Corporate offers to ease as share prices rise

MSWG asks for a reasonable and fair offer price so that minority shareholders would not be left shortchanged


THE number of corporate takeover or general offers could be fewer in the future as the higher share prices post-pandemic would make it more expensive to take control of companies on Bursa Malaysia.

A slew of offers have been tabled in the past few months with the latest coming made for Eastern & Oriental Bhd (E&O) by its substantial shareholders, the Tee brothers, who raised their stakes in the property concern to 42.71% (with person acting in concert) after buy- ing a 10.9% stake from Sime Darby Bhd last week for RM93.5 million or 60 sen a share.

The Covid-19 pandemic depressed the share price of many public-listed companies and thus partly helped trigger the offers, said Minority Shareholders Watch Group (MSWG) CEO Devanesan Evanson.

“Takeovers or privatisation are part and parcel of a vibrant capital market, and there is nothing wrong with them; all we ask for is a reasonable and fair offer price so that minority shareholders would not be left shortchanged,” he told The Malaysian Reserve recently.

The week earlier, Singapore-listed Jardine Cycle & Carriage Ltd (JCCL) presented an unconditional voluntary takeover offer to acquire all the remaining ordinary shares in Cycle & Carriage Bintang Bhd (C&C) for RM2.40 per share.

On Nov 11, 2019, JCCL had offered to buy out minority shareholders of the company via a proposed selective capital reduction and repayment exercise for RM2.20 per share.

While the offers of E&O intend to keep the counter listed, JCCL intends to delist C&C.

The C&C privatisation bid is a second attempt by JCCL after it failed to privatise the company last year, as 13.18% of disinterested shares voted against the selective capital reduction exercise. This fresh attempt may face some hurdles as well.

JCCL’s rationale for the fresh offer was that given the market conditions and ongoing headwinds C&C faces, the business will require significant capital expenditure to support its continued operations and longer-term capital investments.

Devanesan said the C&C’s unaudited net assets per share as at Dec 31, 2020, is RM2.34, which is below the offer price of RM2.40, but there has been a recovery in terms of a reduced loss per share.

He said as at Dec 31, 2020, the unaudited loss per share was 12.9 sen compared to a loss per share of 38.91 sen as at Dec 31, 2019, that is a prima facie indication that the company is on a recovery mode.

“The independent advisors’ advice will shed more light on the fairness and reasonableness of the offer as they, as licensed professionals, will take into consideration many other factors before making a comprehensive recommendation to shareholders.

“So for now, we should await their advice and when their advice is released, shareholders should take the time to read the advice, so that they may be able to make an informed decision,” he added.

As at March 23, C&C has an issued share capital of RM124.6 million comprising 100.74 million shares, of which JCCL holds 66.47%. At the offer price, the takeover will cost JCCL about RM98.88 million. The most recent attempt to fall short of the privatisation target was the RM1.30 share offer tabled by the Federal Land Development Authority (Felda) for FGV Holdings Bhd.

At the close of the offer period, Felda managed to buy 80.99% of FGV shares, short of its 90% target, that would have allowed it to under-take the forced sale of FGV shares from dissenting shareholders.

While the independent advisor has proposed FGV’s shareholders to accept the offer despite its shortcomings, five of FGV’s non-interested directors in January advised minority shareholders to reject Felda’s offer of RM1.30 a share as they viewed the offer as unfair.

C&C last traded at RM2.43, a small premium to its offer price, giving it a market capitalisation of RM244.8 million. The offer price looks set to be key now as the economy recovers.

“At the end of the day, if you pay a lower price, minority shareholders may continue to hold on to their shares, and the privatisation or takeover plan can’t go through.

“In the case of FGV, the shareholders saw the recovering price of crude palm oil, while C&C could recover due to revenge spending on cars.

“Maybe, if JCCL made the offer much earlier during Covid-19, then the timing would be right to let go for most of the retailers,” said Malacca Securities Sdn Bhd head of research Loui Low