In today’s briefing:
- [Japan M&A] Toyota Inds (6201) – Process ALWAYS Bad, Price Bad To Worse; Easily Worth ¥20k+
- Gold Miners ETF (GDX US) Dec Rebalance Preview: Stock Price Moves Shrink Capping Trade
- CSI300 Index Rebalance: 11 Changes & US$7.77bn Trade
- KWEB Index Rebalance: 5 Adds & A Delete
- [Japan M&A] Possible Partial TSURUHA (3391 JP) Tender Changes – More Accretion! Smaller Tender?
- SSE50 Index Rebalance: 4 Changes a Side & US$2.2bn Trade
- [Japan M&A] ParentCo Finally Buys Out Canon Elec (7739 JP) – OK Premium, Meh Process, No Synergies
- Delfi : Consumer Company with Reasonable Valuations
- African Gold Ltd (A1G AU) Enters Scheme With Montage Gold (MAU CN)
- 3SBio Placement: Partnership with Pfizer Going Well; Digestible Deal
[Japan M&A] Toyota Inds (6201) – Process ALWAYS Bad, Price Bad To Worse; Easily Worth ¥20k+
- In April there was a story suggesting Toyota Group would buy out Toyota Industries (6201 JP). In June, they announced a deal. It was a BAD DEAL.
- The price was low, but it was BAD governance because it was the WRONG DEAL. TICO’s Board declared a valuation fair for a deal not announced, ignoring the ACTUAL DEAL.
- The valuation? Assumed no changes to the business. Actual deal? Sell 90+% of net assets driving 50% of net income, buy back 24+% of shares at discount.
Gold Miners ETF (GDX US) Dec Rebalance Preview: Stock Price Moves Shrink Capping Trade
- The VanEck Gold Miners ETF/USA (GDX US) transitioned from the tracking the NYSE Arca Gold Miners Index to the MarketVector Global Gold Miners Index in September.
- Dundee Precious Metals (DPM CN)‘s stock price has continued to move higher and is likely to be added to the index in December.
- Stock moves over the last month have shrunk the capping trade massively. Estimated one-way turnover is 1.8% and the round trip trade is US$1.75bn.
CSI300 Index Rebalance: 11 Changes & US$7.77bn Trade
- There are 11 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) with implementation taking place at the close on 12 December.
- Nearly all the changes are in line with forecasts. Jiangsu Zhongtian Technologies Co, Ltd. (600522 CH) is the one surprise addition.
- The adds outperformed the deletes and the CSI300 from June-September but have given back a chunk of the gains since then. Expect positioning to build over the next few days.
KWEB Index Rebalance: 5 Adds & A Delete
- The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 12 December.
- Alibaba Pictures, East Buy Holding, Ping An Healthcare and Technology, XD Inc. and CaoCao (2643 HK) will be added, while iQIYI Inc (IQ US) will be deleted.
- Short interest has increased in most adds recently and there could be some short covering following the announcement of the index inclusion.
[Japan M&A] Possible Partial TSURUHA (3391 JP) Tender Changes – More Accretion! Smaller Tender?
- Today, post-close of its first day of trading as MergeCo, Tsuruha Holdings (3391 JP) announced 12 different investors who had voted against the deal filed for dissenting shareholder share repurchase.
- This covers 27.154mm shares – a bit more than what Orbis owned when they last filed (25.5mm shs) and is just over half the AGM dissension.
- This creates some weirdness. A 5+% buyback is strong accretion, but “fair price” is a question, and it could mean smaller tender offer quantity and larger eventual index selldowns.
SSE50 Index Rebalance: 4 Changes a Side & US$2.2bn Trade
- There are 4 constituent changes for the SSE50 Index (SSE50 INDEX) that will be implemented at the close on 12 December.
- Dawning Information Industry C (603019 CH) is a surprise add given the upcoming merger with Hygon Information Technology C (688041 CH).
- The SSE50 Index adds have underperformed the deletes over the last couple of months and there could be outperformance from here as positioning builds ahead of the implementation of the changes.
[Japan M&A] ParentCo Finally Buys Out Canon Elec (7739 JP) – OK Premium, Meh Process, No Synergies
- Friday post-close, parent Canon Inc (7751 JP) announced a buyout of subsidiary Canon Electronics (7739 JP). The ¥3,650/share offer is supported and recommended (to shareholders) by Target Co management.
- This is the least surprising of parent-subsidiary buyout situations, but it took some time. I expect there are some funds already long a basket of these, including this one.
- This is not a very fair procedure. The result is therefore, unfair. And no synergies to boot. But it is a 30+% premium to last, and Canon already owns 55%.
Delfi : Consumer Company with Reasonable Valuations
- Number 1 chocolate company in Indonesia with own brands like SilverQueen, Ceres etc. The company also distributes third party brands across South Asia.
- Cocoa prices have halved from their recent peak but still they are higher than historical average
- Stock trades at reasonable multiple to its 2023 earnings when cocoa prices were stable
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African Gold Ltd (A1G AU) Enters Scheme With Montage Gold (MAU CN)
- The gold rush continues with another Canadian outfit bidding to take over an Aussie-listed West African gold play.
- Junior miner African Gold (A1G AU)has entered into a Scheme with Montage Gold (MAU CN). African Gold shareholders will receive 0.0628 new MAU shares for every A1G share.
- That backs out an implied value of A$0.50/share. Independent directors, holding 11.6% of shares out, are supportive. Montage holds 17.3%. Clean deal.
3SBio Placement: Partnership with Pfizer Going Well; Digestible Deal
- 3SBio Inc (1530 HK) is looking to raise around US$400m from a primary placement.
- The deal is a small one, representing 2.9 days of the stock’s three month ADV, and 3.9% of total shares outstanding.
- In this note, we will talk about the placement and run the deal through our ECM framework.
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