Daily BriefsEvent-Driven

Event-Driven: Sydney Airport, Green Cross Cell, Kansai Super Market, HomeCo Daily Needs REIT, Ngern Tid Lor, Demae-Can Co., Ltd., Sk Chemicals Co Ltd/New, Allcargo Logistics and more

In today’s briefing:

  • Sydney Airport (SYD AU): Consortium Ups Bid And Granted Due Diligence
  • Green Cross Merger Got Shareholder Approval (Both Companies): Arb Spread at 5%, I’d Trade It
  • The Kansai Super (9919) Conundrum
  • HomeCo Daily Needs REIT (HDN AU): Perfectly Timed Placement to Offset Index Inflows
  • SET50 Index Rebalance Preview: Two High Probability Changes, Could Be a Couple More
  • Demae-Can’s Latest Offering Preserves The Potential for TOPIX Inclusion
  • SK Chemicals’ Timely Spinoff Announcement Amid Metrica’s Activist Move: What to Make of It
  • SK Chemicals – Spinning Off Its Utility Business & Creating Higher Value
  • Allcargo (AGLL IN): Shareholders Reject! What Now?

Sydney Airport (SYD AU): Consortium Ups Bid And Granted Due Diligence

By David Blennerhassett

The third time is the charm.

After rejecting an $8.25/share proposal on the 15 July, and a $8.45 bid on the 16 August, Sydney Airport (SYD AU) has now granted the Sydney Aviation Alliance (SAA) non-exclusive due diligence after receiving a A$8.75/share conditional proposal, a 51% premium to the undisturbed price on the 4 July 2021.

SAA comprises Aussie investors IFM Investors, QSuper, and AustralianSuper, and the U.S.’ Global Infrastructure Partners. As per Australia’s Airport Act, at least 51% of the airport must be Australian-owned. 

Having taken advice, and considering all the relevant factors, Sydney Airport intends to grant the Consortium the opportunity to conduct due diligence on a non-exclusive basis to enable it to put forward a binding proposal, subject to entry into a Non-Disclosure Agreement on acceptable terms. That due diligence is expected to take 4 weeks from entry into the Non-Disclosure Agreement.(my emphasis)

Consistent with the initial proposal on the 5 July, should the proposal proceed, UniSuper (SYD’s largest shareholder with 15.3%) will roll over its equity stake into the Consortium, rather than receive the cash consideration.

And as per the earlier proposals, any dividend paid would reduce the cash consideration.

With New South Wales recording 1,262 cases yesterday, and seven deaths, the revised Offer is pitched amid, as NSW Premier Gladys Berejiklian describes it, “some stabilisation in local government areas of concern“.

The Offer still looks light – just a 6% bump from the initial bid. 

But this has the backing of the board and its largest shareholder (although rolled up into the back end).

More below the fold. 


Green Cross Merger Got Shareholder Approval (Both Companies): Arb Spread at 5%, I’d Trade It

By Sanghyun Park

The arb spread of the Green Cross swap event widened to 5% again today. Although it is less than the level that expanded to the 7% level a while ago, the current level is definitely attractive compared to the 4% level last week.

Today is the day of the general meeting of shareholders for the approval of the merger. And both companies have just obtained shareholder approval. The key was whether Green Cross Cell would receive shareholder approval, and as 5.68 million shares voted in favor of the merger, the merger passed the general shareholders’ meeting.

Schedule
Shareholder meeting2021. 09. 13
Stock purchase right exercise2021. 09. 13 ~ 10. 04
Trade suspension (only Green Cross Cell)2021. 10. 28 ~ 11. 11
Listing2021. 11. 12
Source: DART

Of course, just because the merger was approved at the shareholders’ meeting doesn’t mean everything is over. We will now have an appraisal rights exercise period from today to October 4th. If the stock purchase cost exceeds ₩150B, the merger may be canceled. Currently, the spread between Green Cross Cell’s dissent rights exercise price and the current share price has widened to the 7% range, so we cannot be relieved.

Spread – stock purchaseGreen Cross Lab CellGreen Cross Cell
Current price₩99,400₩38,000
Exercise price₩103,244₩41,163
Transfer income tax₩791₩641
– Shares10,00010,000
Tax-adj. exercise price₩102,453₩40,522
Spread3.07%6.64%
Source: DART & KRX

The Kansai Super (9919) Conundrum

By Travis Lundy

On 31 August, Kansai Super Market (9919 JP) and its top shareholder (10.02% of shares out) H2 O Retailing (8242 JP) (the parent of Hanshin Department Store and related companies) announced a business merger whereby the H₂O would inject two supermarket businesses it owns – Izumiya and Hankyu Oasis – into a holding company with Kansai Super, receiving shares in a newly enlarged Kansai Super in exchange. 

H₂O would go from owning 10.66% to owning 58% of Kansai Super, and the 89.34% would own 42% of NEWCO. 

The merger was short-dated/accelerated, with the EGM to vote on this deal set for a Record Date on 15 September, the EGMs of all the related companies where an EGM was necessary (Kansai Super, Hankyu Oasis, and Izumiya (the latter two foregone conclusions because they are 100%-owned by H₂O) on 29 October, and the merger effective December 1st.

The shares popped a bit, then fell back. 

At first glance, this seemed somewhat opportunistic for H₂O, and it meant that the 89.34% “minority” in Kansai Super would become a real minority without getting paid a premium or provided a chance to exit. Based on the net assets of the companies, it seemed like H₂O was getting a good deal. Based on the OP levels in the past year, it did not seem like H₂O was getting special treatment. 

A couple of days later, on 3 September, privately-held discount (“every day low price”) supermarket chain OK Corp (primarily based in the Kanto area, but which had been aimed at expanding into the Kansai area), which was the second-largest single shareholder of Kansai Super (based originally in Osaka/Kansai) at 7.23%, stepped up and offered a press release which said that it would vote against the merger and if the merger were not approved, it would be willing to launch a Tender Offer to buy the shares of Kansai Super at ¥2,250/share (the highest price since listing and nearly vs ¥1,374/share the day before, and more than double the market price of Kansai Super in June when the proposal was made). On 3 Sep OK complained about their treatment, and noted that from the perspective of shareholder interest, their bid should be considered, but OK also had no intention of launching a hostile bid.

The shares popped, moving limit up. Then limit up another day, and then the shares traded at JPY 2,200/share in considerable volume before drifting lower.

Today the shares fell back 7+% to just below JPY 2,000/share. 

There is some very long history between the founder of OK and Yuji Kitano the founder of Kansai Super, and they once worked together, with OK seconding employees to Kansai Super to learn the business of fresh grocery sales. 

Mr Kitano passed away in 2013, and OK Supermarket started buying shares in 2016, getting to just under 5%, then it peaked its head above and by the end of the fiscal year in February, owned 7.23%. Of course, that year in October (2016), Kansai Super entered into a business and capital alliance with H₂O Retailing, and H₂O bought about 10% of the shares out. 

Fast forward five years and it turns out that OK approached Kansai Super in April 2021, and proposed a capital and business alliance on 9 June, in writing. Kansai Super put this to an Independent Committee which then took its time, setting its first meeting with OK some 11 weeks later on 26 August. The Kansai Super release (Japanese only) on 31 August suggests there was a “third party tender offer approach” but then doesn’t discuss it much while saying that intense discussions and due diligence was afforded to H₂O Retailing in the same timeframe.

Five days after the first interview with OK, Kansai Super and H₂O announced their deal. 

This is a complicated deal and it begs the question of whether shareholder interests matter and how shareholders decide. 

More discussion below. 


HomeCo Daily Needs REIT (HDN AU): Perfectly Timed Placement to Offset Index Inflows

By Brian Freitas

On 13 September, HomeCo Daily Needs REIT (HDN AU) announced a trading halt and followed up with the announcement of an acquisition and equity raising via an institutional placement. The acquisition of 100% interest in 6 daily needs assets is for a total purchase price of A$222m and will be partially funded by a fully underwritten placement for A$88.3m at an issue price of A$1.61/unit.

The A$1.61/unit price is a 3.3% discount to its prior close and a 2.6% discount to the 5 day VWAP.

The placement bookbuild took place on 13 September, the settlement of the new units issued under the placement takes place on 16 September and the allotment and normal trading of the new units takes place on 17 September.

CoincidentallyHomeCo Daily Needs REIT (HDN AU) is an inclusion to the ASX300 Index and the FTSE EPRA Nareit Index – both inclusions will take place at the close of trading on 17 September. Passive trackers will need to buy around 23% of the shares issued in the placement.

The stock has run up on the expected (and then announced) inclusion in the FTSE EPRA Nareit Index on higher than normal volumes and the increased supply on rebalance day could lead to weakness in the stock in the near term. We recommend trimming existing positions in the stock.


SET50 Index Rebalance Preview: Two High Probability Changes, Could Be a Couple More

By Brian Freitas

The Stock Exchange of Thailand (SET) will announce the results of the semi-annual review of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) in mid-December and the changes will be effective after the close of trading on 30 December.

The review period for market cap calculations runs from 1 September to 30 November, while the liquidity calculations run from 1 December 2020 to 30 November 2021.

We see three potential changes at the current time with an estimated one-way turnover for the rebalance at 1.40%.

Potential inclusions are Ngern Tid Lor (TIDLOR TB) and Banpu Public (BANPU TB) while the potential deletions are Sri Trang Agro Industry (STA TB) and Ratch Group PCL (RATCH TB).

The SET has multiple levers that it can use to determine the stocks to be included and excluded. At the current time, Delta Electronics Thai (DELTA TB) and Berli Jucker (BJC TB) are very close to failing the monthly turnover test. If the stocks are deleted from the index, the corresponding inclusions are TOA Paint (Thailand) (TOA TB) and Kerry Express Thailand (KEX TB).


Demae-Can’s Latest Offering Preserves The Potential for TOPIX Inclusion

By Janaghan Jeyakumar, CFA

Japan-based food delivery company Demae-Can Co., Ltd. (2484 JP) launched a follow-on equity offering after market-close today to raise capital for business expansion. 

In this offering the company will be issuing 55,436,400 new shares and selling 3,240,000 treasury shares out of which a total of 19,293,900 shares will be allocated to the public and 39,382,500 shares will be allocated for Z Holdings (4689 JP) and South-Korea based Naver Corp (035420 KS). Based on today’s closing price, the total size of this equity offering could be around ~¥105bn (US$950mn) and the portion allocated to public shareholders could be around ~¥35bn (US$315mn). However, the official announcement estimates the minimum size of the equity offering to be around ~¥80bn (US$726mn) and the above-mentioned allocation can change slightly depending on share price movement and public investor interest. 

There is a really interesting event angle here which should pique the interest of investors. 

More below.


SK Chemicals’ Timely Spinoff Announcement Amid Metrica’s Activist Move: What to Make of It

By Sanghyun Park

SK Chemicals will spin out the electricity and steam (utility) supply business unit through a physical division, which means the newly created entity will be SK Chemicals’ wholly-owned subsidiary. The name of the subsidiary is SK Multi-Utility Co., Ltd. (tentative name).

This announcement came out at 4:30 pm after the market close today.

SK Multi-Utility has been producing the energy necessary for plant operation at the SK Chemicals Ulsan plant. It has been supplying the energy needed for the Ulsan plant and selling the surplus energy to SK chemicals’ affiliates. Last year, the division’s sales were ₩37.3B. If the spin-off is approved at the SK Chemicals extraordinary general meeting held on October 25, SK multi-utility will be officially launched on December 1.

Then, the closing date of the shareholder register for the general meeting was set as September 28.

In addition, SK Chemicals announced that after this split, SK Multi-Utility would invest ₩428.1B in facilities to convert the current business structure to an eco-friendly business structure. This investment will begin in May next year.


SK Chemicals – Spinning Off Its Utility Business & Creating Higher Value

By Douglas Kim

On 13 September, Sk Chemicals Co Ltd/New (285130 KS) announced after the market close that it will be spinning off its utility business that makes industrial boilers and power generation facilities that produce electricity.

Overall, we believe this spin-off of the utility business will have a positive impact on the company. The utility business is a non-core business of the company and it can realize higher value for this business as it separates this operation into a stand-alone unit.

With the six months lock-up ending on September 18th for SK Bioscience shares, investors will be watching carefully to see if indeed SK Chemicals partially sells its shares of SK Bioscience. There are still four trading days left this week and it is likely that investors will likely drive up price of SK Chemicals while drive down the share price of SK Bioscience this week.


Allcargo (AGLL IN): Shareholders Reject! What Now?

By Janaghan Jeyakumar, CFA

Allcargo Logistics (AGLL IN) announced after market-close yesterday that their shareholders had rejected their proposal for voluntary delisting bringing an abrupt end to an event trade that was gathering a lot of momentum. 

Since the time the Deal was announced in August 2020, Allcargo share price has more-than-doubled.

However, this is now a Deal Break situation. 

More below the fold.


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