Yearly Archives: 2016

Beximco Pharmaceuticals starts exporting to the US

Beximco Pharma released a press release this morning announcing that the company is the first firm in Bangladesh to start exporting generic pharmaceutical products to the United States. This news was some time in the making since Beximco Pharma, also as a Bangladeshi first, already received US FDA approval one year ago. Apparently the launch was a big event in Bangladesh, with multiple newspapers reporting on it, and with a ceremony that was attended by the Finance Minister of Bangladesh and the US Ambassador in Dhaka.

I don’t expect that this launch will have a major impact on the profitability of the company in the near term, but since the US is a huge market and Bangladesh a very cheap producer of generic pharmaceutical products it could become a sizable growth factor. I’m not really in this stock because of the growth potential, but it’s nice that it’s there. While the stock is up 12.8% at the time of writing this post the London GDRs are still trading at an almost 60% discount compared to the price of the ordinary shares in Dhaka. There is no catalyst in sight for this to change, but I think that the GDRs are simply too cheap not to own and in the meantime we get paid a reasonable dividend that doesn’t have any discount.

Beximco Carvedilol US launch ceremony


Author is long Beximco Pharma

MTY Food Group closes acquisition of Kahala Brands

Kahala Brands logoMTY Food Group announced yesterday that it had successfully closed the acquisition of Kahala Brands. The deal closed without any delays after Kahala Brands shareholders approved the merger last week. It’s still a bit too early to tell if this merger was indeed the merger arbitrage idea of the year as I called it in an earlier blog post. The final payout price is still unknown since it remains subject to post-closing working capital adjustments. I don’t expect a negative surprise here, but we’ll see. Since I bought the stock at $139 and the expected value of the merger consideration is roughly $155 I think it will work out very fine. Hopefully the cash will hit my account soon.


Author is long Kahala Brands

Elliott Associates increases bids for QFAL and QFID

Elliott Associates launched bids for four different Italian REIFs two months ago, and so far they haven’t been very successful in acquiring shares. They managed to acquire 16% of the shares of the Polis fund, but another hedge fund overbid them on the Mediolanum Real Estate Fund and apparently there was little interest from Fondo Alpha and Immobiliare Dinamico shareholders to tender their shares. As a result Elliott Associates decided to increase their bid for those two funds. They raised the offer for Fondo Alpha by 12.4% from €1156.25 to €1300.00 and the offer for Immobiliare Dinamico was increased by 12.5% from €69.31 to €78.00. I didn’t tender my shares in the previous offers, and I don’t intent to tender them in the new offers, but I do find it very encouraging to see the large interest from hedge funds in Italian REIFs. I bought them last year and no-one was interested, and now everybody tries to get a piece of the action:

Overview tender offers for iREIFs


Author is long Fondo Alpha and Immobiliare Dinamico

Bidding war for QFDI heats up, QFVIG sells Milan property

This year a lot seems to be happening in the Italian REIF sector. First we had Elliott Associates launching tender offers for four different funds, and then York Capital Management joined the party by offering €54/share (plus CVR) for Fondo Delta. It didn’t take long before a second interested bidder emerged who was willing to offer €56.70/share and on Monday the bidding war intensified with a third fund launching a tender offer at €65/share. I’m not exactly sure why there is so much interest in this specific fund, but I can’t complain. This offer is still at a 30% discount to the €92/share NAV, but it’s a huge improvement to the 50% discount Fondo Delta was trading at earlier this year. Despite that I don’t think I’ll tender my shares since I expect that simply waiting for the fund to liquidate will be better.

One fund that is making excellent progress in this regard is Valore Immobiliare Globale. The fund announced last Friday that it sold its Milan property for €26.8 million (equal to its appraised value as of 31 December 2015). This is a pretty big deal since the fund now only has two properties remaining with a combined value of €28.3 million. The announcement caused the stock the jump by 20%, but also in this case the discount to NAV remains big at 30%.

Milano - Via Messina 38 - Tower A / C


Author is long QFDI.MI and QFVIG.ME

Argo Group completes share buyback programme

Last Friday Argo Group announced that is successfully completed the share repurchase program that was started on the 30th of March. In just three months time the company spend £1.96 million repurchasing 19.0 million shares (28.1% of the outstanding shares) which is pretty impressive considering that insiders owned 33.2% of the share capital and on the AIM market average daily volume is around 60 thousand shares a day. Apparently there was plenty of liquidity off-exchange using block trades.

I have mixed feelings about the successful share repurchase program. It’s good that they managed to buy a large amount of shares at a nice discount to NCAV which is nicely accretive to intrinsic value. At the same time I’m worried that the management team didn’t do this share repurchase program to create value, but to solidify their control of the company. Thanks to the repurchase program their ownership went from 33.2% to 51.2% without paying any control premium to minority shareholders. I don’t really like this, and that is why urged people earlier this year to vote against the share buyback proposal. Unfortunately the vote passed, and I now have to accept that I’m even more at the mercy of the whims of the Rialas brothers than before.

Agro Group repurchase history


Author is long Argo Group