Key points Board unanimously recommended a scheme for...

Key points Board unanimously recommended a scheme for A$0.25/sh, ~A$530m The price is below both consensus of A$0.275/sh and our TP of A$0.3/sh On May 18, SEH’s JV partner received a ~A$864m offer for its 51% stake Event  SEH’s Board has unanimously recommended a scheme from Lone Star for a cash consideration of A$0.25/sh (A$530m), a discount to our A$0.30/sh TP and consensus of ~A$0.275/sh. The unanimous board approval is surprising, given the stock traded at A$0.235/sh only 11 days ago.  On May 18, SEH's JV partner was made a RMB4.2bn (~A$864m) offer from Jinhong Holdings Group (000669.SZ) for the entity holding the 51% stake in SGE. This implies a valuation for SEH of ~A$830m, A$$0.39/sh. Impact  The Lone offer...: The May 31 scheme from Lone Star of A$0.25/sh implies a ~A$530m valuation of SEH, less than our risked target price of A$0.3/sh, and well below our unrisked A$0.7/sh. The value is a 19% premium to last close and 32% premium to 1-month VWAP. However, over the past ten years the avg takeover premium to last close has been ~46%, implying ~A$0.3/sh.  ...ain’t no Star: The Board believes the scheme provides certainty to shareholders after weighing up the significant upside compared to the future risks. However, it is subject to an Independent Expert concluding that the Scheme is in the best interest of shareholders as well as the shareholder vote.  Hold up there partner: Separately, on May 18, SEH's JV partner was made a RMB4.2bn (~A$864m) offer from Jinhong Holdings Group (000669.SZ) for the entity holding the 51% stake in SGE, acknowledging SEH's 49% ownership. This offer implies a valuation for SEH of ~A$830m, A$0.39/sh. However, we acknowledge some additional components: CERCG and Jinhong both share a chairman, Jinhong shares remain suspended due to “major events” until June 1, and Jinhong will raise equity to fund the transaction but have “tentatively scheduled the purchase as cash