The review period runs from 18-31 January for the February QIR, the results will be announced on 10 February (Asia-time) with the changes implemented after the close on 28 February.
There are quite a few potential changes in China and Korea, with a couple in Japan and one in Indonesia. There are a few stocks close to the inclusion/exclusion thresholds.
Other big changes include a potential increase in the Foreign Inclusion Factor for SK Square (402340 KS) and an increase in the Index Inclusion Factor for Sea Ltd (SE US).
The merger ratio provides an uplift to already strong recent relative performance for MAGIC holders, and strong pro-forma NAV and DPU accretion for MCT holders.
And it means a lot of flow. Lots and lots of flow.
Each Mapletree North Asia Commercial Trust (MAGIC SP)/MNACT unitholder will receive either a scrip-only or the cash-and-scrip offer worth S$1.1949 per MNACT unit, a 7.6% premium to the last close price.
The proposed merger provides Mapletree Commercial Trust (MCT SP) unitholders with meaningful geographic diversification through a DPU and NAV accretive transaction.
MNACT unitholders will receive an attractive consideration in terms of P/NAV and gross exchange ratio. Both unitholders will benefit from the enlarged REIT’s higher free float and growth potential.
The price review period for the FTSE All-World/All-Cap March 2022 SAIR ended on 31 December. The changes are expected to be announced on 18 February and implemented on 18 March.
There are loads of potential inclusions to the index for China – a lot of the changes are a result of stocks being included in Northbound Stock Connect.
There are stocks that are potential inclusions in other indices and will have additional passive inflows. Nongfu Spring could also be included in the FTSE China 50 and HSI indices.
Typically, the inclusions rally and the deletions drop between announcement and implementation with a big jump immediately post announcement. Pre-positioning prior to announcement is important.
NTT (9432 JP) sees a US$1bn selldown of shares on 29 December, due to a weird quirk in the way TOPIX and JPX Nikkei 400 are constructed and managed.
China’s State Administration for Market Supervision is reviewing Razer (1337 HK)‘s privatisation as a simple case. With the key regulatory pre-condition all but satisfied, the Scheme timeline will significantly shorten.
The trade is to be long the back end of Shinsei Bank (8303 JP)‘s Tender Offer. BUY Shinsei Bank shares – outright, and vs large Japanese banks with higher PBRs.
MAGIC SP unitholders will receive a scheme consideration of S$1.1949/unit of MAGIC SP, and will have a scrip-only option and a cash and scrip option.
The increase in index shares for Mapletree Commercial Trust (MCT SP) will result in large buying from passive FTSE EPRA Nareit Developed Asia, Straits Times Index and MSCI Singapore trackers.
On Wednesday, Sigma Healthcare (SIG AU) rejected an indicative takeover offer from rival Australian Pharma Industries (API AU). Shareholders were disappointed with the news, with Sigma’s shares closing 12.3% lower at A$0.54 per share. API shares fared better and fell 3.6% to A$1.35 each.
We believe Sigma’s board were left with the tough choice of accepting a lowball offer or improving the existing business and riding out the inevitable share price fall. By rejecting the API bid, the Sigma board made the difficult but right choice, in our view. While further downside risk to the share price is limited, we caution that shareholders require patience as the road to share price recovery will be long.
Wheelock & (20 HK) is coming up “expensive”, but it’s Wharf Holdings (4 HK) which is under-performing after PRC property sales targets are lowered amid Beijing’s cooling measures.
Preceding my comments on Wheelock and other stubs are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.
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On the 27th November 2018, Xenith Ip (XIP AU) and Qantm Intellectual Property (QIP AU), both leading providers of IP origination services in Australia – and two of the three listed IP plays – announced a merger via an all-scrip scheme, such that Xenith shareholders will receive 1.22 QANTM shares for every Xenith share, or an implied value of A$1.598/share. QANTM and Xenith shareholders would own 55% and 45% of the merged group, respectively. Xenith’s board unanimously recommended the merger to its shareholders.
The same day IPH proposed an unsolicited, indicative, preliminary, conditional and non-binding cash & scrip proposal to acquire QANTM at $1.80/share (including a A$0.05 dividend) by way of a scheme. QANTM’s board rejected the proposal due to its highly conditional nature.
IPH bought a 19.9% stake in Xenith at $1.85/share (or ~A$33mn) on the 13 February 2019 and said that is does not support the QANTM scheme. IPH followed up with a scheme proposal for Xenith comprising cash (A$1.28) and IPH shares (0.1056 IPH shares) or A$1.97/share, which was summarily rejected by Xenith.
Execution risk, especially ACCC approval was an express concern for Xenith. At the time, this appeared spurious given privately owned companies collectively hold a larger market share – and growing – compared to the three listcos currently in play.
The ACCC agreed and signed off on the IPH/XIP tie-up on the 21 March, and a IPH/Xenith merger on the 28 March. Xenith continued to stonewall and backed QANTM’s proposal.
On the 8 April, IPH bumped the scrip portion of its proposal for Xenith. The revised terms were cash (A$1.28) and 0.1261 IPH shares – or $2.15/share – at the time of the announcement. There is a mix & match facility wherein shareholders can choose 100% cash or 100% scrip, subject to scale back.
Xenith approached QANTM to provide a counter proposal to match IPH’s updated offer, however QANTM opted out. Xenith had run out of excuses not to back IPH’s proposal.
This is a done deal and will trade tight to terms. Conditions include the termination of the QANTM scheme implementation deed (which will take place shortly with Xenith incurring a A$1.6mn break fee) and Xenith shareholder approval.
The Scheme meeting is tentatively scheduled for the week commencing the 15 July with an expected implementation date early August.
Korea’s news outlet Maeil Economic Daily reported yesterday that the main bidding of Nexon sale was pushed back to next month. It was originally planned for this month. Maeil said lower-than-expected interest among potential bidders was the main reason. More specifically, Tencent isn’t showing any serious commitment or intention.
Tencent is the key player in this event. But Tencent seems to be hiding its cards. Following are reasonable conclusions at this point wrt what must be going on in this deal:
Tencent has the upper hand in all situations.
Tencent must be the one who is taking more time and pushing back the schedule.
But there is still a higher chance that Tencent will stay in this race to the end.
But it is also very possible that final offer price will be lower than initially and currently expected as Tencent will likely get better deal conditions.
On 9 April 2019, after a press release by the Ministry of Finance saying that it had commenced the selection procedure for underwriters to assist on such a sale, the Nikkei carried an article (Japanese-only) saying that the government would sell down a stake in Japan Post Holdings (6178 JP) from its current 60-odd percent to a level of “over one-third” (presumably a level relatively close to one-third and a share) which is the minimum ownership level mandated by the Postal Service Privatization Act. The proceeds of the sale are designed to raise money for reconstruction related to the 2011 Tohoku Earthquake.
Currently, the Ministry of Finance owns 2.5595 billion shares out of the 4.5bn shares outstanding which is 56.88%, but the company has 10.34% of its shares as treasury shares so the MoF has voting rights of 63.3%. Another Nikkei article suggested the news meant a maximum sale of approximately 1.06 billion shares out of those 2.56bn shares held to bring the position down to 1.5bn shares exactly.
Importantly, IF the government got down to the “one-third plus one share” level (or close enough to it), that would complete the required privatization by the government based on the formal legal terms of the Privatization Act.
At Tuesday’s close of ¥1,286/share, 1.06bn shares would be ¥1.36 trillion as an offer size less fees and a discount to the close. The Japan Postal Service Privatization Act specified that the amount raised reach ¥4 trillion in total. The amount raised in sales so far is ¥2.8 trillion according to the Nikkei. That suggests the minimum acceptable price at which such an Offering could take place is around ¥1,160-1180. However, the word used in the Nikkei article is profit so despite the government’s very low accounting basis, it is possible that the minimum price would be closer to the current price, or it could even be higher.
In any case… it is important to note other factors here.
Pricing is a problem. The current price remains below the last two times the government tapped the market.
Making the deal attractive is a problem. JPH is required to continue to own 100% of the postal service and the 24,000 post office branches across the country. With the use of physical post services declining, JPH needs to have some profits elsewhere to support that. Those postal branches are to some degree supported by payments made by JPI and JPB for fair usage, but it is not enough. JPH needs to do some M&A and it has stated its policy includes more of it. The first round (buying Toll Holdings) did not go well. The second round of buying 7% of Aflac Inc (AFL US) is (I think) a great idea, but it doesn’t hit the income statement for a couple of years.
Buybacks at the JPI and JPB level raise EPS at those two entities. However, it doesn’t raise the level of EPS at the JPH level. For that, you need to reduce the denominator there too.
KDB’s press release came out WRT Asiana Airlines (020560 KS) liquidity crisis shortly after the market closed yesterday. KDB clearly said that Kumho Asiana Group’s self-rescue plans aren’t acceptable. KDB made it clear that there will be only two ways here: massive rights offer and asset selloff.
Indofood Agri Resources (IFAR SP) has announced PT Indofood Sukses Makmur Tbk, its controlling shareholder with 74.52%, has made a voluntary conditional cash offer of $0.28/share for all IFAR shares it does not own. The offer price, which is a 7.7% premium to last close, is not final. Any dividend declared will reduce the consideration under the proposal.
The Offer is conditional on PT Indofood holding 90% of shares out at the close of the offer. There is no other condition.
IFAR’s share price has increased 27% this month – evidently, there was some news leakage ahead of the announcement – positioning its discount to NAV at ~50%, around its narrowest inside a year, but on a look-through basis, the Offer price backs out just 0.4x P/B.
The Offer price represents a premium of approximately 21.5%, 26.3%, 29.0% and 23.1% over the VWAP for 1M, 3M, 6M and 12M. IFAR traded above the Offer price as recent as May last year. One wonders if the consideration is sufficient to achieve the 90% condition.
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Wheelock & (20 HK) is coming up “expensive”, but it’s Wharf Holdings (4 HK) which is under-performing after PRC property sales targets are lowered amid Beijing’s cooling measures.
Preceding my comments on Wheelock and other stubs are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Korea’s news outlet Maeil Economic Daily reported yesterday that the main bidding of Nexon sale was pushed back to next month. It was originally planned for this month. Maeil said lower-than-expected interest among potential bidders was the main reason. More specifically, Tencent isn’t showing any serious commitment or intention.
Tencent is the key player in this event. But Tencent seems to be hiding its cards. Following are reasonable conclusions at this point wrt what must be going on in this deal:
Tencent has the upper hand in all situations.
Tencent must be the one who is taking more time and pushing back the schedule.
But there is still a higher chance that Tencent will stay in this race to the end.
But it is also very possible that final offer price will be lower than initially and currently expected as Tencent will likely get better deal conditions.
On 9 April 2019, after a press release by the Ministry of Finance saying that it had commenced the selection procedure for underwriters to assist on such a sale, the Nikkei carried an article (Japanese-only) saying that the government would sell down a stake in Japan Post Holdings (6178 JP) from its current 60-odd percent to a level of “over one-third” (presumably a level relatively close to one-third and a share) which is the minimum ownership level mandated by the Postal Service Privatization Act. The proceeds of the sale are designed to raise money for reconstruction related to the 2011 Tohoku Earthquake.
Currently, the Ministry of Finance owns 2.5595 billion shares out of the 4.5bn shares outstanding which is 56.88%, but the company has 10.34% of its shares as treasury shares so the MoF has voting rights of 63.3%. Another Nikkei article suggested the news meant a maximum sale of approximately 1.06 billion shares out of those 2.56bn shares held to bring the position down to 1.5bn shares exactly.
Importantly, IF the government got down to the “one-third plus one share” level (or close enough to it), that would complete the required privatization by the government based on the formal legal terms of the Privatization Act.
At Tuesday’s close of ¥1,286/share, 1.06bn shares would be ¥1.36 trillion as an offer size less fees and a discount to the close. The Japan Postal Service Privatization Act specified that the amount raised reach ¥4 trillion in total. The amount raised in sales so far is ¥2.8 trillion according to the Nikkei. That suggests the minimum acceptable price at which such an Offering could take place is around ¥1,160-1180. However, the word used in the Nikkei article is profit so despite the government’s very low accounting basis, it is possible that the minimum price would be closer to the current price, or it could even be higher.
In any case… it is important to note other factors here.
Pricing is a problem. The current price remains below the last two times the government tapped the market.
Making the deal attractive is a problem. JPH is required to continue to own 100% of the postal service and the 24,000 post office branches across the country. With the use of physical post services declining, JPH needs to have some profits elsewhere to support that. Those postal branches are to some degree supported by payments made by JPI and JPB for fair usage, but it is not enough. JPH needs to do some M&A and it has stated its policy includes more of it. The first round (buying Toll Holdings) did not go well. The second round of buying 7% of Aflac Inc (AFL US) is (I think) a great idea, but it doesn’t hit the income statement for a couple of years.
Buybacks at the JPI and JPB level raise EPS at those two entities. However, it doesn’t raise the level of EPS at the JPH level. For that, you need to reduce the denominator there too.
KDB’s press release came out WRT Asiana Airlines (020560 KS) liquidity crisis shortly after the market closed yesterday. KDB clearly said that Kumho Asiana Group’s self-rescue plans aren’t acceptable. KDB made it clear that there will be only two ways here: massive rights offer and asset selloff.
Indofood Agri Resources (IFAR SP) has announced PT Indofood Sukses Makmur Tbk, its controlling shareholder with 74.52%, has made a voluntary conditional cash offer of $0.28/share for all IFAR shares it does not own. The offer price, which is a 7.7% premium to last close, is not final. Any dividend declared will reduce the consideration under the proposal.
The Offer is conditional on PT Indofood holding 90% of shares out at the close of the offer. There is no other condition.
IFAR’s share price has increased 27% this month – evidently, there was some news leakage ahead of the announcement – positioning its discount to NAV at ~50%, around its narrowest inside a year, but on a look-through basis, the Offer price backs out just 0.4x P/B.
The Offer price represents a premium of approximately 21.5%, 26.3%, 29.0% and 23.1% over the VWAP for 1M, 3M, 6M and 12M. IFAR traded above the Offer price as recent as May last year. One wonders if the consideration is sufficient to achieve the 90% condition.
Post market close on 9th of April, as per media reports, the Japanese government said that it plans to sell another 1.06bn share of Japan Post Holdings (6178 JP) (JPH). The government aims to do so as soon as Sep 2019. The sale, at around US$12bn, would amount to 23.5% of the company and nearly 41% of the government’s current shareholding. It would mark the second sell down by the government since JPH listed in 2015. Post the news release, JPH shares closed down 3% on 10th of April. They are now trading below the IPO price, below the last placement price and just off their all-time lows.
The postal service privatization act seems to be in full swing, with JPH about to enter its third round of selling and Japan Post Insurance (7181 JP) (JPI) in the midst of its first post IPO sell down. However, Japan Post Bank (7182 JP) (JPB) has yet to see a sell down even though the recent deposit ceiling revision required JPH to reduce its holding in JPB. Were JPH to sell some of its JPB stake ahead of the government sale of JPH, it could mitigate a large part of its own placement using the cash that it generates from JPI and possible JPB stake sale to buyback some stock. Thus, there is a possibility that JPB placement might come before JPH’s next placement.
For people interested in reading more about the history and background, I’ve covered the IPO and JPH sell down in the below series of insights:
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
On 9 April 2019, after a press release by the Ministry of Finance saying that it had commenced the selection procedure for underwriters to assist on such a sale, the Nikkei carried an article (Japanese-only) saying that the government would sell down a stake in Japan Post Holdings (6178 JP) from its current 60-odd percent to a level of “over one-third” (presumably a level relatively close to one-third and a share) which is the minimum ownership level mandated by the Postal Service Privatization Act. The proceeds of the sale are designed to raise money for reconstruction related to the 2011 Tohoku Earthquake.
Currently, the Ministry of Finance owns 2.5595 billion shares out of the 4.5bn shares outstanding which is 56.88%, but the company has 10.34% of its shares as treasury shares so the MoF has voting rights of 63.3%. Another Nikkei article suggested the news meant a maximum sale of approximately 1.06 billion shares out of those 2.56bn shares held to bring the position down to 1.5bn shares exactly.
Importantly, IF the government got down to the “one-third plus one share” level (or close enough to it), that would complete the required privatization by the government based on the formal legal terms of the Privatization Act.
At Tuesday’s close of ¥1,286/share, 1.06bn shares would be ¥1.36 trillion as an offer size less fees and a discount to the close. The Japan Postal Service Privatization Act specified that the amount raised reach ¥4 trillion in total. The amount raised in sales so far is ¥2.8 trillion according to the Nikkei. That suggests the minimum acceptable price at which such an Offering could take place is around ¥1,160-1180. However, the word used in the Nikkei article is profit so despite the government’s very low accounting basis, it is possible that the minimum price would be closer to the current price, or it could even be higher.
In any case… it is important to note other factors here.
Pricing is a problem. The current price remains below the last two times the government tapped the market.
Making the deal attractive is a problem. JPH is required to continue to own 100% of the postal service and the 24,000 post office branches across the country. With the use of physical post services declining, JPH needs to have some profits elsewhere to support that. Those postal branches are to some degree supported by payments made by JPI and JPB for fair usage, but it is not enough. JPH needs to do some M&A and it has stated its policy includes more of it. The first round (buying Toll Holdings) did not go well. The second round of buying 7% of Aflac Inc (AFL US) is (I think) a great idea, but it doesn’t hit the income statement for a couple of years.
Buybacks at the JPI and JPB level raise EPS at those two entities. However, it doesn’t raise the level of EPS at the JPH level. For that, you need to reduce the denominator there too.
KDB’s press release came out WRT Asiana Airlines (020560 KS) liquidity crisis shortly after the market closed yesterday. KDB clearly said that Kumho Asiana Group’s self-rescue plans aren’t acceptable. KDB made it clear that there will be only two ways here: massive rights offer and asset selloff.
Indofood Agri Resources (IFAR SP) has announced PT Indofood Sukses Makmur Tbk, its controlling shareholder with 74.52%, has made a voluntary conditional cash offer of $0.28/share for all IFAR shares it does not own. The offer price, which is a 7.7% premium to last close, is not final. Any dividend declared will reduce the consideration under the proposal.
The Offer is conditional on PT Indofood holding 90% of shares out at the close of the offer. There is no other condition.
IFAR’s share price has increased 27% this month – evidently, there was some news leakage ahead of the announcement – positioning its discount to NAV at ~50%, around its narrowest inside a year, but on a look-through basis, the Offer price backs out just 0.4x P/B.
The Offer price represents a premium of approximately 21.5%, 26.3%, 29.0% and 23.1% over the VWAP for 1M, 3M, 6M and 12M. IFAR traded above the Offer price as recent as May last year. One wonders if the consideration is sufficient to achieve the 90% condition.
Post market close on 9th of April, as per media reports, the Japanese government said that it plans to sell another 1.06bn share of Japan Post Holdings (6178 JP) (JPH). The government aims to do so as soon as Sep 2019. The sale, at around US$12bn, would amount to 23.5% of the company and nearly 41% of the government’s current shareholding. It would mark the second sell down by the government since JPH listed in 2015. Post the news release, JPH shares closed down 3% on 10th of April. They are now trading below the IPO price, below the last placement price and just off their all-time lows.
The postal service privatization act seems to be in full swing, with JPH about to enter its third round of selling and Japan Post Insurance (7181 JP) (JPI) in the midst of its first post IPO sell down. However, Japan Post Bank (7182 JP) (JPB) has yet to see a sell down even though the recent deposit ceiling revision required JPH to reduce its holding in JPB. Were JPH to sell some of its JPB stake ahead of the government sale of JPH, it could mitigate a large part of its own placement using the cash that it generates from JPI and possible JPB stake sale to buyback some stock. Thus, there is a possibility that JPB placement might come before JPH’s next placement.
For people interested in reading more about the history and background, I’ve covered the IPO and JPH sell down in the below series of insights:
At AlphaSituations, we look for unusual spreads in announced US M&A deals of >$400MN in size with the intention of identifying and highlighting misunderstood and/or under the radar risk arb opportunities. In our current list of unusual spreads, the most compelling relates to the China Oceanwide/Genworth Financial (GNW US) transaction which was announced more than two years ago. The merger spread currently stands at 40%. Below, we explain why we are confident that this deal will move to completion giving the arbs an opportunity to profit substantially.
Unusual Merger Spreads (As at April 9, 2019)
M&A Situation
Spread
Expected Close
Comment
CO/GNW
40%
Apr-19
Still waiting Canada, China SAFE, FINRA approvals/Skepticism prevails over deal completion
TMUS/S
27%
Jul-19
Potential antitrust complications/Extended review period
FMF/STC
14%
Jun-19
Regulatory/Pricing Adjustment Risk
4Q 2016-1Q 2019 Live US M&A Announced Deals (>$400 MN) & Spreads
Acquirer
Target
Sector
Date Announced
Transaction Type
Expected Close
Offer Price
Target Firm Price
4/9/2019
Spread
4Q-2016
China Oceanwide (China)
GNW
Financial – LTC,Life Insurance/Mortgage Insurance
23-Oct-16
Cash
Dec-18
$5.43
$3.88
39.9%
1Q-2018
SJW
CTWS
Water Utility
15-Mar-18
Stock
Dec-18
$72.09
$62.85
14.7%
SJW
CTWS
Water Utility
6-Aug-18
Cash (OfferRevised)
Jun-19
$70.00
$69.60
0.6%
FNF
STC
Insurance
19-Mar-18
Cash/Stock
Jun-19
$49.09
$43.07
14.0%
2Q-2018
Teamsport Parent
EHIC
Car Rental/Leasing Services
6-Apr-18
Cash
N/A
$13.50
$10.56
27.8%
Teamsport Parent
EHIC
Car Rental/Leasing Services
19-Feb-19
Cash
Apr-19
$12.25
$12.21
0.3%
TMUS
S
Wireless Communications Services
29-Apr-18
Stock
Jul-19
$7.32
$5.78
26.7%
Knauf (Germany)
USG
Building Materials
11-Jun-18
Cash
Apr-19
$44.00
$43.37
1.5%
3Q-2018
Amcor (Australia)
BMS
Packaging
6-Aug-18
Stock
Jun-19
$56.08
$55.15
1.7%
HIG
NAVG
P&C Insurance
22-Aug-18
Cash
Jun-19
$70.00
$69.93
0.1%
4Q-2018
ESV
RDC
Oil Drillers
8-Oct-18
Stock
Jun-19
$11.10
$11.08
0.1%
HRS
LLL
Aerospace & Defense
14-Oct-18
Stock
Jun-19
$211.71
$210.55
0.5%
Oncor Electric
HIFR
Utility REIT
18-Oct-18
Cash
Jun-19
$21.00
$21.04
-0.2%
IBM
RHT
Technology- Software
28-Oct-18
Cash
Dec-19
$190.00
$183.10
3.8%
ILMN
PACB
Healthcare-Diagnostics
1-Nov-18
Cash
Jun-19
$8.00
$7.34
9.0%
IIVI
FNSR
Communication Equipment
9-Nov-18
Cash/Stock
Jun-19
$24.42
$24.01
1.7%
NXTR
TRCO
TV Broadcaster
3-Dec-18
Cash
Sep-19
$46.50
$46.17
0.7%
Siris Capital/Evergreen Coast Capital (Elliott)
TVPT
Leisure
10-Dec-18
Cash
Jun-19
$15.75
$15.70
0.3%
LVMH
BEL
Lodging
14-Dec-18
Cash
Jun-19
$25.00
$24.95
0.2%
ABCB
LION
Regional Banks
17-Dec-18
Stock
Jun-19
$28.08
$28.01
0.2%
1Q-2019
BMY
CELG
Biopharmaceuticals
3-Jan-19
Cash/Stock
Sep-19
$96.03
$94.24
1.9%
DXC
LXFT
Technology-Software
7-Jan-19
Cash
Jun-19
$59.00
$58.75
0.4%
NEM
GG
Gold Mining
14-Jan-19
Stock
Jun-19
$11.96
$11.68
2.4%
FISV
FDC
Business Services
16-Jan-19
Stock
Dec-19
$26.77
$26.20
2.2%
CHFC
TCF
Regional Banks
28-Jan-19
Stock
Oct-19
$21.86
$21.66
0.9%
Hellman & Friedman
ULTI
Software Infrastructure
4-Feb-19
Cash
Jun-19
$331.50
$330.21
0.4%
SXC
SXCP
Coal MLP
5-Feb-19
Stock
Jul-19
$12.52
$13.00
-3.7%
BBT
STI
Regional Banks
7-Feb-19
Stock
Dec-19
$62.16
$61.20
1.6%
Thomas Bravo
ELLI
Mortgage Software
12-Feb-19
Cash
Jul-19
$99.00
$98.87
0.1%
Qlik
ATTU
Technology-Software Application
21-Feb-19
Cash
Jun-19
$23.50
$23.37
0.6%
Roche
ONCE
Biotech
25-Feb-19
Cash
Jun-19
$114.50
$112.76
1.5%
Ipsen
CMTA
Biotech
25-Feb-19
Cash
Jun-19
$25.00
$26.23
-4.7%
Platinum Equity
LABL
Business Services
25-Feb-19
Cash
Sep-19
$50.00
$50.00
0.0%
BIIB
NITE
Biotech
4-Mar-19
Cash
Jun-19
$25.50
$25.36
0.6%
NVDA
MLNX
Technology – Semiconductors
11-Mar-19
Cash
Dec-19
$125.00
$118.41
5.6%
SNN
OSIR
Biotech
12-Mar-19
Cash
Jun-19
$19.00
$19.00
0.0%
FIS
WP
Business Services
18-Mar-19
Cash/Stock
Dec-19
$116.40
$113.94
2.2%
JLL
HFF
Commercial Real Estate Services
19-Mar-19
Cash/Stock
Sep-19
$47.58
$47.31
0.6%
CUZ
TIER
Office REIT
25-Mar-19
Stock
Sep-19
$28.55
$28.27
1.0%
CNC
WCG
Healthcare Plans
27-Mar-19
Cash/Stock
Jun-20
$315.09
$287.14
9.7%
ON
QTNA
Technology – Semiconductors
27-Mar-19
Cash
Dec-19
$24.50
$24.14
1.5%
ZF Friedrichshafen
WBC
Auto Parts
28-Mar-19
Cash
Mar-20
$136.50
$133.58
2.2%
2Q-2019
UGI
APU
Utility – Regulated Gas
2-Apr-19
Cash/Stock
Sep-19
$34.17
$35.42
-3.5%
Merck KGaA
VSM
Specialty Chemicals
8-Apr-19
Cash
Dec-19
$53.00
$51.82
2.3%
Source: AlphaSituations
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On 12 March 2019 after the close, Shin Etsu Chemical (4063 JP)announced a share buyback program to buy up to 14 million shares for up to ¥100 billion. If it bought all 14 million shares, that would be 3.3% of shares outstanding. Simultaneously, it announced a ToSTNeT-3 buyback of 11,001,100 shares at today’s closing price of ¥9,090/share which if all bought would complete the buyback program.
As I write, the shares are up 4-6% in thin trading in the ADRs.
There was some speculation across the Street there would be a buyback because of slowing earnings expectations and a surfeit of capital, which was itself important because of the company’s lack of recent history of buybacks (the last and only time the company has bought back shares (to date) was a repurchase of 3 million shares for ¥13.6 billion in late October 2008 when things were hairy (and cheap)).
The shares are down over the past year, but the price in the past few days is not dramatically at the low end of the range of the past six months or so.
There may be some information in the context and structure of this buyback which tells you something different than people’s first reaction.
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An old favorite in the Asian arbitrageur’s investment universe is the Hang Lung stub. The Hang Lung Group acquired Hang Lung Properties (formerly named Amoy Properties) and designated the subsidiary as its property investment arm. After both companies were listed in 1992, the same year that the company entered the mainland with its purchase of the Grand Gateway 66 and Plaza 66 in Shanghai, the pair was open to arbs. The Hang Lung Group now controls over RMB 130 (USD 19.4b) billion of property in Hong Kong and China.
In the wonderful world of Asian holding companies, Hang Lung needs little introduction. However, in this insight I would like to highlight a trade idea. I will detail why I think now is the right time to setup a stub trade and some background information on the company and what assets constitute the stub.
On Wednesday, Sigma Healthcare (SIG AU) rejected an indicative takeover offer from rival Australian Pharma Industries (API AU). Shareholders were disappointed with the news, with Sigma’s shares closing 12.3% lower at A$0.54 per share. API shares fared better and fell 3.6% to A$1.35 each.
We believe Sigma’s board were left with the tough choice of accepting a lowball offer or improving the existing business and riding out the inevitable share price fall. By rejecting the API bid, the Sigma board made the difficult but right choice, in our view. While further downside risk to the share price is limited, we caution that shareholders require patience as the road to share price recovery will be long.
Wheelock & (20 HK) is coming up “expensive”, but it’s Wharf Holdings (4 HK) which is under-performing after PRC property sales targets are lowered amid Beijing’s cooling measures.
Preceding my comments on Wheelock and other stubs are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.
On 12 March 2019 after the close, Shin Etsu Chemical (4063 JP)announced a share buyback program to buy up to 14 million shares for up to ¥100 billion. If it bought all 14 million shares, that would be 3.3% of shares outstanding. Simultaneously, it announced a ToSTNeT-3 buyback of 11,001,100 shares at today’s closing price of ¥9,090/share which if all bought would complete the buyback program.
As I write, the shares are up 4-6% in thin trading in the ADRs.
There was some speculation across the Street there would be a buyback because of slowing earnings expectations and a surfeit of capital, which was itself important because of the company’s lack of recent history of buybacks (the last and only time the company has bought back shares (to date) was a repurchase of 3 million shares for ¥13.6 billion in late October 2008 when things were hairy (and cheap)).
The shares are down over the past year, but the price in the past few days is not dramatically at the low end of the range of the past six months or so.
There may be some information in the context and structure of this buyback which tells you something different than people’s first reaction.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
