Brief Event-Driven: Netmarble Games + Tencent = The Most Likely Consortium to Acquire NXC Corp/Nexon? and more

In this briefing:

1. Netmarble Games + Tencent = The Most Likely Consortium to Acquire NXC Corp/Nexon?
2. M&A: A Round-Up of Deals in January 2019
3. BGH Lurks As Brookfield Firms Offer For Healthscope
4. Hyundai Heavy/DSME Event – Comprehensive Summary
5. SCSK (9719 JP) Launches Buyout of Subsidiary VeriServe (3724 JP)

1. Netmarble Games + Tencent = The Most Likely Consortium to Acquire NXC Corp/Nexon?

Netmarble Games (251270 KS) officially announced on January 31st that it is interested in buying Nexon/NXC Corp. We believe that there is a growing likelihood of a potential consortium which includes Tencent and Netmarble Games to acquire NXC Corp/Nexon. Three major reasons why Tencent may want to partner with Netmarble Games to acquire NXC Corp/Nexon include the following:

• Avoid the cultural backlash from Korean gamers
• Among all the companies that Tencent has invested in Korea, Netmarble Games has become the biggest in amount. 
• Netmarble Games is more focused on games and has a stronger balance sheet than Kakao Corp, which has also shown interest in acquiring NXC Corp/Nexon. 

2. M&A: A Round-Up of Deals in January 2019

For the month of January, seventeen new deals were discussed on Smartkarma with an overall deal size of US$91bn, with ~81% of that figure from the Celgene Corp (CELG US) deal. This overall number does not include rumours on Nexon Gt Co Ltd (041140 KS) and Capitaland Ltd (CAPL SP)‘s acquisition of Ascendas-Singbridge. The average transaction premium was 43%, or 26% if ignoring Earthport plc (EPO LN).

M1 Ltd (M1 SP) is essentially an ongoing transaction; while Mastercard Inc Class A (MA US) trumped Visa Inc Class A Shares (V US)‘s December offer for Earthport. Healius (HLS AU) rejected its proposal.

Bank Danamon Indonesia (BDMN IJ) is similarly an ongoing transaction and arguably the premium is higher than 14.9%, which is based on the last close.

Directly below is a summary of ongoing M&A situations, followed by a recap of news associated with each event situation.

3. BGH Lurks As Brookfield Firms Offer For Healthscope

Healthscope Ltd (HSO AU) has announced it has entered into an Implementation Deed with Brookfield, under which Brookfield seeks to acquire 100% of Healthscope by way of a scheme at A$2.50/share, and a simultaneous Off-market takeover Offer at $2.40/share.

The considerations under these proposals compares to the earlier indicative considerations of $2.585/share and $2.455/share respectively under the unsolicited conditional proposals announced back in November.

The $2.50/share under the scheme – which is priced at a 40% premium to the undisturbed price – includes an interim dividend of $.035/share. The scheme consideration represents an EV/EBITDA (Dec-18 end) of ~14.7x.

Both proposals are subject to limited conditions and neither are subject to due diligence and financing. The Off-market is subject to a 50.1% acceptance condition and the Scheme not being successful.

Brookfield’s proposals have unanimous HSO Board backing. 

The Off-market takeover will remain open for at least four weeks after the date of the Scheme meeting, providing shareholders with opportunity to consider the Offer, depending on the outcome of the Scheme vote.

HSO also announced that the BGH-led consortium, which holds a ~20% stake, said it could improve the terms of its previous offer of $2.36/share, provided it was given access to Healthscope’s data room.

An explanatory booklet for Brookfield’s proposals is expected to be dispatched in April/May and the Scheme meeting to take place in May/June.

Currently trading tight to the Scheme consideration at $2.45/share.

4. Hyundai Heavy/DSME Event – Comprehensive Summary

• Below is a comprehensive summary of the Hyundai Heavy/DSME event that engulfed the Korean market yesterday. This is a multi step process. Details of most events will be determined after one month of holdback period.
• I will provide a trade approach on each name in a follow-up post.

5. SCSK (9719 JP) Launches Buyout of Subsidiary VeriServe (3724 JP)

Today after the close, Sumitomo Corp (8053 JP) consolidated subsidiary SCSK Corp (9719 JP) announced a Tender Offer to buy out minorities in Veriserve Corp (3724 JP).

SCSK currently holds 2,900,000 shares or 55.59% of voting rights. 

The Tender Offer is at ¥6,700/share which is a 43.6% premium to the last traded price of the day before the announcement (¥4,665), a 44.6% premium to the one-month average, a 28.3% premium to the 3-month average, and a 36.6% premium to the 6-month average.

The price does not seem egregiously unfair, but for investors who own it who think it has another double in it this year they might get upset.

This is one of those situations with which the currently underway METI M&A Fairness enquiry might have a problem.

And if you care about the fairness of the M&A bidding and response process, and ensuring that minority investors get their interests defended by process, have a look at the METI Fair M&A panel and its consultation paper and by all means offer your comments.