Redtone independent directors say No to Juara Sejati's takeover offer

KUALA LUMPUR: Two of Redtone International Bhd independent directors have rejected the “fair and reasonable” evaluation given by independent adviser Mercury Securities Sdn Bhd regarding Juara Sejati Sdn Bhd's conditional takeover offer of the telecommunications service provider.

Mercury Securities has recommended the acceptance of the Berjaya Group unit's offer prices of 80 sen per Redtone share and 32 sen per Redtone irredeemable convertible unsecured loan stocks (Iculs).

Six non-interested directors agreed with the adviser’s recommendation to accept Juara Sejati’s offer. 

However, the two remaining non-interested directors, Mathew Thomas Vargis Mathews and Jagdish Singh Dhaliwal, took the opposite view.

“They view the offer price to be low after taking into consideration the long-term growth potential and prospects of the group as supported by the strong contribution from the group’s managed telecommunications network services segment as well as other future projects which may be secured by the group,” Redtone said on Monday in a circular to its share and Icul holders.

Moreover, the closing market prices of Redtone shares and Redtone Iculs on the last trading day prior to the takeover notice (March 26) of 83 sen and 32.5 sen respectively “(both higher than their respective offer price) further reinforce their confidence in the prospects of the group and are, in their view, more reflective of the value of the Redtone shares and Redtone Iculs at the minimum.”

Redtone closed unchanged at 80 sen on Monday.

Mercury Securities did point out that Juara Sejati's offer was below the market price of Redtone shares as of April 20 - being the last practicable date prior to the issuance of its independent advice circular - while the Iculs offer price was the same as their market price. 

However, it estimated the fair value of Redtone shares to range from 71 sen to 76 sen based on the discounted cash flow method.

Mercury Securities also qualified its recommendation by saying “the decision to be made would rest entirely on the individual risk appetite and specific requirements of the holders,”

It also advised the share and Icul holders to be mindful that “there may be continuous fluctuations in the market prices of the Redtone shares and/or Redtone Iculs prior to the closing date (May 8).”

As at end-March, Juara Sejati and the parties acting in concert with it (PACs) had a combined 35.85% direct stake in Redtone. The Johor Sultan, with a 20.13% interest, had stated that he would not sell his shares. 

While the offeror, Juara Sejati, aims to maintain Redtone’s listing status, Mercury Securities cautioned that suspension might nonetheless occur if the public shareholding spread fell to less than 25% of the listed shares. This could be the result of high acceptances to the offer and/or the company being unable to secure Bursa Malaysia Securities’ approval for a time extension to rectify the spread requirement.