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Most Read: Shinsei Bank, Softbank Group, Sydney Airport, Tencent, Green Cross Cell and more

In today’s briefing:

  • SBI (8473) Launches a HOSTILE Tender Offer on Shinsei Bank (8303)!
  • That Upcoming $3-4bn SELL on Softbank Group (9984)
  • Sydney Airport (SYD AU): Consortium Ups Bid And Granted Due Diligence
  • Tencent 410 as HSI Digs for a New Low
  • Green Cross Merger Got Shareholder Approval (Both Companies): Arb Spread at 5%, I’d Trade It

SBI (8473) Launches a HOSTILE Tender Offer on Shinsei Bank (8303)!

By Travis Lundy

When in late December 2020 I wrote that Shinsei Bank (8303 JP) was my 2021 High Conviction Trade (at the time) (in 2021 High Conviction – Shinsei Bank), I talked about buybacks, and pressure on the stock, and float, and the government ownership, and value, and business recycling, and other things. 

Over the next three months, the stock was up as much as 50%, helped by both Shinsei Bank buying back stock and SBI Holdings (8473 JP) lifting its position sharply. When I wrote SBI had reported a position of 10.3% months earlier. A couple of days later they reported an uplift and by the end of March had an additional 16.067mm shares, giving them 16.5% of shares out and 19.85% of voting rights. 

As I wrote in 2021 High Conviction Update – Shinsei Bank Float Squeeze to Mitigate Near-Term in mid-March before they got that far, it was likely they needed to pause because someone who wants to own more than 20% of voting rights of a bank has to ask the Ministry of Finance first, before going over.

Shinsei reported results in mid-May, launched another 20mm share ¥20bn buyback, saw a float weight drop by MSCI at end-May, and since mid-May had bought back 5.049mm shares spending ¥7.2bn to do so as banks and other financials in Japan fell with US long rates.

Today SBI Announced A Tender Offer To Go To 48%

Today, SBI announced a Tender Offer to go to 48%. The Tender Offer starts tomorrow and goes for 30 business days. The price is ¥2000/share. 

As of today, the SBIHD Parties have not held prior discussions regarding the Tender Offer with the Target Company and have not confirmed whether the Target Company will support the Tender Offer.

This is a hostile bid.

SBI bought just under 5% in April-August 2019. In September 2019, SBI proposed that SBI buy 33.4-48% of Shinsei and bring the bank under SBI’s wing. Two years have passed since the initial proposal of an alliance, and after what appears to be a lack of progress (and some implied criticism not acted upon), and SBI’s vote against the re-election of four directors at the AGM in June, SBI apparently did not seem to think it fruitful to hold any further discussions on practical matters until they had the ability to do something. This is vaguely reminiscent of Itochu’s lifting of its stake in Descente Ltd (8114 JP) a couple years ago. 

The Financial Instruments & Exchange Act (FIEA) Article 27-2 sets out the rules for Tender Offers, for both would-be acquirers and Target Companies. Shinsei Bank now has 10 days to come up with an Official Opinion (the immediate announcement is “we’ll take a look and get back to you”).

One should expect this to continue on somewhat to highly unfriendly terms.  But there is not much Shinsei can do about it. 

Or is there…?

I’ve got popcorn. 

And lots more discussion below about how to think about this situation…

That Upcoming $3-4bn SELL on Softbank Group (9984)

By Travis Lundy

After consulting the ancient texts, studying the runes, tossing the bones, and reading the tea leaves, I surmise there is likely to be a large seller on Softbank Group (9984 JP) coming shortly. 

My take on this is the selldown is $3-4bn worth of stock. Which is decent. Especially as the company has taken it on the chin recently with investments in China turning less salutary.

Explained below.

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. 

Tencent 410 as HSI Digs for a New Low

By Thomas Schroeder

Tencent call to re test the 410-20 macro support in our August 25 insight. The ideal long set up faces regulatory headwinds but needs a washout low in the HSI and HK tech.

HSI short targets a potential triple low at 24,600 but a washout low to 24,000 is favored to set the stage for a short squeeze rise. If Tencent can hold 410 key support during this process, it sets the stage for a higher conviction long in Tencent (re test of the 410 buy support).

510 is near resistance and the short zone (500). Conviction rests with buying a macro support re test with policy headwinds into year end.

Below 400 opens the way lower to 330-20.

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.

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
Source: DART & KRX

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