[HOLD评级]SHANGHAI JAHWA(600315)：JAHWA PARENT CO. TO BUY 20% STAKE OF JAHWA LISTCO AT RMB38/SHARE
Tender offer announced after market close
Shanghai Jahwa （Jahwa） announced after market close today that ShanghaiJahwa Group, the parent company of Jahwa listco, plans to buy up to 20% ofJahwa's shares at RMB38/share. Jahwa’s shares will resume trading from 13 Oct.Details are as below:
Buyer: Shanghai Jahwa Group （parent company of Jahwa listco）。
Seller: All the shareholders excluding all the entities under Ping An （ChinaPingAn Life Insurance, Shanghai Huisheng Industrial Company, and Shanghai Tai FuXiang Er Equity Investment Fund Partnership）。
Offer price: RMB38/share （+18% vs the closing price, RMB32.15/share beforesuspension）
Period: 30 days after the announcement. The subscription will only start after itannounces a full circular.
No. of shares: Involves 135m shares （20% of total issued shares）。
Amount: RMB5.1bn, 20% of the amount （RMB1bn） to be deposited as guarantee.
Capital funding: from Ping Pu Investment, the parent company of ShanghaiJahwa Group under Ping An.
Rationale: 1） The share acquisition is a way to strengthen the parent company’scontrol on the listed company. 2） Premium in offer price reflects Ping An’sconfidence in the China HBC industry and Jahwa’s long-term perspective; 3） Thistender offer is a partial tender offer; i.e., the parent company intends to maintainJahwa’s listing status after completion.
Future plan: Apart from this tender offer, Shanghai Jahwa Group does not havea plan to continue increasing the stake of Jahwa listco in the next 12 months.
Deutsche Bank view
Post the share purchase, Ping An will remain Jahwa’s controlling shareholder.The table below shows the share structure change from Shanghai Jahwa Groupand the related companies under Ping An.
We believe the mechanism is similar to the last tender offer initiated by PingAn in November 2015. However, the offer price looks more attractive for theshareholders. There is one difference. Last time, the offer price was 9%/-3% vs.the average share price of the past three/six months, respectively. This time, PingAn’s offer price is 23%/27% higher than the average price of the past/six months,implying a 62%/49% 2017/18 PE.
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