Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

FLOW FRONT?  Anatomy of a multi-billion dollar flowback - Part Deux

FLOW FRONT IN LIMBO?   AMAT & TEL delay their merger to June

FLOWFRONT: Cancelled - TEL/AMAT cancel their merger, FLOWS result

Event-Driven

The merger between Tokyo Electron (8035 JP) and Applied Materials (AMAT US) (hereafter "TEL" and "AMAT"),&nbsp;<a href="http://www.tel.com/news/document/20130926-e.pdf" target="_blank">announced</a>&nbsp;in September 2013 and currently scheduled to complete in late March 2015, has been one of the large Asia-related scrip deals out there in the past few&nbsp;years. The all-scrip Business Combination creates what is now a $45 billion company. The shares in both companies&nbsp;have risen 50+%&nbsp;since the announcement, partly based on improving fundamentals,&nbsp;and partly based on expected synergies ($500mm p.a. 3 years out) and promised post-deal capital management ($3bn repurchase program in the first 12 months).&nbsp;Shareholders and some&nbsp;regulators have agreed on the deal. We await final regulatory approvals (principally MOFCOM) to satisfy conditions precedent&nbsp;(reports in December in the press suggested remediation was being negotiated).&nbsp;This deal event offers potentially dramatic trading opportunities based on the flows particular to the structure of the deal, and the mandates of the existing holders. While the deal has been much discussed, one aspect has not seen that much press - the aspect of <a href="http://www.investopedia.com/terms/f/flowback.asp" target="_blank">Flowback</a>.&nbsp;In this case, it is not so much Flowback as "FlowFront"; the numbers are significant, and the supply is concentrated in a very short timeframe before the merger event, with some interesting technical aspects to consider.As of Friday's close, AMAT is&nbsp;trading 8+% rich to TEL. There is a wall of supply in TEL to come. If you are confident the deal gets done,&nbsp;AMAT looks like a good&nbsp;tactical short based on the sheer size of the supply. &nbsp;IF the remaining approvals are announced and the deal spread tightens on the news, TEL is likely the right short. Either&nbsp;would be a short-term trade. The best way to cover the short is into the massive TEL selling to come prior to TEL being delisted 4 business days before the merger is Effective.As a side note,&nbsp;if there is $8bn of TEL to sell in Japan-related index-trackers (both hard passive and closet trackers) and domestic-only stock portfolios, there is nearly&nbsp;$8bn of reallocation demand into the other index and portfolio components around the same time.&nbsp;This Insight&nbsp;is related to TEL (8035 JP), its unsponsored ADR (TOELY US), and AMAT (AMAT US).

The merger between Tokyo Electron (8035 JP) and Applied Materials (AMAT US) (hereafter "TEL" and "AMAT"),&nbsp;announced&nbsp;in September 2013 and currently scheduled to complete in late March 2015, has been one of the large Asia-related scrip deals out there in the past few&nbsp;years. The all-scrip Business Combination creates what is now a $45 billion company. The shares in both companies&nbsp;have risen 50+%&nbsp;since the announcement, partly based on improving fundamentals,&nbsp;and partly based on expected synergies ($500mm p.a. 3 years out) and promised post-deal capital management ($3bn repurchase program in the first 12 months).&nbsp;Shareholders and some&nbsp;regulators have agreed on the deal. We await final regulatory approvals (principally MOFCOM) to satisfy conditions precedent&nbsp;(reports in December in the press suggested remediation was being negotiated).&nbsp;This deal event offers potentially dramatic trading opportunities based on the flows particular to the structure of the deal, and the mandates of the existing holders. While the deal has been much discussed, one aspect has not seen that much press - the aspect of Flowback.&nbsp;In this case, it is not so much Flowback as "FlowFront"; the numbers are significant, and the supply is concentrated in a very short timeframe before the merger event, with some interesting technical aspects to consider.As of Friday's close, AMAT is&nbsp;trading 8+% rich to TEL. There is a wall of supply in TEL to come. If you are confident the deal gets done,&nbsp;AMAT looks like a good&nbsp;tactical short based on the sheer size of the supply. &nbsp;IF the remaining approvals are announced and the deal spread tightens on the news, TEL is likely the right short. Either&nbsp;would be a short-term trade. The best way to cover the short is into the massive TEL selling to come prior to TEL being delisted 4 business days before the merger is Effective.As a side note,&nbsp;if there is $8bn of TEL to sell in Japan-related index-trackers (both hard passive and closet trackers) and domestic-only stock portfolios, there is nearly&nbsp;$8bn of reallocation demand into the other index and portfolio components around the same time.&nbsp;This Insight&nbsp;is related to TEL (8035 JP), its unsponsored ADR (TOELY US), and AMAT (AMAT US).

FLOW FRONT? :  Anatomy of a multi-billion dollar pre-deal flowback