This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. [Japan Activism/M&A] – Closing In On the Tsuruha Partial Tender – Likely Needs To Be Higher
- The merger between Tsuruha Holdings (3391 JP) and Welcia Holdings (3141 JP) will go through in about 6 weeks. In the interim, there are interesting events.
- After, there is a Partial Tender Offer. I expect Aeon Co Ltd (8267 JP) will have to pay up.
- Furthermore, the stock is not overly expensive vs Peers AND there are synergies to come from the merger, making it relatively cheaper. It’s not squeezy, but it’s skewed.
2. Hang Seng (11 HK)’s Offer: HSBC Investors Are Not Sold On The Strategic Benefits
- Since announcing HSBC (5 HK)‘s Offer, Hang Seng Bank (11 HK) has traded tight-ish to terms, at a ~3.9% gross spread (including dividends). Or ~10% annualised if a five month offramp.
- Annualised spreads for clean liquid deals in Asia-Pac, do tend to widen after day 1. Meaning, the gross spread remains roughly static as investors hit their full quota early on.
- HSBC shareholders are questioning the deal merits. For Hang Seng minorities, this is a great exit. Inside this report, I take a deeper dive into Hong Kong bank takeover precedents.
3. Merger Arb Mondays (13 Oct) – Dongfeng, Hang Seng, Soft99, Toyota Industries, Pacific Ind, Mandom
- 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: Smart Share Global (EM US), Mayne Pharma (MYX AU), ENN Energy (2688 HK), Soft99 Corp (4464 JP), Dongfeng Motor (489 HK), Joy City Property (207 HK).
- Lowest spreads: Bright Smart Securities (1428 HK), Pacific Industrial (7250 JP), Mandom Corp (4917 JP), Humm Group (HUM AU), Ainsworth Game Technology (AGI AU), Seven West Media (SWM AU).
4. Genting Malaysia (GENM MK): Genting (GENT MK)’s Curious Offer
- Genting Malaysia (GENM MK), the owner of Resort World Genting, has announced a conditional offer from controlling parent Genting Bhd (GENT MK).
- GENT is offering RM2.35/share, an uninspiring 9.81% premium to last close, for the 50.64% of shares out not held. The Offer has a 50% acceptance threshold.
- GENT already consolidates GENM (AFAIK). At this price, compulsory acquisition won’t be afforded (you’d think). GENT should have launched the Offer back in April when the share price was floundering.
5. Korea’s Div Tax Story Suddenly Hits a Radical Inflection: Targeting Samsung Elec & Hyundai Motor
- Kim Yong-beom proposed cutting eligibility to 25%+ payout firms and hinted the Presidential Office may slash the dividend tax ceiling to 25%, potentially the boldest move yet.
- Short-Term spotlight: large-cap 25–40% payout stocks, led by Samsung Elec and Hyundai Motor. Kim Yong-beom hinted the Presidential Office wants them included to drive dividend growth.
- Big-Cap 25–40% payout stocks, especially Samsung Elec and Hyundai Motor, could see heavy flows, with their preferred shares poised to outperform in the near term.
6. [Quiddity Index] Index Consultation Anncmt Suggests The Big M Will Delete 1 LargeCap, 5 Small.
- Global Index Provider M _ _ _ announced an index consultation on Digital Asset Treausry Companies on 27 August. Friday, they extended til year-end, but gave a clear proposal update.
- They propose to exclude companies where digital asset holdings represent >50% of assets. They seek input. They also seek input on whether a company self-defines as a DAT…
- And also look at stated reasons for capital raising. A preliminary list suggests Strategy (MSTR US) and Metaplanet (3350 JP) are obvious targets. Others will be too.
7. Genting Malaysia (GENM MK): Genting’s Conditional Voluntary Offer at RM2.35
- Genting Malaysia (GENM MK) disclosed a conditional voluntary offer from Genting Bhd (GENT MK) at RM2.35, a 9.8% premium to the last close price of RM2.14.
- The 50% minimum acceptance condition is easily met as Genting is the largest shareholder, representing 49.36% of outstanding shares.
- Genting’s preferred endgame is to delist GENM, thereby fully benefiting if GENM successfully bids for a downstate New York casino licence. Therefore, there is a good chance of a bump.
8. Mayne Pharma (MYX AU): Court Rules Cosette Cannot Walk
- In a watershed decision, the Supreme Court of NSW ruled Cosette cannot terminate its Scheme for Mayne Pharma (MYX AU).
- The hearings were the first time a material adverse change clause had been considered by an Australian court under such circumstances.
- The transaction still requires FIRB signing off. Concerns linger over whether Cosette intends to close a South Australian plant. Mayne has previously dispelled these concerns.
9. StubWorld: Genting (GENT MK)’s U.S. Expansion Is A Gamble
- Genting (GENT MK)‘s Offer for Genting Malaysia (GENM MK) is further evidence of the gaming group’s move for even greater U.S. exposure.
- Preceding my comments on GENT are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
10. Value Partners: Supports Samyang Holdings’ Equity Spin-Off Plan But Must Cancel Treasury Shares
- On 13 October, Value Partners has come out in support of Samyang Holdings (000070 KS)’s equity spin-off plan but on the condition that the company must cancel its treasury shares.
- Value Partners believes Samyang Holdings is currently severely undervalued, trading at a P/B of 0.34x. A shareholders meeting for Samyang Holdings is scheduled for 14 October.
- We have a positive view of this equity spin-off. Our NAV valuation of Samyang Holdings suggests an implied price per share of 127,138 won (28.6% higher than current price).
