Independent adviser: Huat Lai takeover offer not fair

KUALA LUMPUR: Mercury Securities, the independent adviser to poultry company Huat Lai Resources Bhd's minority shareholders, has described the RM5 a share takeover offer as "not fair" as it was lower than the fair value.

In its independent advice issued on Thursday, it said that based on the discounted cashflow valuation method, it derived a range of fair value for Huat Lai of between RM535.70mil and RM574.59mil, which translates into an estimated fair value per share of RM6.87 and RM7.36.

“The offer price of RM5 is lower than and represents a discount of approximately 27.22% to 32.07% over the abovementioned range of fair value per share,” it said.

Although the offer was deemed “not fair”, Mercury Securities said that the “reasonable” view outweighs the “not fair” because of the illiquidity of the shares and provides an exit opportunity to the holders.

“Since the listing of Huat Lai on July 3, 2002 up to the last practical date, the shares have never traded above the offer price (except for only four market days, which are Nov 6, 2015; Nov 9, 2015; Nov 11, 2015 and Feb 11, 2016).

“Accordingly, Mercury Securities recommends the Holders to Accept the offer,” it said.

In late October, the founding family of Huat Lai Resources launched a takeover offer for the remaining shares they did not own in the company for RM5 a share.

The Lim family owns a 74.6% stake and would fork out RM98.9mil for the remaining shares.

The Lim family is also the management and sits on the board of directors of the Malacca-based company.