Daily BriefsEvent-Driven

Event-Driven: Toshiba Corp, Wakita & Co Ltd, Coca Cola Amatil, Think Childcare, Frasers Logistics & Industrial Trust, RLX Technology Inc and more

In today’s briefing:

  • Toshiba – CVC Capital Partners Bid Highlights Value
  • Japan Activism: A Look into Wakita (8125 JP) Potential Pre-Event
  • Coca Cola Amatil (CCL AU): This Is It
  • Think Childcare (TNK AU): Busy Bees Delivers a Knock-Out Bid
  • STI Rebalance Preview: FLT Poised to Replace Jardine Strategic
  • Long Smoore/Short RLX: RLX’s Lock-Up Expiry Could Aggravate the Sell-Off

Toshiba – CVC Capital Partners Bid Highlights Value

By Mio Kato

Nikkei Asia reported today that CVC Capital Partners would propose a privatisation of Toshiba valuing the company at $20.8bn. CVC will discuss the terms of the deal with management and will also need to win approval from the Finance Ministry. The question is whether shareholders would accept such a bid as it looks perhaps a little light.


Japan Activism: A Look into Wakita (8125 JP) Potential Pre-Event

By Travis Lundy

Wakita & Co Ltd (8125 JP) has been a deep value stock for years. It has had deep value investors owning stakes before.

However, the company has pretty low ROE based on truly awful capital allocation policy. A very large portion of the long-term assets in the firm are effectively managed by people with little to no experience in the space, in a sub-optimal capital structure. The company has large amounts of net cash, and securities, and more securities and crossholdings. And the entire company is effectively a leasing business with some add-ons, and it finances itself with almost zero debt. 

While it is dangerous to call a paradigm change on companies where there is a significant corporate cross-holding and significant family holding and control, there are times when the confluence of events make stocks like Wakita worth a deeper look.

This may be such a time.


Coca Cola Amatil (CCL AU): This Is It

By David Blennerhassett

Back on the 26 October, Australia’s largest non-alcoholic beverage bottler Coca Cola Amatil (CCL AU) announced an indicative proposal of A$12.75/share from Coca-Cola European Partners plc (CCEP). A firm Offer was announced on the 4 November. Reports immediately surfaced that some major shareholders considered the proposal inadequate. 

Responding to shareholder pushback, CCEP and CCL entered into a Scheme Implementation Deed at A$13.50/share on the 15 February, a 5.9% bump to the firm Offer on the 4 November, and a  25.6% premium to the undisturbed price. The Offer was declared best and final. 

Independent CCL shareholders will vote on the proposal at the Scheme Meeting to be held on the 16 April. Coca-Cola Co (KO US) (TCCC) with 30.808% of shares out, will abstain from voting. 

CCEP has now advised CCL that it has elected to purchase all the remaining shares held by TCCC at the implementation of the Scheme, for cash. TCCC will subsequently cease to be a shareholder of CCL.

As always, more below the fold.


Think Childcare (TNK AU): Busy Bees Delivers a Knock-Out Bid

By Janaghan Jeyakumar, CFA

On 16 November 2020, Australia-based Childcare company Think Childcare (TNK AU) received a Non-binding Indicative Proposal at an Offer Price of A$1.35/share from the PE arm of Alceon Group which is an Australian independent multi-strategy alternative investments firm.

A week later, on 23rd Nov 2020, TNK received a competing bid at an Offer Price of A$1.75/share from Busy Bees Early Learning Australia Pty Ltd which is the Australian arm of multinational child care firm Busy Bees Nursery Group which is backed by Ontario Teachers’ Pension Plan (OTPP) and Temasek. I discussed this competitive situation in Think Childcare (TNK AU): Competitive Bid by Busy Bees pointing out the implications of Alceon’s matching right and since TNK’s share price of A$1.60 translated to a very attractive spread given the high likelihood of a further overbid, I was Bullish on the stock.

I expect TNK shareholders to receive at least A$1.75/share at the end of this competitive situation and I also expect TNK to trade much closer to terms once there is more clarity on Alceon’s stance in the next 5 days. (written 23 Nov 2020)

Although initially Alceon let their matching right lapse, a month later, on 24th December 2020, they launched a revised non-binding and indicative proposal matching that of Busy Bees’ non-binding bid (A$1.75/share) and also announced they had acquired a relevant interest of 19.23% in TNK. Roughly a month later, Busy Bees revised their competitive bid to A$2.10/share –  a 20% bump from the previous bid level. I discussed this situation again in Think Childcare (TNK AU): Bigger Bid by Busy Bees reiterating my bullish stance on the stock. 

 I expect TNK shareholders to receive at least A$2.10/share at the end of this competitive situation. (written 20 Jan 2021)

However on 4th March 2021, as the Shares were trading through Terms at A$2.23, considering the deal break risk, I suggested in Think Childcare (TNK AU): Trading Through Terms. Should You Fold Now? that it might be time to exit.  

Turns out I was wrong this time. Earlier Today, Busy Bees launched a revised bid at A$3.20. More below the fold.

For more information about M&A rules, regulations, and practices in Australia, please refer to Quiddity Australia M&A Guide 2019 and Quiddity M&A: Australia Foreign Investment Reforms 


STI Rebalance Preview: FLT Poised to Replace Jardine Strategic

By Brian Freitas

On 8 March, Jardine Matheson Holdings (JM SP) announced the acquisition of the 15% of Jardine Strategic Holdings (JS SP) that it did not own for US$33/share in cash. The Special General Meeting of Jardine Strategic Holdings (JS SP) shareholders will be held on 12 April at 8am in Bermuda. The last day of dealing in Jardine Strategic Holdings (JS SP) will be 12 April as well.

Jardine Strategic Holdings (JS SP) will be deleted from the MSCI and FTSE indices at the close of trading on 12 April. Jardine Strategic Holdings (JS SP) will also be deleted from the FTSE Straits Times Index (STI) (STI INDEX) at the close of trading on 12 April.

The replacement for Jardine Strategic Holdings (JS SP) in the FTSE Straits Times Index (STI) (STI INDEX) will be determined based on the closing prices on 8 April. Frasers Logistics & Industrial Trust (FLT SP) has a full market cap that is 10.1% higher than Suntec REIT (SUN SP) and is the most likely inclusion in the index with 2 trading days to go before the replacement is chosen.

The potential deletion of Suntec REIT (SUN SP) from the MSCI Singapore Free Index (SIMSCI INDEX) opens up an interesting trade. Frasers Logistics & Industrial Trust (FLT SP) has outperformed Suntec REIT since the announcement of the Jardine Strategic Holdings (JS SP) acquisition, and there could be more upside in the pair over the next few weeks.


Long Smoore/Short RLX: RLX’s Lock-Up Expiry Could Aggravate the Sell-Off

By Oshadhi Kumarasiri

Investors started dumping Chinese e-vapor stocks following the announcement of draft amendments to the Tobacco Monopoly Law, if approved could extend the law’s jurisdiction to e-cigarettes. As a result, RLX Technology Inc (RLX US)’s share price plunged 48% while Smoore International (6969 HK)’s (less dependent on China) fell by 23%. Meanwhile, the lock-up period for RLX’s pre-IPO holders’ expiries on 21st July 2021 possibly leading to additional selling pressure in the short term.


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