China Gas takeover offer

China Gas has been trading over the offer price. Sinopec and ENN is offering HK$3.50 but the stock has been trading above that since Dec 20 2011. For those who bought in earlier below or at HK$3.50 I would advise to take money and run.

Personally, I dont get involve in a deal once it trades above its offer price (other than in some cases where I Short them instead).

If we look at the bidders, ENN and Sinopec, ENN probably would not be in a financial situation to raise the bid unless the concede more control to Sinopec. Sinopec ( a government controlled entity) would have no problem financing this deal. Thus they might have to rework on how their structure would be.

Since 7th March, the bidders have submitted their applications to get approval from all the necessary regulators including MOFCOM, the Anti Monopoly Law of PRC. The deal might lapse if it could not get approval by the regulators by 31st March 2012, but usually the bidders would extend the Long Stop Date to accomodate more time to obtain regulatory approval.

In the course of the takeover, employees of the firm has written to 2 letters , one to the board and one addressed to both the board and shareholders. It was signed by more than 4,000 employees stating their concern for the potential detrimental effects on the operation of the company and also the competition in and development of the gas industry in PRC. (First time I have witnessed this. Wonder how much influence it has as these are workers and also minority shareholders of the company)

Interestingly there has been 2 entities that have increased their shareholdings since the deal was announced. South Korea's SK Holdings and London Listed Fortune Oil Plc, controlled by former managing director of China Gas, Liu Ming. He was removed from the company's board after being detained by Shenzen police force last year. Would there be any possible bids coming in? Chances are low I believe. More likely the shareholders are entrenching their positions to get a higher offer price.

Substantial time has passed now, which means they are still negotiating on the price. How keen are the buyers? How keen are the sellers? Deals that are on the borderline of success or failure due to pricing is always a major turnoff for me.
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With that said, I would take profits and run (if invested at attractive price). New investors looking at this deal should possibly refrain from getting into it.

KFC MK and QSR MK

Currently the offer for KFC MK is $4.00 and the offer for QSR Brands is $6.80. Based on the last price of $3.76 and $6.45 it is a premium of 6.38% and 5.42%.

Assuming the deal completes by the end of the year, it equates to IRR of roughly 8% and 6.8% unlevered.

 Johor Corp and CVC Capital  announced the bid through a special purpose vehicle, Massive Equity Sdn Bhd. Johor Corp will own 51% of equities and the remaining 49% with CVC Capital.

QSR owns 51% of KFC. QSR itself is roughly 54% owned by Kulim (M) Bhd. Johor Corp owns 55.9% of Kulim (M) Bhd.

I have not found any definitive agreement signed between the two parties other than the acceptance to consider the bid by the board.

Keeping on watchlist.

Ludowici Takeover Update 3

The share price closed at  A$11.42.  The highest offer is $11 by FLSmidth.

Weir Group has yet to announce their intention. I will continue to hold.



Update : Weir has pulled their offer. Share price is down to below $11.00. Will hold till deal completion.

Glencore bids $5.49 billion for Viterra..another Potash Corp?

Glencore seems to be very aggressive since it listed. Announcing a deal for Xstrata and now Viterra. Wondering if this deal will be another Saskatchewan failure like Potash Corp.

For readers who did not follow the Potash Corp deal, in year 2010, BHP Billinton made a $40 billion dollar hostile bid for Potash Corp, the world's largest fertilizer company. However the federal government blocked the deal stating that it does not bring "net" benefit to the country. The local Saskatchewan policy makers are against it as well.

I guess Glencore will find themselves in a similar situation as BHP soon. Its no longer easy for them to find big targets to takeover. Policy makers will be on alert whenever they are associated with a takeover and attract more scrutiny unless the targets are small and innocuous.

Austar Takeover by Foxtel

Seems like the ACCC is set to give the green lights to Foxtel to takeover its regional counterpart Austar Limited on the condition that content is made available to IPTV operators that are competing with both of them.

On an interview with ABC News, the chairman of ACCC, Rod Sims, has made it clear that the worry is what the takeover means to Telstra's market power. Telstar is a 50% owner of Austar. The other shareholders in Foxtel are James Packer's Consolidated Media Holdings and Rupert Murdoch's News Limited, publisher of The Australian.

A very good article to read would be 

http://www.theaustralian.com.au/business/mergers-acquisitions/foxtel-austar-fall-into-line-as-accc-warns-on-net-sports-rights/story-fn91vdzj-1226292610886

However, I wonder what would the market participants come up with in the next fortnight to scuttle the deal. The ACCC chairmans seems to have partly confirmed the deal will go through with the undertakings that Foxtel and Austars agreed to, but I am pretty sure the other ISPs are not too keen on this merger happening.

One of the points are Fox Sports (Sports content)  is still exclusive to Foxtel. This is one major area of monetisation for IPTV, thus a few issues might be raised here. With Austar under the wings of Foxtel, who else can negotiate to get sports contents in Australia and the rest of the world? The smaller IPTV operators will never gain enough clout/money/reputation to get the rights to sports. However, the ACCC chairman, says they will look into this in future if there is monopoly (brushing this matter aside, which is absurd). I believe they should undertake to make sports a non-exclusive content if they are really looking at opening up the market and do away with the monopoly.

However, Australia is a pretty strange country where monopoly or duopoly exists and the ACCC has been very accommodative at times. The financial sector,wealth management sector and more prominently the retail/supermarket sector has witnessed this.

I am not too keen to get involved, although markets seems to be pointing towards the deal happening.

WCL AU Update 2

Seems like instead of a confirmation of merger, Westside Corp came out with a capital raising of 2 shares for every 5 owned at a price of $0.25.

The indicative offer by LNG Limited is at $0.65. Seems to me it lowers the chances of a deal coming up. I mean LNG is not a very big company. It you look at the market cap for both company, they are relatively similar.

The biggest shareholder of WCL, New Hope Corporation, which is owned by Washington Soul Pattinson, has come out to support the capital raising. I would not be surprised if this idea of capital raising  came from them.

Its getting really murky here. I'll keep my hands off until a definitive agreement can be reached.

Ludowici takeover Update 2

The Takeovers Panel has declined to conduct proceeding on the review of the panels earlier decision on Ludowici.

Lets see now if Weir Group is serious in their bid. They have 6 hours after the review panel establish its findings. Its either they extend the dateline of their bid and round up their ppl to see if they will put in another bid... or they could just let it lapse.

Leader Universal Holdings Bhd, LUH MK, privatization by owner

Leader Universal Holdings received a proposal for the sale of its entire assets and liabilities to a company owned by the founder family. Cash would be distributed back to shareholders through a special dividend and capital reduction payment. Usually these deals in Malaysia with the sale of the entire assets and liabilities take a long time to complete as once the deal is confirmed, they still need to get court approval to distribute back the capital to shareholders. From experience, the speed definitely depends on the size and motivation of the deal. Ranges between 6 months - 12 months. The deal was announced back in October 2011.

It is expected that the deal will be completed in the third quarter of 2012. The offer price is $1.10
The current price is $1.05. This implies a premium of 4.76%.

Assuming the completion date is the end of September 2012, the annualized return is still 8.5%. Lever it up once and you'll get returns of 17%.

This seems to be a low risk deal and will get more attractive with time if it stays at $1.05.

I would add this deal to my book.

KFC MK and QSR MK. A possible bidding war?

I believe these two are worth a look at. Will provide a post when I have the chance.


Reasonable sized companies. Seems like a battle between private equity firm, CVC and Johor Corp versus the Malay Chamber of Commerce Malaysia. Not that I believe there is huge potential upside as usually private equity firms pull out instead of getting suckered in.


Update :

The Malay Chamber offer was rejected by the board already in January 2012.

Charter Hall Office REIT takeover by consortium led by GIC and Canadian pension fund. An arbitrage opportunity by going the other way?

I have been watching this deal by the sidelines. I was hesistant on engaging as the final value received on the deal is unknown.

The explanatory memorandum has given a ball park firgure that the US assets being sold should fetch around $1.11 if there are no other contingencies arising from any issues that might require them to keep a part of it.

In total the payment is $2.49 + $1.11 (subject to realised amount on the US assets). The first 7 assets were sold off and the returns would be $0.48. (This will be paid on 8th March 2012) Thus the remaining value should be $2.49 + $0.63 = $3.12.

Charter Hall Office announced today that the sale of the remaining assets will probably take longer thus incurring a cost of $3mm, or roughly 0.6 cents per share.

The last traded price for CQO AU is $3.07. Let assume we will receive $3.12 and we buy in at $3.07.

If you go through the Explanatory Memorandum, you'll find that $0.15 of the $1.11 (US asset sale component) will only be paid 6 months after the Implementation Date. Thus if we buy it at $3.07 today, and assume we get $3.12 in 6 months time, the IRR is only 2.88%.

Or rather i would look at it from a perspective, if i were to sell it at $3.07, put the money in the bank, at a 4.25% interest rate, i would get $3.134 in 6 months time. This seems like an opportunity for me. The risk is however, the US assets manage to fetch more than the expected $1.11, which I highly doubt.

Still an interesting case here. I might chinese/short some at $3.08 and above if I can get borrow.

WCL AU update

Westside Corp has gone into trading halt and will resume trading on Thursday. I expect that there will be a significant announcement. Probably agreeing the terms for a definitive binding proposal.