Ping An owned 41% of LU Fax before the dividend and 57% after, because most people took cash. Because Ping An crossed over the 50% ownership level, under HK law they are required to make a general offer for all outstanding shares.
However, Ping An don't want 100% and prefer to keep Lufax as a listed company. So they made the general offer at the lowest possible price, which is the lowest price Ping An have paid in the last 12 months. Since they haven't bought any shares, this price is the price of the dividend shares; $1.127 or $2.254 per ADR.
I don't think there is a rule for going over 50% though? The offer might actually be triggered by the creeper rule now that I think of it. If a holder owns between 30% and 50% and increases their stake by more than 2% in an acquisition of shares, they will have to make a mandatory offer.
Since this was obviously going to happen, why didn't they file for a whitewash waiver to prevent having to make a mandatory offer?
There is. There is a requirement to make a general offer if you go over 30% or over 50% or if you increase by more than the "creeper clause" limit per year, which I think is 2%.
Ping An as shareholder can't file themselves. It has to be Lu Fax that files. And the regulators will normally only grant the whitewash if Lu Fax shareholders agree. So, as the largest shareholder, Ping An could tell Lu Fax to request the whitewash. Then Lu Fax would have to hold a shareholder meeting and get the whitewash approved before they pay the dividend. Plus, Ping An didn't know how many shareholders would go for cash Vs shares. If other shareholders had chosen shares, like you did, then there would be no requirement for a general offer and getting the whitewash beforehand would have been a waste of time and money.
There are some costs involved either way, but they are not really significant. Doing it this way was faster, which may be significant if the business is now recovering ......
It's too late to request a whitewash, and Ping An have already said they will make the offer.
" Morgan Stanley, as the financial adviser to the Joint Offerors, will for and on behalf of the Joint Offerors, make the Lufax Share Offer pursuant to Rule 26.1 of the Takeovers Code on the following basis: The Lufax Share Offer
For each Lufax Share ............................... US$1.127 in cash
For each Lufax ADS ................................ US$2.254 in cash"
Since this price is well below the current market price it's unlikely anyone will accept the offer and this whole process is just a regulatory formality.
Ah ok so they are counting on the offer being rejected, now I get it. Since Ping An is only forced to make an offer, not forced to actually go through with an offer.
Legally Ping An have to make the offer, so that's what they're doing. The offer is binding, so if shareholders accept the offer, Ping An has pay.
But Ping An doesn't actually want to take Lufax private. So they are offering the minimum price they can, and if shareholders do accept the offer (if for example the Lufax price crashes next month) Ping An will sell down in the market so that they own less than 75% and the shares keep trading.
The dividend was US$1.21 per share, so $2.42 per ADR. The reinvestment price, if you take the dividend in shares, is $1.127 per share, or $2.254 per ADR. So for every share/ADR you hold you should get 1.07 new share/ADR of you chose the scrip option.
I don't expect any further shareholding changes in the short or medium term. The share option has turned out better than cash ($2.42 in cash Vs $3.15 worth of ADR (2.94*1.07 = 3.15)).
NAV per ADR is now about $12 (rough estimate) so still about a 75% discount to NAV when business seems to be picking up. Personally, I would wait at least until the interim results at the end of August to see how the business is performing.
Ah so the USD 1.07/share was a typo then on IBKR side. I suppose legally this is treated similarly as a bank that accidentally wires a billion $ to your account?
Ping An owned 41% of LU Fax before the dividend and 57% after, because most people took cash. Because Ping An crossed over the 50% ownership level, under HK law they are required to make a general offer for all outstanding shares.
However, Ping An don't want 100% and prefer to keep Lufax as a listed company. So they made the general offer at the lowest possible price, which is the lowest price Ping An have paid in the last 12 months. Since they haven't bought any shares, this price is the price of the dividend shares; $1.127 or $2.254 per ADR.
I don't think there is a rule for going over 50% though? The offer might actually be triggered by the creeper rule now that I think of it. If a holder owns between 30% and 50% and increases their stake by more than 2% in an acquisition of shares, they will have to make a mandatory offer.
Since this was obviously going to happen, why didn't they file for a whitewash waiver to prevent having to make a mandatory offer?
There is. There is a requirement to make a general offer if you go over 30% or over 50% or if you increase by more than the "creeper clause" limit per year, which I think is 2%.
Ping An as shareholder can't file themselves. It has to be Lu Fax that files. And the regulators will normally only grant the whitewash if Lu Fax shareholders agree. So, as the largest shareholder, Ping An could tell Lu Fax to request the whitewash. Then Lu Fax would have to hold a shareholder meeting and get the whitewash approved before they pay the dividend. Plus, Ping An didn't know how many shareholders would go for cash Vs shares. If other shareholders had chosen shares, like you did, then there would be no requirement for a general offer and getting the whitewash beforehand would have been a waste of time and money.
There are some costs involved either way, but they are not really significant. Doing it this way was faster, which may be significant if the business is now recovering ......
They probably knew what Tun Kung would do though As they are basically insiders.
What happens if they don't file for the whitewash before August 6th (when dividend is paid)? They have to actually go through with the offer?
It's too late to request a whitewash, and Ping An have already said they will make the offer.
" Morgan Stanley, as the financial adviser to the Joint Offerors, will for and on behalf of the Joint Offerors, make the Lufax Share Offer pursuant to Rule 26.1 of the Takeovers Code on the following basis: The Lufax Share Offer
For each Lufax Share ............................... US$1.127 in cash
For each Lufax ADS ................................ US$2.254 in cash"
Since this price is well below the current market price it's unlikely anyone will accept the offer and this whole process is just a regulatory formality.
I wonder why the market reacted so positively to the news. Share price went from $2.4 to $2.8.
Probably just the market misunderstanding, because a few days later it was back down to $2.40.
Then the price recovered. So i'm hoping for good 2Q results next month.
Ah ok so they are counting on the offer being rejected, now I get it. Since Ping An is only forced to make an offer, not forced to actually go through with an offer.
Not exactly.
Legally Ping An have to make the offer, so that's what they're doing. The offer is binding, so if shareholders accept the offer, Ping An has pay.
But Ping An doesn't actually want to take Lufax private. So they are offering the minimum price they can, and if shareholders do accept the offer (if for example the Lufax price crashes next month) Ping An will sell down in the market so that they own less than 75% and the shares keep trading.
The dividend was US$1.21 per share, so $2.42 per ADR. The reinvestment price, if you take the dividend in shares, is $1.127 per share, or $2.254 per ADR. So for every share/ADR you hold you should get 1.07 new share/ADR of you chose the scrip option.
I don't expect any further shareholding changes in the short or medium term. The share option has turned out better than cash ($2.42 in cash Vs $3.15 worth of ADR (2.94*1.07 = 3.15)).
NAV per ADR is now about $12 (rough estimate) so still about a 75% discount to NAV when business seems to be picking up. Personally, I would wait at least until the interim results at the end of August to see how the business is performing.
Ah so the USD 1.07/share was a typo then on IBKR side. I suppose legally this is treated similarly as a bank that accidentally wires a billion $ to your account?
Well, $1.07 per share is less than $1.21 per share. So if you ask IBRK they may be happy to give you the lower number.
Doesn't the lower $ number imply more shares? I would get 1.125x the amount of ADRs Im holding instead of 1.07x.