IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

Arun has over 15 years’ experience covering the Technology sector. During this time, he has worked with technology start-ups and as an equity analyst in investment banks and independent research firms. He was formerly a Technology Analyst for Canaccord Genuity, Altium Securities, Espirito Santo Investment Bank, Noble Group and Clear Capital. He has a dual Master’s degree in Financial Engineering and Industrial and Operations Engineering from the University of Michigan. He obtained his Bachelor’s degree in Mechanical Engineering from the Indian Institute of Technology, Bombay. He is also a CFA charterholder.

IPOs and Catalysts/Events

China Logistics Property’s Mandatory Conditional Offer Set in Motion

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Global Equity Research Ltd

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Event-Driven

China Logistics Property Holdings / Event-Driven

China Logistics Property Holdings (1589 HK)

<a href="https://www.smartkarma.com/entities/china-logistics-property-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:22799:1" rel="noopener">China Logistics Property Holdings (1589 HK)</a>/CNLP is a leading provider of premium logistics facilities in China. As of 30 June 2021, CNLP had 179 logistics facilities in operation in 38 logistics parks located in logistics hubs in 19 provinces or centrally administered municipalities. After market close on Thursday, CNLP announced that Mr Li Shifa, the founder and the Chairman, is in discussions with a potential purchaser to sell his 26.38% stake in CNLP. If the transaction is completed, it may lead to a change in control and a mandatory general offer (MGO) under Rule 26.1 of the Takeovers Code. The announcement was in response to a Bloomberg article that claimed that <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a> is in discussions to purchase Mr Li Shifa along with RRJ Capital’s stake in CNLP at a valuation of about $2 billion (implies a price of HK$4.48 per share). JD.com is the fourth-largest shareholder and represent 10.11% of the outstanding shares. Speculation on the fate of Mr Li Shifa and RRJ Capital’s stakes have been ongoing for several months. On 29 December 2020, CNLP announced that both Mr Li Shifa and RRJ Capital were conducting a preliminary strategic review of their stakes which could lead to a sale of all or part of the stakes. Press reports at that time suggested that Mr Li Shifa and RRJ Capital were looking for around HK$4.70 per share.If JD.com acquires Mr Li Shifa stake it will own 30% or more of the voting rights, which will trigger an MGO under Rule 26.1 of the Takeovers Code. Notably, JD.com is also CNLP’s largest customer accounting for 29.9% of total revenue in 2020.CNLP recently raised HK$767 million through a placement which completed on 17 June 2021. Post the placement, the public float of 24.02% was below the minimum level of 25% as prescribed by Rule 8.08(1)(a) of the Listing Rules. CNLP noted that it is in discussions with various substantial shareholders to place down their shares. <div class="content-highlight">We think the transaction is sensible for JD.com as it provides a quicker "buy" route than the "build" route to securing premium logistics facilities in China. We think that a deal will be struck as an agreement will be beneficial to both sides. At the last close price of HK$4.22, the gross spread to the potential MGO price of HK$4.48 per share implied by a $2 billion valuation is 6.2%. </div>

China Logistics Property Holdings (1589 HK)/CNLP is a leading provider of premium logistics facilities in China. As of 30 June 2021, CNLP had 179 logistics facilities in operation in 38 logistics parks located in logistics hubs in 19 provinces or centrally administered municipalities. After market close on Thursday, CNLP announced that Mr Li Shifa, the founder and the Chairman, is in discussions with a potential purchaser to sell his 26.38% stake in CNLP. If the transaction is completed, it may lead to a change in control and a mandatory general offer (MGO) under Rule 26.1 of the Takeovers Code. The announcement was in response to a Bloomberg article that claimed that JD.com Inc (ADR) (JD US) is in discussions to purchase Mr Li Shifa along with RRJ Capital’s stake in CNLP at a valuation of about $2 billion (implies a price of HK$4.48 per share). JD.com is the fourth-largest shareholder and represent 10.11% of the outstanding shares. Speculation on the fate of Mr Li Shifa and RRJ Capital’s stakes have been ongoing for several months. On 29 December 2020, CNLP announced that both Mr Li Shifa and RRJ Capital were conducting a preliminary strategic review of their stakes which could lead to a sale of all or part of the stakes. Press reports at that time suggested that Mr Li Shifa and RRJ Capital were looking for around HK$4.70 per share.If JD.com acquires Mr Li Shifa stake it will own 30% or more of the voting rights, which will trigger an MGO under Rule 26.1 of the Takeovers Code. Notably, JD.com is also CNLP’s largest customer accounting for 29.9% of total revenue in 2020.CNLP recently raised HK$767 million through a placement which completed on 17 June 2021. Post the placement, the public float of 24.02% was below the minimum level of 25% as prescribed by Rule 8.08(1)(a) of the Listing Rules. CNLP noted that it is in discussions with various substantial shareholders to place down their shares. We think the transaction is sensible for JD.com as it provides a quicker "buy" route than the "build" route to securing premium logistics facilities in China. We think that a deal will be struck as an agreement will be beneficial to both sides. At the last close price of HK$4.22, the gross spread to the potential MGO price of HK$4.48 per share implied by a $2 billion valuation is 6.2%. 

China Logistics Property’s Potential MGO from JD.com