

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