Fengxiang (9977 HK): PAG Invites Dissent After Scrapping Scrip Alternative

• In an unusual move, the Offeror, PAG, and 59.42% shareholder of Shandong Fengxiang (9977 HK), has opted not to provide a scrip alternative, despite satisfying conditions to do so.

• The scrip option condition - not less than 0.5% of shares out expressing interest - was satisfied on the 12th May. Therefore at least 7.9mn shares got snubbed.

• Evidently PAG reckons the support for the scrip is not worth the trouble. Nor critical in mass to disrupt the Offer.

Fengxiang is super illiquid - look away now if this is not your thing.

The Trade:

• This still looks done.

• Pricing appears fair.

• However this is an illiquid arb - and Hong Kong has seen two failed small-cap Schemes recently.

• If illiquid arbs are your bent, and assuming completion late August, I'd pay up to HK$1.90/share.

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The NEW News

• The scrip alternative arrangement (mostly) mirrored that seen in L'Occitane (973 HK)'s and Shanghai Henlius Biotech (2696 HK)'s playbooks (see L'Occitane (973 HK): No, PLP Is Not Getting A Back-End Bump and Henlius Biotech (2696 HK): Fosun Pharma's "Fair" Offer)

  • This option, into "Rollover Securities", which was at "the sole discretion of the Offeror" was predicated on 0.5% of shares out (7.916mn shares) notifying the Offeror, in writing, expressing an interest in the scrip alternative.

    • Such notification must be received by the 11th May.

    • That was subsequently satisfied. The quantum of those seeking scrip was not made public.

  • Maximum scrip issuance? Rollover shares shall not exceed 5% of shares out or 79.167mn shares.

  • As seen below, independent comprise 218.5mn shares.

  • This scrip alternative is being offered to all shareholders except Falcon (the Offeror) and Platinum Peony (Abu Dhabi Investment Authority).

• After the close yesterday, after careful consideration, the Offeror "decided not to introduce the Potential Share Alternative Offer."

• No reason was given. Presumably the scrip interest was only at, or a little more than 0.5%.

• So that's that.