Daily BriefsEvent-Driven

Event-Driven: Shinsei Bank, Kerry Logistics Network, Nature Home Holding Company, Kakao Corp, Hanssem Co Ltd, Sydney Airport, Daibochi Plastic & Packaging Industry and more

In today’s briefing:

  • Shinsei Looks To A Poison Pill, But Probably Not Really
  • Kerry Logistics (636 HK): Sell Here As Opposed To Tendering
  • Nature Home (2083 HK): Scheme Doc Out. Court Meeting On 6 Oct. Evergrande Overhang
  • Kakao’s De Facto Holding Company K Cube Holdings: Exactly What Are They Accused Of?
  • Hanssem Vs. Teton Capital Partners on Mandatory Tender Offer in Korea
  • Sydney Airport’s Further Revised Offer Gets the Board’s Approval
  • Scientex – Daibochi: Unconditional Voluntary Take-Over Offer

Shinsei Looks To A Poison Pill, But Probably Not Really

By Travis Lundy

On Thursday 9 September, SBI Holdings (8473 JP) announced a Tender Offer aimed at lifting its stake in Shinsei Bank (8303 JP) to 48% at a sharp premium (up 46%). It hadn’t warned Shinsei Bank of its intention to do so.

Kana Inagaki and Leo Lewis at the FT had a story early Thursday evening describing the situation – the most concise and accurate take I have seen. I followed up hours later with something wordier in SBI (8473) Launches a HOSTILE Tender Offer on Shinsei Bank (8303)! On Thursday night the ADRs rose to ¥1930/share equivalent. 

On Friday, the stock went limit up, Smartkarma held a Flash Webinar, and Mio Kato added Shinsei Bank – Valuations to the anthology. 

Over the weekend, articles were everywhere in the media, but they didn’t say much. Shinsei hadn’t told them what to say and SBI had already done the talking for its part. 

Trading resumed on Monday and the stock opened above the Tender Offer Price ¥2000/share before closing a bit lower. 

Yesterday saw articles suggesting Shinsei Bank would send SBI a list of questions to answer, would look at what they got back, and then would decide their opinion. 

But TODAY we see the real start of the game. 

The Nikkei reported in a short article a few hours ago that Shinsei’s board would meet this week to approve an “emergency” poison pill defence. 

How that would work might matter, but it might not. 

More below the fold.


Kerry Logistics (636 HK): Sell Here As Opposed To Tendering

By David Blennerhassett

The Partial Offer for Kerry Logistics Network (636 HK), announced on the 9 February, closes on the 16 September.

The record date for the interim dividend (HK$0.211/share) was the 13 September. The record date for the special dividend (HK$7.28/share) is the 15 September.

Shares are now trading ex- both dividends.

You can still tender into the Offer – but not buy and tender.

If you tender, you still receive the special dividend.

But if you intend to tender into the Offer, with a minimum pro-ration of 76.02%, you should simply sell in the market here at HK$18.60 and get 100% filled.

More below the fold.


Nature Home (2083 HK): Scheme Doc Out. Court Meeting On 6 Oct. Evergrande Overhang

By David Blennerhassett

Following its suspension “pursuant to the Code of Takeovers and Mergers” on the 19 July, wood flooring manufacturer Nature Home Holding Company (2083 HK) announced on the 27 July an Offer from its founding shareholders, by way of a Scheme, at HK$1.70/share, bang in line with my earlier estimate. The Offer Price will not be increased. Nature Home does not intend to declare any dividends during the Offer period.  Dehua Tb New Decoration A (002043 CH) has given an irrevocable rollover undertaking for its 19.6% stake. 

The Scheme Document was despatched last night. The Court Meeting is scheduled for the 6 October and provided all resolutions pass, cheques are expected to be despatched on or before the 26 October.

This Offer still looks done. The IFA considers the terms to be fair and reasonable, but also flags uncertainty as to Nature Home’s financial position and operating cash flow on account of its outstanding trade receivables with Evergrande. 

More below the fold.


Kakao’s De Facto Holding Company K Cube Holdings: Exactly What Are They Accused Of?

By Sanghyun Park

There is a lot of confusion about exactly in which areas Kakao is under investigation by the Fair Trade Commission.

The Fair Trade Commission is investigating K Cube Holdings from two angles.

First: Non-disclosure of data on affiliates

The FTC requires every business group whose total assets exceed ₩10T to submit data on all affiliates to designate a cross-ownership restricted business group every year. In particular, the FTC requires detailed shareholder status data for companies (wholly or partially) owned by the family members of the head of a business group.

This purpose is clear. This is intended to regulate the exploitation of private interests by an owner family. That is, the FTC intends to prevent an unfair transfer of wealth.

However, the Fair Trade Commission argues that detailed data on K Cube Holdings, the de facto holding company of Kakao, have not been submitted for a long time.

The FTC is planning to intensively investigate whether K Cube Holdings has received profits from Kakao in an unfair way.

K Cube Holdings was established in January 2007 for the purpose of software development, and Kim Beom-soo (Kakao founder and chairman) owns 100% of the shares. K Cube Holdings currently owns a 10.59% stake in Kakao.

Kakao shareholding
Kim Beom-soo13.29%
K Cube Holdings10.57%
 
NPS8.40%
MAXIMO PTE (Tencent)6.29%
BlackRock5.17%
Source: KRX FIND

Most of K Cube Holdings’ seven employees (as of April of this year) are the family members of Chairman Kim. Chairman Kim’s younger brother, Kim Hwa-young, served as the CEO until the end of last year. Chairman Kim and his wife (Hyoung Mi-sun) are part-time directors. Chairman Kim’s son Kim Sang-bin and his daughter Kim Ye-bin also serve at the company.

Second: Violation of the Separation of Industrial & Financial Capital

The second is actually more fatal. The FTC is also investigating allegations that Kakao violated the ‘Regulation on Separation of Industrial and Financial Capital’.

K Cube Holdings changed its business registration type this year from management consulting to financial investment. As a result, K Cube Holdings, a financial company, came to govern the non-financial company, Kakao.

The Fair Trade Act stipulates that financial companies belonging to a cross-ownership restricted business group cannot exercise their voting rights over non-financial companies in accordance with the principle of Separation of Industrial and Financial Capital.

Violation of the Separation of Industrial and Financial Capital is way more serious than an unfair transfer of wealth and is subject to severe penalties.


Hanssem Vs. Teton Capital Partners on Mandatory Tender Offer in Korea

By Sanghyun Park

For those who aren’t familiar with this Hanssem deal, here is a quick summary:

  • In July, Hanssem’s major shareholder signed an MOU to sell a 30.21% stake to IMM PE for 1.5 trillion won.
  • And Lotte Shopping will participate as a strategic investor (SI) by investing 299.5 billion won in a fund created by IMM PE for the acquisition.

Here is the link to the news article about the MOU (source: Korea Times). 

Here is the link to the news article about Lotte Shopping investing in the fund created by IMM PE for the acquisition (source: JoongAng Daily).

Now, an unexpected event occurred in this deal that was expected to be completed smoothly. Teton Capital Partners, Hanssem’s second-largest shareholder, has taken legal action.

Teton Capital first purchased Hanssem shares in October 2009. At that time, the stock price of Hanssem was 9,900 won. Teton expanded its stake to 5% in September 2011 and became subject to the disclosure of changes in its stake. As of the end of June this year, Teton’s stake was 8.43%.

So what are the legal actions Teton Capital has taken? The Korea Times article below summarizes this well.

Here is the link to the news article about Teton Capital taking legal actions.

The key reason for Teton Capital’s legal action is the MANDATORY TENDER OFFER.

Yes, Teton requests the court to legally guarantee a mandatory tender offer to minority shareholders in this deal.


Sydney Airport’s Further Revised Offer Gets the Board’s Approval

By Arun George

Sydney Airport (SYD AU) is Australia’s largest airport and the only listed airport on ASX. Sydney Airport has granted a consortium (Sydney Aviation Alliance) non-exclusive due diligence access based on a further revised indicative proposal of A$8.75 cash per share. The revised indicative offer is A$8.75 per share is a 52% premium to the unaffected price of A$5.75 (1 July). The revised indicative offer is also a marginal 3.6% bump to the first revised offer of A$8.45 per share received from the consortium on 16 August.

Pushing for a better price is part of the M&A game. The Board were said to be seeking a price around A$9.00 per share, according to press reports. However, the Board faced increasing shareholder pushback to engage with the consortium and facilitate due diligence. The consortium viewed A$9.00 per share as excessive but shareholder feedback suggested that the price of A$8.75 per share would get the Board onside. UniSuper, the largest independent shareholder, will rollover its shares instead of receiving cash under the scheme and will be required to vote as a separate class on the scheme. 

The Board intends to recommend the revised offer subject to a binding scheme implementation agreement and no superior offer. The due diligence which is expected to take four weeks should be relatively straightforward due to the consortium’s expertise in airport infrastructure. The deal requires regulatory approval from the Australian Competition and Consumer Commission (ACCC) and the Foreign Investment Review Board. The ACCC will commence a review of the proposed transaction “in due course” and the review should take about three months to complete. The shareholder vote for approval is likely to be held in 1Q22. 

Overall, we think that the further revised indicative offer is attractive and marginally above the pre-COVID-19 rights adjusted share price high reached in December 2019. The offer will prove attractive to shareholders who are looking for valuation certainty in an environment where the pace of the recovery in international air travel remains unclear. At the last close price of A$8.23, the shares are trading at a 6.3% gross spread to the indicative offer.


Scientex – Daibochi: Unconditional Voluntary Take-Over Offer

By Janaghan Jeyakumar, CFA

On 13th September 2021, Malaysia based packaging material manufacturer and property developer Scientex (SCI MK) launched an Unconditional Voluntary Take-Over Offer to buy all the remaining shares in their 61.88%-owned subsidiary Daibochi (DPP MK).  

Scientex will pay RM2.70 per ordinary share and RM0.32 per warrant in cash. The Offer is for 124,784,759 ordinary shares (representing 38.12% of the total issued shares) and 26,137,985 warrants (representing 95.75% of the outstanding Warrants). The overall size of the Deal is approximately US$80mn. 

More below the fold. 

For more information about M&A rules, regulations, and practices in Malaysia, please refer to Quiddity Malaysia M&A Guide 2019 


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