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.