The parent company has made an offer of HKD$13.50 to take the company private. The current share price is $13.22.
This indicates a gross premium of 2.1% to be earned.
The parent company already owns 73% of the company and is looking to buy back 27%. As this will be done through a scheme of implementation, I would expect it to take at last 3 months. Another point to note is that , 75% of the independent investors need to vote for the deal and not more than 10% rejects the scheme. this means that only a mere 2.7% investor can block the deal.
A plain vanilla deal from the looks of it. I would definitely own some. No due dilligence risk, no financing risk. no regulatory risk.
I would check on the list of shareholders to see if there would be any dissenters and if the offered price is reasonable. Will update this post when I have the chance.
Update:
Shareholder registry looks sensible and most are institutional investors whom I believe has no reason to not accept this exit opportunity.
Wednesday, February 29, 2012
Wilmar buys into Goodman Fielder..a possible takeover?
Wilmar International, the world's largest palm oil trader/producder, announced they have acquired a 10.1% stake in Goodman Fielder in Australia. Goodman Fielder is the largest bread maker in Australia and New Zealand.
Last year, Wilmar bought the sugar unit of CSR Ltd, Sucrogen, Australia's largest sugar company, for A$1.75 billion. Wilmar also bought Prosperpine Sugar Miller Association for A$120 million plus working capital, making it the largest raw and refined sugar producer in Australia.
According to a statement release on SGX, where Wilmar is listed,
"This acquisition will make Wilmar the largest shareholder in Goodman Fielder. Wilmar is currently assessing whether to increase its shareholding in Goodman Fielder.
Last year, Wilmar bought the sugar unit of CSR Ltd, Sucrogen, Australia's largest sugar company, for A$1.75 billion. Wilmar also bought Prosperpine Sugar Miller Association for A$120 million plus working capital, making it the largest raw and refined sugar producer in Australia.
According to a statement release on SGX, where Wilmar is listed,
"This acquisition will make Wilmar the largest shareholder in Goodman Fielder. Wilmar is currently assessing whether to increase its shareholding in Goodman Fielder.
Wilmar’s Chairman and CEO, Mr Kuok Khoon Hong said: “We look forward to working with Goodman
Fielder and its management team to improve Goodman Fielder’s performance over time”."
Possibly Wilmar might look into buying the rest of Goodman Fielder. Unsurprisingly, the share price of Goodman has rose to a high of $0.695 and closed at $0.66. Goodman was trading at $0.495 exactly 7 days ago.
For now I will be keeping Goodman on the watch list.
Possibly Wilmar might look into buying the rest of Goodman Fielder. Unsurprisingly, the share price of Goodman has rose to a high of $0.695 and closed at $0.66. Goodman was trading at $0.495 exactly 7 days ago.
For now I will be keeping Goodman on the watch list.
Ludowici takeover revisited
Much has happened in this deal, and it was positive news for all Merger Arb investors.
After FLSmidth put in an offer of $10.00. As expected, the Weir Group put in their $10.00 bid as well.
Subsequently FLSmidth increased their offer to $11.00
The takeoverpanels have come out with their ruling of the case submitted by Weir Group,
In essence, it is not prohibiting FLSmidth to proceed with an offer higher than $7.20 and FLSmidth has to advertise in major publications to seek out investors who sold their shares before the $10.00 was made and pay them compensation as assess by an arbitrater. The payment shall not exceed the difference of $9.87 ( the vwap price on the day the $10.00 offer was made) and $7.20.
Now i guess the billion dollar question is, will you take your money now and run or expect a bidding war?
In Weir's offer, it gives the rights to Weir to terminate the scheme of implementation if the Takeover panels does not prohibit FLSmidth to proceed with an higher offer than $7.20. The key word here is the "rights", not automatically terminate.
At the levels LDW is currently trading, $11.18, it seems to imply that Weir is going to come in with another bid.
I would not exit the trade now. The risk now is there is no bid coming in and you receive $11.00 or potentially another bid comes in at another +10%. I would wait and see. This is a case where you would want to let your profits run.
***Additions****
Seems like Weir group has put in an appeal to the Takeovers Panel on their ruling. I would think this is nothing other than to buy more time for them to plan and execute their next action. I would think it is highly unlikely the Takeovers Panel will reverse their ruling. It will be really messy if they do so. The path of least resistance is to stand by the original ruling.
After FLSmidth put in an offer of $10.00. As expected, the Weir Group put in their $10.00 bid as well.
Subsequently FLSmidth increased their offer to $11.00
The takeoverpanels have come out with their ruling of the case submitted by Weir Group,
In essence, it is not prohibiting FLSmidth to proceed with an offer higher than $7.20 and FLSmidth has to advertise in major publications to seek out investors who sold their shares before the $10.00 was made and pay them compensation as assess by an arbitrater. The payment shall not exceed the difference of $9.87 ( the vwap price on the day the $10.00 offer was made) and $7.20.
Now i guess the billion dollar question is, will you take your money now and run or expect a bidding war?
In Weir's offer, it gives the rights to Weir to terminate the scheme of implementation if the Takeover panels does not prohibit FLSmidth to proceed with an higher offer than $7.20. The key word here is the "rights", not automatically terminate.
At the levels LDW is currently trading, $11.18, it seems to imply that Weir is going to come in with another bid.
I would not exit the trade now. The risk now is there is no bid coming in and you receive $11.00 or potentially another bid comes in at another +10%. I would wait and see. This is a case where you would want to let your profits run.
***Additions****
Seems like Weir group has put in an appeal to the Takeovers Panel on their ruling. I would think this is nothing other than to buy more time for them to plan and execute their next action. I would think it is highly unlikely the Takeovers Panel will reverse their ruling. It will be really messy if they do so. The path of least resistance is to stand by the original ruling.
Billabong takeover revisited
Seems like the company has rejected TPG's initial proposal of $3.00. TPG subsequently increased their offer price to $3.30 to facilitate due diligence but was flatly rejected by the directors and major shareholders Gordon Merchant and Colette Paul and I quote from their lawyer's letter to TPG, "
2. do not support Billabong taking any steps to assist or facilitate a proposal by TPG Capital, including allowing TPG capital to commence due dilligence on Billabong, even if the price TPG capital offered was $4.00 per share (which our clients consider would still represent a discount on the true value of Billabong shares)
"
There are rumours as well that KKR and Blackstones are sniffing onto this deal as reported by The Financial Times.
Anyone has thoughts on this deal? I'll write more when I get some time to get more info.
Initial thoughts, on Feb 17 2012, Billabong annouced a major restructuring including closing 150 outlets and dismissing 400 full time workers. Seems like the company isnt holding up well. If you look at the share price, that is the case as well.
If you look at the shareholder structure, besides Mr Merchant that owns 14.8% of the shares(since he is founder), he might not want to sell, but the rest are institutional investors. Need to check on their buy in price to see at what levels they would be sellers.
Again to re-iterate, there isnt any binding deal here.
2. do not support Billabong taking any steps to assist or facilitate a proposal by TPG Capital, including allowing TPG capital to commence due dilligence on Billabong, even if the price TPG capital offered was $4.00 per share (which our clients consider would still represent a discount on the true value of Billabong shares)
"
There are rumours as well that KKR and Blackstones are sniffing onto this deal as reported by The Financial Times.
Anyone has thoughts on this deal? I'll write more when I get some time to get more info.
Initial thoughts, on Feb 17 2012, Billabong annouced a major restructuring including closing 150 outlets and dismissing 400 full time workers. Seems like the company isnt holding up well. If you look at the share price, that is the case as well.
If you look at the shareholder structure, besides Mr Merchant that owns 14.8% of the shares(since he is founder), he might not want to sell, but the rest are institutional investors. Need to check on their buy in price to see at what levels they would be sellers.
Again to re-iterate, there isnt any binding deal here.
Thursday, February 23, 2012
An example of a Mandatory General Offer. Khazanah Nasional Berhad divests stake in Proton Holdings to DRB HICOM Berhad
On 16th January 2012, Khazanah Nasional, the sovereign wealth fund for Malaysia, announced that it will divest its entire stake 42.74% in Proton Holdings Berhad to DRB HICOM for $5.50 a share. As the stake is more than 33%, DRB HICOM is required to make a mandatory general offer for the rest of Proton Holdings shares at the same price.
The current price for Proton Holdings is $5.47. This reflects that there is only 0.54% in the deal which I believe roughly equates to interest rates in Malaysia. Usually there will be traders who would do the carry trades on deals that are certain to happen. As an example, say the trader can borrow money at 0.5% and will be able to earn 1% after all transaction cost, this equates to a net profit of 0.5% for the trader. If the trader can use leverage and lever it up x 10, he can make 5% on this trade alone.
Sometimes in Mandatory General Offers, where the acquirer has no plans to delist the target and wishes to keep the target listed, the price of the target might even go above the offer price. I would usually try to get borrow and short these stocks. In reality, these cases happen very rarely but they do prove that market can sometimes be inefficient/irrational.
The current price for Proton Holdings is $5.47. This reflects that there is only 0.54% in the deal which I believe roughly equates to interest rates in Malaysia. Usually there will be traders who would do the carry trades on deals that are certain to happen. As an example, say the trader can borrow money at 0.5% and will be able to earn 1% after all transaction cost, this equates to a net profit of 0.5% for the trader. If the trader can use leverage and lever it up x 10, he can make 5% on this trade alone.
Sometimes in Mandatory General Offers, where the acquirer has no plans to delist the target and wishes to keep the target listed, the price of the target might even go above the offer price. I would usually try to get borrow and short these stocks. In reality, these cases happen very rarely but they do prove that market can sometimes be inefficient/irrational.
African Iron Limited takeover by Exxaro .. revisited
The takeover offer by Exxaro for African Iron Limited (AKI AU Equity) has gone unconditional since 14th February 2012. The current level of acceptance is roughly 65%.
The offer price is $0.51. If the deal gets to an acceptance level of 75%, the offer price will be increased to $0.57. The current share price is $0.56. As the deal is unconditional, payment will be made within 14-days.
A few of my friends has pointed this deal out to me, where one can earn roughly 1.7% returns in 14-days. That translates to a 17% annualised return. However bear in mind that the offer closes on 4pm Perth Time 28th-February-2012. This is only just 3 trading days away. I would be hesitant to invest at current levels.
The downside is $0.05 (if they fail to get to 75% acceptance ) versus an upside of $0.01 with just 3 trading days to go. I am pretty sure they will get to the 75% acceptance but sometimes bizarre things do happen.
The offer price is $0.51. If the deal gets to an acceptance level of 75%, the offer price will be increased to $0.57. The current share price is $0.56. As the deal is unconditional, payment will be made within 14-days.
A few of my friends has pointed this deal out to me, where one can earn roughly 1.7% returns in 14-days. That translates to a 17% annualised return. However bear in mind that the offer closes on 4pm Perth Time 28th-February-2012. This is only just 3 trading days away. I would be hesitant to invest at current levels.
The downside is $0.05 (if they fail to get to 75% acceptance ) versus an upside of $0.01 with just 3 trading days to go. I am pretty sure they will get to the 75% acceptance but sometimes bizarre things do happen.
Nera Telecommunications Ltd takeover in Singapore by STE Limited
The acquiror Singapore Technologies Electronics Limited announced the proposed acquisition of all the shares in Nera Telecommunications by the way of a scheme of implementation. In this case, the shareholders will vote on either accepting or rejecting the proposed acquisition. The scheme requires at least 75% of votes present to vote for the proposed scheme with the number of votes no lesser than 50% of the issued shares.
The controlling shareholder of Nera Telecommunications, Eltek ASA, who owns 50.05% of the company's shares, has announcement that they have undertaken an irrecovable undertaking, to the acquirer, to vote all the shares they own in favour of the scheme.
In the event that another potential bidder comes into play, STE limited has the right to withdraw the Scheme and make a voluntary offer instead (Switch Option). This options basically gives STE the rights to be able to navigate quicker in a hostile environment of a potential bidding war and gives them the option to lower the conditional acceptance of the deal ie they can make a voluntary offer for say 50% of acceptance or make the deal non conditional upon the level of acceptance.
Given that Eltek ASA, has already agreed to sell their stake to STE, this deal is a very low risk deal. They only require another 25% of votes from the rest of the shareholders. Given the historical share price of this company, the bid price of $0.45 is a reasonable price. The risk level is also reflected in the price as it last traded at $0.44.
The premium in this deal is 2.2%. Given a 3 month holding period this translates to roughly an annualised return of 8.5%. Even comparing the 2.2% to the local interest rates in Singapore, it is an attractive premium.
The controlling shareholder of Nera Telecommunications, Eltek ASA, who owns 50.05% of the company's shares, has announcement that they have undertaken an irrecovable undertaking, to the acquirer, to vote all the shares they own in favour of the scheme.
In the event that another potential bidder comes into play, STE limited has the right to withdraw the Scheme and make a voluntary offer instead (Switch Option). This options basically gives STE the rights to be able to navigate quicker in a hostile environment of a potential bidding war and gives them the option to lower the conditional acceptance of the deal ie they can make a voluntary offer for say 50% of acceptance or make the deal non conditional upon the level of acceptance.
Given that Eltek ASA, has already agreed to sell their stake to STE, this deal is a very low risk deal. They only require another 25% of votes from the rest of the shareholders. Given the historical share price of this company, the bid price of $0.45 is a reasonable price. The risk level is also reflected in the price as it last traded at $0.44.
The premium in this deal is 2.2%. Given a 3 month holding period this translates to roughly an annualised return of 8.5%. Even comparing the 2.2% to the local interest rates in Singapore, it is an attractive premium.
Wednesday, February 22, 2012
WCL AU takeover
The company, Westside Corporation Limited, has come out to state that there is indeed a non-binding, indicative proposal with the price to be around $0.65. Seems like nothing is concrete at the moment. Discussions are on-going and the joint venture partner of Westside has given consent for revealing the confidential joint venture agreement to the bidder after both sides agreed to a confidentialy agreement.
If you look at the statements released by Westside, Misuit E&P Pty Ltd is one of their major partners in the Meridian Gas field tenemants and also the Bowen Basin tenemants. QGC is their other partner in the Bowen Basin tenemants. Neither has struck me as potential sellers of assets.
It is interesting to note that the share price has been on a decline since a major spike up to $0.57 on the 17-Feb-2012. It currently closed at $0.455.
Before we look further into the deal, lets look at the premium and drawdown
If the deal goes through at current levels, the potential returns are 42.8%. If the deal fails to materialise and say the share price goes back down to $0.25 the draw is -45.05%
From the share price, it can be inferred that the market perceives this deal, currently, to be a 50/50.
So I believe unless a deal can be struck with the join venture partners of Westside Corporation, this deal might not go through. I would stay away until more information comes to light.
If you look at the statements released by Westside, Misuit E&P Pty Ltd is one of their major partners in the Meridian Gas field tenemants and also the Bowen Basin tenemants. QGC is their other partner in the Bowen Basin tenemants. Neither has struck me as potential sellers of assets.
It is interesting to note that the share price has been on a decline since a major spike up to $0.57 on the 17-Feb-2012. It currently closed at $0.455.
Before we look further into the deal, lets look at the premium and drawdown
If the deal goes through at current levels, the potential returns are 42.8%. If the deal fails to materialise and say the share price goes back down to $0.25 the draw is -45.05%
From the share price, it can be inferred that the market perceives this deal, currently, to be a 50/50.
So I believe unless a deal can be struck with the join venture partners of Westside Corporation, this deal might not go through. I would stay away until more information comes to light.
Tuesday, February 21, 2012
Westside Corporation Limited in Australia
Just came across this non binding , indicative deal. Anyone out there care to share their thoughts on this deal?
I ll share my thoughts when I have the chance to review the documents.
Billabong offer by TPG
So TPG has came back again with the same offer for Billabong at $3 per share but this time it does not preclude the Nixon agreement Billabong has with Trilantic Capital Partners. Last week, Billabong announced that they are selling 48.5% of its stake in Nixon to the private equity group. Billabong will have a stake of 48.5% while the management will hold the remaining 3%
However investors should bear in mind that this is a non-binding, indicative proposal that is highly conditional. Another point to bear in mind is that the Acquirer is a Private Equity Group. Deals involving private equities are usually associated with higher risk. The deals when announced tend to be non-binding, indicative proposals that are highly conditional. So unless when a deal is announce and the private equity group has already have in place some skin in the game, I would usually be more cautious.
Now the deal is subjected to due dilligence risk, financing risk and other conditions yet to be announced but precludes the Nixon agreement with Trilantic.
I would say that this shows that TPG is abit more serious in trying to get Billabong. For them to continue making an offer even after Billabong agreed to sell Nikon, one of the stronger brands in the company, shows that they are perhaps a little desperate to get some money into action.
At this point in time, I would recommend no positions in this trade or if you feel the need to diversify, a small position due to the risk inherent in this deal.
At the current closing price of $2.83, there is a 6% premium to be earned if the deal goes through at $3.
However investors should bear in mind that this is a non-binding, indicative proposal that is highly conditional. Another point to bear in mind is that the Acquirer is a Private Equity Group. Deals involving private equities are usually associated with higher risk. The deals when announced tend to be non-binding, indicative proposals that are highly conditional. So unless when a deal is announce and the private equity group has already have in place some skin in the game, I would usually be more cautious.
Now the deal is subjected to due dilligence risk, financing risk and other conditions yet to be announced but precludes the Nixon agreement with Trilantic.
I would say that this shows that TPG is abit more serious in trying to get Billabong. For them to continue making an offer even after Billabong agreed to sell Nikon, one of the stronger brands in the company, shows that they are perhaps a little desperate to get some money into action.
At this point in time, I would recommend no positions in this trade or if you feel the need to diversify, a small position due to the risk inherent in this deal.
At the current closing price of $2.83, there is a 6% premium to be earned if the deal goes through at $3.
Ludowici takeover
After a hiatus from the blog, I am back. It has been a tumultuous ride through 2010 and 2011 for me. I believe 2012 would be a better year.
So the deal we are looking at this time around would be Ludowici Ltd. Listed in ASX under the code LDW.AX
An offer was made by FLSmidth in late January 2012 at the price of AUD $7.20. Anyone who entered the trade around that level would have made a killing. Current price as of 21-Feb-2012 is AUD $9.74
In between the jump in price, we have seen another offer coming in from the Weir Group and how they have gone to the Takeover Panels to prevent FLSmidth to put in a better offer.
In their undertakings to the Takeover Panels, they seek that FLSmidth to be held accountable for their CEOs statement on Reuters "that the bid was last and final". Weir Group is seeking that the Takeover Panel rules the statement is legit and FLSmidth not resile from it.
Since then, FLSmidth has put in another offer of AUD $10.00 pending the results from the takeover panel.
In my view, the takeover panel would not block the AUD$10.00 deal as the stock was not halted and investors/speculators have continued to take on positions/sell position. By blocking the deal, it would mean that the Takeover Panel is consciously impeding a free auction market for an asset where there is a willing buyer and seller.
Now i understand that there are investors our there that sold their shares based on the statement given the the CEO in the Reuteres interview declared " The bid was last and final", they would probably seek damages from the FLSmidth if the takeover preceeds. Besides that, the most probably course of action the Takeover Panels might do is just serve a fine to the CEO, as there wasnt any release in any ASX official document. It was just an interview with Reuters which Reuters did eventually update and remove the statement from their website. As it goes with interviews, words might get misintepreted.
So what do we make of the deal at the moment?
With the current price of $9.74 and the deal should pay out date, barring any disaster, to be around early to mid June. Lets take 15-June as the payout date. The premium translates to 2.66% or on an annualised basis, 8.47%. Note that the current Australian Cash Rate is 4.25%
This means we essentially earn roughly 4.2% above cash rate.
Now however if you look at the downside of the share, it can go down a long way to $3.00. a whopping -66% lost. However it is deemed unlikely given that there are 2 suitors for this company. Once the Takeover Panels have given their ruling , I believe the Weir Group would come in with their serious offer. Also note, if the ruling is in favor of FLSmidth and there is a takeover war, this trade could still translate to another +20% ie the offer of $12.00 by one of the potential acquirers.
I would personally wait for abit on this trade. Potentially i would have a normal size position when it hits below $9.70
At $9.70, the premium is roughly 3.1% and the annualised rate is 9.8% unlevered.
I believe in low-interest rate countries, this is actually a good return. Even after hedging for currency risk. If one believes that the AUD will get stronger, then just leave the currency risk unhedged.
So the deal we are looking at this time around would be Ludowici Ltd. Listed in ASX under the code LDW.AX
An offer was made by FLSmidth in late January 2012 at the price of AUD $7.20. Anyone who entered the trade around that level would have made a killing. Current price as of 21-Feb-2012 is AUD $9.74
In between the jump in price, we have seen another offer coming in from the Weir Group and how they have gone to the Takeover Panels to prevent FLSmidth to put in a better offer.
In their undertakings to the Takeover Panels, they seek that FLSmidth to be held accountable for their CEOs statement on Reuters "that the bid was last and final". Weir Group is seeking that the Takeover Panel rules the statement is legit and FLSmidth not resile from it.
Since then, FLSmidth has put in another offer of AUD $10.00 pending the results from the takeover panel.
In my view, the takeover panel would not block the AUD$10.00 deal as the stock was not halted and investors/speculators have continued to take on positions/sell position. By blocking the deal, it would mean that the Takeover Panel is consciously impeding a free auction market for an asset where there is a willing buyer and seller.
Now i understand that there are investors our there that sold their shares based on the statement given the the CEO in the Reuteres interview declared " The bid was last and final", they would probably seek damages from the FLSmidth if the takeover preceeds. Besides that, the most probably course of action the Takeover Panels might do is just serve a fine to the CEO, as there wasnt any release in any ASX official document. It was just an interview with Reuters which Reuters did eventually update and remove the statement from their website. As it goes with interviews, words might get misintepreted.
So what do we make of the deal at the moment?
With the current price of $9.74 and the deal should pay out date, barring any disaster, to be around early to mid June. Lets take 15-June as the payout date. The premium translates to 2.66% or on an annualised basis, 8.47%. Note that the current Australian Cash Rate is 4.25%
This means we essentially earn roughly 4.2% above cash rate.
Now however if you look at the downside of the share, it can go down a long way to $3.00. a whopping -66% lost. However it is deemed unlikely given that there are 2 suitors for this company. Once the Takeover Panels have given their ruling , I believe the Weir Group would come in with their serious offer. Also note, if the ruling is in favor of FLSmidth and there is a takeover war, this trade could still translate to another +20% ie the offer of $12.00 by one of the potential acquirers.
I would personally wait for abit on this trade. Potentially i would have a normal size position when it hits below $9.70
At $9.70, the premium is roughly 3.1% and the annualised rate is 9.8% unlevered.
I believe in low-interest rate countries, this is actually a good return. Even after hedging for currency risk. If one believes that the AUD will get stronger, then just leave the currency risk unhedged.
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