Sakari Resources conditional cash offer by PTT Mining

Deal price is $1.90. Current price (suspended) $1.49.

Currently the offerer and concerted party owns 45.43%. Deal conditional upon them reaching 50%. This is a no brainer deal. Should open pretty tight. However not regulatory approval conditions are attached to the announcement, which is weird. I would have thought it require approval from the Indonesian regulators as PTT Mining is owned by the Thai Ministry of Finance. This deal is not conditional upon any financing.

New deals

SAR SP - Sakari Resources takeover by PTT Mining
AIX AU - Australia Infrastructure Fund by Future Fund

Washington Soul takes over Exco Resources Limited

The offer at $0.19 which implies a premium of 5.56%. Downside risk of 16.67% if the deal breaks and it fall through to $0.15

Heineken's final $53 offer.

Well it seems that Heineken has shown their hands now. There is also a minuscule break fee of US47 million. (Not that it matters in this case)  The final act depends on Thai Bev.

Lets do a rewind and start from the beginning.

ThaiBev bought a 22.2% of F&N for $8.88 and 8.6% of APB for $45.

This translates to an investment of roughly S$2.8 billion for the F&N Stake. Thai Beverage has continued to buy in the open markets another 4% of the stock and it cost them roughly another S$500 million. Total investment is S$3.3 billion.

For the APB stake, it was bought by the son in-law of Mr Charoen, for the 8.6% it cost them roughly S$1 billion. If they flip it to Heineken now, they will net a profit of roughly a cool S$170 million. That is like a 17% return.

However in the grand scheme of things, they have invested up to S$4.3 billion till now. Will they cash out now on APB for a 17% return for 4 months ( have to hold it till deal completion by end of the year)? Why did they increase their stakes in F&N these pass few weeks?

The Charoen's initially took out S$1 billion to buy the stakes ( + S$2.8 billion loan facility). They have since invested another $500 million into F&N shares. So their total investment is $1.5 billion cash + $2.8 billion loan. By agreeing to Heineken's latest deal, F&N will get about S$5.5 billion. That equates to roughly $3.80 per share and S$1.4 billion for Thai Beverage's stake of 26.2% if a special dividend is paid out. Mr Charoen's son in law will also get back S$1.17 billion.

In this case they will both get back roughly S$2.57 billion. This means they will have an additional cash of S$1 billion (the loan facility of S$2.8 billion remains without change). Seems like a good deal. If the Charoens have the money to take over APB, it would have put in an offer for all APB shares. Instead they have proven that they are just there to be a "major" nuisance in building up a minority presence.

I would believe Heineken's offer would be accepted unless of course Mr Charoen continues in bulding up his stake in F&N.

Thai Bev owns 26.2% of Fraser and Neave

Seems like Thai Bev is not giving Heineken much time or space to think. They have increased their holding in F&N to 26.2% now.

Thai Bev bids $55 for 7.3% of Asia Pacific Breweries

Thai Bev has made an unsolicited bid for 7.3% of APB's shares. It will be interesting to see what follows. As presumed, Thai Bev would make it harder for Heineken to buy APB, but the question is will Thai Bev be able to take over APB fully or are they just looking to build a blocking stake looking for a better bid.

To me it seems like the latter is possibly. Or possibly they want to protect their interest as they have just spend a fortune buying over the F&N stake from OCBC and company. But will Heineken bite?

It definitely looks more interesting now as Thai Bev have shown their hands. I would want to think Heineken wouldnt walk away so fast, thus there should be 1 bid left by Heineken. Lets see where this opens tomorrow.

Standard Chartered, money laundering for Iran

Stock is down 7.4% as I am typing.. I believe it would continue to head downwards, as this would be lengthy and involve a huge cost to SCB, and potentially exit from US (very, very small chance).

**Currently it is trading in London close to 24% down from previous close.

For a company with a market cap of roughly 35billion and being down 25% is a whopping 8.75 billion, I do not think there is much more downside, given their exposure to US is probably like 20% of their business. Probably they get fine a couple billion dollars. Do not see it going down much further today. Probably rebound when more information comes to light. However as in any fraud cases, you'll never know the stupidity of some people.

Staying away from this one for now. Speculative bet would be to buy.

Knight Capital Group..a lifeline US$400m.. an opportunity?

A bit of divergence from Merger Arb to event trades. Caught my eye although it is not in Asia.

Well it seems that the firm has secured sales of $400 million dollars worth of convertible/preference shares which can be converted to common stocks at $1.50. The major investors are Getco, Blackstone, Jefferies, TD Ameritrade, Stephens and Stifel.

If we just calculate a theoretical price based on number of shares and current price,

	millions	Current Price
Total convertible issued	267	1.5
Current Outstanding Shares	98.21	3.04
Theoritical price	1.91
Potential Upside on Short	37.04%

We get to this figure of $1.91 as the expected share price of Knight Capital. However for Getco and Blackstone to continue having a member on the board, they have to keep at least 25% of the preference shares subscribed. Same goes to Jefferies if they want to have a say on the third additional board member. So theo price should be higher, calculated by my system to be $2.19.

Another way of looking at this is using projection of earnings and divide by the number of new outstanding shares to get the EPS. Use a P/E to project where the price would be.

Did a very simple example

Based on P/E	P/E 10	P/E 15
EPS	0.199	0.199
P/E	12	15
Price	2.39	2.98
Potential Upside on Short	21.32%	1.65%

Well, I would think that it would be highly unlikely that the P/E would be at 15, but there is a small chance of it going back there.

More like it will take some time to recover to those levels. I am looking to short Knight.

APB, Thai Beverage, Heineken, F&N, Coca- Cola and Kirin

Seems like this is a complicated one. The dateline is on 3rd Aug for F&N to reply to Heineken's offer for the 40% stake in APB.

First of all, it started when OCBC, Great Eastern and Lee Rubber decided to sell its stakes in F&N (22%) amd APB(8.6%) to Thai billionaire Charoen Sirivadhanabhakdi. Obviously this does not rest well with Heineken.

Heineken has no obvious interest in the other parts of F&N save the brewery side and has made an offer of $50 for F&N's stake in APB. The offer is not conditional upon any due diligence or financing. Just subjected to the Boards recommendation to shareholders, shareholder approval and regulatory approval (if any). The offer will be extended to the APB minority shareholders as well. Currently F&N owns 40% of APB and Heineken owns 42%.

To complicate matters, Kirin Holdings (2503.T) owns 14.7% of F&N. and Mr Charoen is currently amassing shares in F&N raising his stake to 24.1% (as of 31st July 2012).  This translates to roughly 40% of  voting shares in F&N. I have not seen any Japanese firms giving up on overseas assets especially as growth is slowing down in Japan and where Kirin is involved, they are more likely to acquire than divest. Mr Charoen has made his decision obvious by trying to amass more shares in F&N to make sure they do not divest their stakes in APB.

Rumours are also flying that maybe Coca-cola will make a bid for the soft drink assets of F&N.

However as I look at this, I am not confident Heineken will get their hands on APB so easily. I am abit sceptical when there are cornerstone investors like Kirin, whom will not likely want to change status quo, and Mr Charoen, who just got his hands on F&N and APB shares. Unless a deal is done where these players can roll their interest into the new company, very likely nothing will happen.

I was actually tempted to short APB but have kept myself out of this. Lets see the verdict tomorrow.