Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Equity Analyst with 10+ years experience in fundamental and event-driven research.

On Smartkarma, I mainly publish insights on index flow events. This includes predicting regular and intra-review index changes and formulating market-neutral trading strategies based on flow catalysts. I also cover special situations such as mergers & acquisitions, equity offerings, buybacks, and other corporate restructuring events.

Index Rebal Trades & Special Situations

Mainstream (MAI AU): Bidding War Continues as SS&C Overbids for the 4th Time

Mainstream (MAI AU): +120% in ~2 Months but Bidding War Continues...

Mainstream (MAI AU): Apex on Top Again as Bidding War Continues...

Mainstream (MAI AU): More Competition Forces SS&C to Bump

Mainstream (MAI AU): Three-In-A-Row! Bullseye!

Mainstream (MAI AU): Massive Overbid by SS&C, Now Vistra Has to Respond

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

Mainstream Group Holdings Ltd / Event-Driven

<p>A couple of months ago, on 9th March 2021, Australia-based third party fund administration services provider <a href="https://www.smartkarma.com/entities/mainstream-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:30611:1" rel="noopener">Mainstream Group Holdings Ltd (MAI AU)</a> announced they had signed a Scheme Implementation Deed to be acquired by Hong Kong-headquartered Vistra in an all-cash deal that valued the company at a market cap of ~A$170mn. </p>
<p>The Offer Price was an all-time high for the stock and MAI major shareholders had agreed to vote in favour of the Transaction but there was a go-shop provision which made things interesting because MAI was a company that had achieved strong growth in Funds under Administration in the last few years especially in the US Private Equity Space.</p>
<p>In June 2020, MAI launched a key client’s unlisted managed fund (identified as Magellan's Australian subsidiary Airlie Australia Share Fund (AASF) in this <a href="https://www.proactiveinvestors.com.au/companies/news/926881/mainstream-group-holdings-continues-to-grow-revenue-reaching-554-million-for-fy20-926881.html" target="_blank" rel="noopener">news article</a>) quoted on the ASX under a new structure known as a "Quoted Fund". The fund was previously an <em>unquoted</em> fund and this move permitted investors to buy and sell units through their broker on the ASX alongside the fund’s existing traditional application and redemption process administered by Mainstream. According to the company, this represented the convergence of listed and unlisted open-ended funds into a single investment vehicle, allowing fund managers to offer investors both unlisted and exchange traded entry methods in a standard fund format. MAI claimed this to be an industry first initiative - a single system that handles listed and unlisted funds together, so the data source is one repository. </p>
<p>Vistra's Offer Price of A$1.20/share translated to an EV/EBITDA (June 21E) of 14.4x and when considering the projected EBITDA CAGR of 28%+ for the following two years, the Offer Price seemed light in my opinion and the situation seemed suitable for Bumpitrage.  </p>
<p><strong>Since then, I have maintained a Bullish stance on the situation and multiple competing bidders have gotten involved causing the Terms to more than double in less than 2 months. MAI shares have risen from A$1.23 to A$2.65 in that period. </strong></p>
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<h3>Date</h3>
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<h3>Insight Title</h3>
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<h3>Outcome</h3>
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<td style="width: 73px;">09-Mar-21</td>
<td style="width: 154px;">
<a href="https://www.smartkarma.com/insights/mainstream-group-mai-au-go-shop-provision-makes-it-interesting" target="_blank" data-smartkarma-citation="insights:48962" rel="noopener">Mainstream Group (MAI AU): Go-Shop Provision Makes It Interesting</a> </td>
<td style="width: 434px;">On 12th April, US-based financial technology company <a href="https://www.smartkarma.com/entities/ss-c-technologies-holdings" target="_blank" data-smartkarma-citation="entities:3464:1" rel="noopener">Ss&amp;C Technologies (SSNC US)</a> launched a competing bid at A$2.00/share (a 66.7% increase from Vistra's A$1.20). </td>
</tr>
<tr>
<td style="width: 73px;">15-Apr-21</td>
<td style="width: 154px;">
<a href="https://www.smartkarma.com/insights/mainstream-mai-au-massive-overbid-by-ss-c-now-vistra-has-to-respond" target="_blank" data-smartkarma-citation="insights:50366" rel="noopener">Mainstream (MAI AU): Massive Overbid by SS&amp;C, Now Vistra Has to Respond</a> </td>
<td style="width: 434px;">MAI received a bid at A$2.20/share from an unidentified 3rd party party and SS&amp;C bumped their bid to A$2.25/share on 27th April 2021. </td>
</tr>
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<td style="width: 73px;">27-Apr-21</td>
<td style="width: 154px;">
<a href="https://www.smartkarma.com/insights/mainstream-mai-au-more-competition-forces-ss-c-to-bump" target="_blank" data-smartkarma-citation="insights:50762" rel="noopener">Mainstream (MAI AU): More Competition Forces SS&amp;C to Bump</a> </td>
<td style="width: 434px;">After the close on 28th April, Global Fund Administrator <a href="https://www.theapexgroup.com/" target="_blank" rel="noopener">Apex Group Limited</a> (Apex) launched a non-binding bid at A$2.35/share and MAI matched this bid. </td>
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<td style="width: 73px;">29-Apr-21</td>
<td style="width: 154px;">
<a href="https://www.smartkarma.com/insights/mainstream-mai-au-three-in-a-row-bullseye" target="_blank" data-smartkarma-citation="insights:50761" rel="noopener">Mainstream (MAI AU): Three-In-A-Row! Bullseye!</a> </td>
<td style="width: 434px;">
<p>Apex <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02369747-2A1295495?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">bumped</a> their bid to A$2.55/share on 30th April 2021.  </p>
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<p></p>
<p><em>More below the fold. </em></p>
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<p>For more information about M&amp;A rules, regulations, and practices in Australia, please refer to <a href="https://www.smartkarma.com/insights/quiddity-australia-m-a-guide-2019" target="_blank" data-smartkarma-citation="insights:30118" rel="noopener">Quiddity Australia M&amp;A Guide 2019</a> and <a href="https://www.smartkarma.com/insights/quiddity-m-a-australia-foreign-investment-reforms" target="_blank" data-smartkarma-citation="insights:40210" rel="noopener">Quiddity M&amp;A: Australia Foreign Investment Reforms</a></p>
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A couple of months ago, on 9th March 2021, Australia-based third party fund administration services provider Mainstream Group Holdings Ltd (MAI AU) announced they had signed a Scheme Implementation Deed to be acquired by Hong Kong-headquartered Vistra in an all-cash deal that valued the company at a market cap of ~A$170mn. 
The Offer Price was an all-time high for the stock and MAI major shareholders had agreed to vote in favour of the Transaction but there was a go-shop provision which made things interesting because MAI was a company that had achieved strong growth in Funds under Administration in the last few years especially in the US Private Equity Space.
In June 2020, MAI launched a key client’s unlisted managed fund (identified as Magellan's Australian subsidiary Airlie Australia Share Fund (AASF) in this news article) quoted on the ASX under a new structure known as a "Quoted Fund". The fund was previously an unquoted fund and this move permitted investors to buy and sell units through their broker on the ASX alongside the fund’s existing traditional application and redemption process administered by Mainstream. According to the company, this represented the convergence of listed and unlisted open-ended funds into a single investment vehicle, allowing fund managers to offer investors both unlisted and exchange traded entry methods in a standard fund format. MAI claimed this to be an industry first initiative - a single system that handles listed and unlisted funds together, so the data source is one repository. 
Vistra's Offer Price of A$1.20/share translated to an EV/EBITDA (June 21E) of 14.4x and when considering the projected EBITDA CAGR of 28%+ for the following two years, the Offer Price seemed light in my opinion and the situation seemed suitable for Bumpitrage.  
Since then, I have maintained a Bullish stance on the situation and multiple competing bidders have gotten involved causing the Terms to more than double in less than 2 months. MAI shares have risen from A$1.23 to A$2.65 in that period. 




Date


Insight Title


Outcome



09-Mar-21

Mainstream Group (MAI AU): Go-Shop Provision Makes It Interesting 
On 12th April, US-based financial technology company Ss&amp;C Technologies (SSNC US) launched a competing bid at A$2.00/share (a 66.7% increase from Vistra's A$1.20). 


15-Apr-21

Mainstream (MAI AU): Massive Overbid by SS&amp;C, Now Vistra Has to Respond 
MAI received a bid at A$2.20/share from an unidentified 3rd party party and SS&amp;C bumped their bid to A$2.25/share on 27th April 2021. 


27-Apr-21

Mainstream (MAI AU): More Competition Forces SS&amp;C to Bump 
After the close on 28th April, Global Fund Administrator Apex Group Limited (Apex) launched a non-binding bid at A$2.35/share and MAI matched this bid. 


29-Apr-21

Mainstream (MAI AU): Three-In-A-Row! Bullseye! 

Apex bumped their bid to A$2.55/share on 30th April 2021.  






More below the fold. 




For more information about M&amp;A rules, regulations, and practices in Australia, please refer to Quiddity Australia M&amp;A Guide 2019 and Quiddity M&amp;A: Australia Foreign Investment Reforms




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