In today’s briefing:
- STAR50/STAR100 Index Rebalance: Changes & Capping Lead to US$3.3bn Trade
- [Japan M&A] Yutaka Giken (7229 JP) TOB – Possibly the Most Offensively Low TOB Price I’ve Ever Seen
- [Japan ECM] Lifedrink (2585) – Fast-Growing Beverage Seller Meets P.E. Firm Selldown
- Merger Arb Mondays (01 Sep) – Dongfeng, ENN, Joy City, Kangji, Mayne, Santos, Shibaura, CareNet
- Mayne Pharma (MYX AU): FY25 Results Aid Both Sides
- Shandong Gold Mining Placement – H-Share Running Ahead of A-Shares
- Simcere Pharma Placement – First Primary Raising, past Deals Have Been Mixed
- HKBN (1310 HK): On the Cusp of Being Declared Unconditional
- Current Merger Arbitrage Opportunities and Strategic Reviews in Global Markets: Key Active Cases
- Clearing up the FSS’s Sudden Call on Samsung Life’s Samsung Elec Stake Accounting Shift
STAR50/STAR100 Index Rebalance: Changes & Capping Lead to US$3.3bn Trade
- There is 1 constituent change for the STAR50 INDEX and 5 changes for the STAR100 Index at the next rebalance that will be implemented at the close on 12 September.
- We estimate one-way turnover of 6.1% for the SSE STAR50 (STAR50 INDEX) resulting in a round-trip trade of CNY 23.8bn (US$3.3bn).
- There will be huge capping outflows for Cambricon Technologies Lt (688256 CH) following the massive rally in the stock over the last couple of months.
[Japan M&A] Yutaka Giken (7229 JP) TOB – Possibly the Most Offensively Low TOB Price I’ve Ever Seen
- Honda Motor (7267 JP) and Samvardhana Motherson International Ltd (MOTHERSO IN) have arranged to buy Honda’s 69.7%-owned subsidiary Yutaka Giken (7229 JP) in a Tender Offer.
- The transaction structure means Motherson buys Yutaka for less than net cash but even assuming Motherson pay minority TOB price for everything, TOB ex-net cash = 0.05x PBR, <1x EBITDA.
- But they are paying less. They are paying ¥12.4bn less than net cash, and getting the other ¥58bn of net assets (¥23bn inventory, the rest in hard assets) for free.
[Japan ECM] Lifedrink (2585) – Fast-Growing Beverage Seller Meets P.E. Firm Selldown
- Today post-close, Lifedrink (2585 JP) announced the Sunrise PE funds which own 22% of the company will sell their stake in a clean-up offering with pricing in 8 days.
- This offering comes 8 trading days after a new post-earnings all-time-high. At 24x ADV, the offering will increase Max Real World Float by 50+%.
- There are some index and buyback supply/demand dynamics to note. It’s a heavy offering, so bullish/bearish may be a matter of horizon.
Merger Arb Mondays (01 Sep) – Dongfeng, ENN, Joy City, Kangji, Mayne, Santos, Shibaura, CareNet
- I summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Mayne Pharma (MYX AU), Smart Share Global (EM US), ENN Energy (2688 HK), Dongfeng Motor (489 HK), Joy City Property (207 HK), Santos Ltd (STO AU).
- Lowest spreads: Bright Smart Securities (1428 HK), Pacific Industrial (7250 JP), Humm Group (HUM AU), Ashimori Industry (3526 JP), Carenet Inc (2150 JP), Ainsworth Game Technology (AGI AU).
Mayne Pharma (MYX AU): FY25 Results Aid Both Sides
- On 29 August, Mayne Pharma (MYX AU) reported its FY25 results with underlying EBITDA of A$47 million, which is at the lower end of its guidance range.
- At first glance, FY25 results are positive for Mayne as they suggest that the weak 3Q was an aberration and its performance is on an upward trajectory.
- However, my analysis suggests that the results provide Cosette with several angles to pursue to bolster its case of a MAC breach. This remains a high-risk/high-reward set-up.
Shandong Gold Mining Placement – H-Share Running Ahead of A-Shares
- Shandong Gold Mining (1787 HK) aims to raise around US$500m via a primary placement, in order to pay down debt.
- The H-shares are now trading at all-time highs and have been performing better than the A-shares this year.
- In this note, we talk about the deal dynamics and run the deal through our ECM framework.
Simcere Pharma Placement – First Primary Raising, past Deals Have Been Mixed
- Simcere Pharmaceutical Group (2096 HK) is looking to raise around US$200m via a top-up placement.
- This is the first primary raising by the company since its listing. There have been a few secondary deals, with mixed results.
- In this note, we talk about the deal dynamics and run the deal through our ECM framework.
HKBN (1310 HK): On the Cusp of Being Declared Unconditional
- HKBN Ltd (1310 HK)’s offer from China Mobile (941 HK) is HK$5.075 with a 50% minimum acceptance condition. The first closing date is September 3.
- Based on CCASS data, including acceptances, China Mobile’s shareholding was 48.93% of outstanding shares as of September 1.
- Therefore, the offer should be declared unconditional by the first closing date. At the last close and for a September 12 payment, the gross/annualised spread is 0.5%/15.7%.
Current Merger Arbitrage Opportunities and Strategic Reviews in Global Markets: Key Active Cases
- Apiam Animal Health received a takeover offer at A$0.88/share with an 11% spread, supported by founder Dr. Chris Richards.
- Plymouth Industrial REIT has a $24.10/share bid from Sixth Street Capital, with a 14-15% spread and board review ongoing.
- DallasNews has two takeover offers: $15/share from Hearst and $18.5/share from Alden, requiring two-thirds shareholder approval.
Clearing up the FSS’s Sudden Call on Samsung Life’s Samsung Elec Stake Accounting Shift
- Today’s FSS IFRS17 ruling is an accounting fix (equity vs. liability), not the Samsung Life Law, which is a regulatory cap on affiliate stakes based on market value.
- The FSS ruling signals Samsung Life doesn’t need to treat its Samsung Electronics stake as a forced-sale liability, lowering near-term sale risk.
- This eases the overhang, delays potential stake moves, and reinforces the relative underperformance setup on Samsung C&T highlighted in earlier posts.
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