PETALING JAYA: The fight for control over Lay Hong Bhd has resulted in the poultry-producing company breaching its 25% free float requirement.
At the same time, analysts are predicting that QL Resources Bhd, which had failed in its attempt to take over Lay Hong, may continue to fight for board representation in the latter.
Agro-food manufacturer QL, which already had 27% of Lay Hong shares prior to launching a voluntary conditional general offer at RM3.50 per Lay Hong share on Sept 23, had subsequently accumulated some 12.92% of shares in the company, thus raising its stake in Lay Hong to 39.92% as at the closing date of the offer on Wednesday. To be noted is that following the failed takeover bid, QL would now have to return 1.59% of Lay Hong shares to shareholders who had accepted the offer within the next two weeks.
Excluding those shares, QL has about a 38.3% stake in Lay Hong, while the latter’s founding shareholders, the Yap family, have about 44%, bringing the combined shareholdings of both parties in Lay Hong to about 82.3%. This means the 25% public spread requirement has been breached.
CIMB Research said it believed the Yap family and QL would work out a solution to prevent Lay Hong from being delisted.
“We believe that Lay Hong’s family will continue to grow its business, which should in turn benefit QL,” the brokerage said in its report, adding that Lay Hong was expected to contribute around 1.4% to 1.5% of QL’s estimated earnings for financial years ending March 31, 2015, to 2017.
“By having a larger stake in Lay Hong, QL will have more influence on the company and we believe that it will continue to fight for a board seat,” CIMB Research noted.
QL announced the lapse of its conditional takeover offer to acquire Lay Hong on Wednesday, as the former did not manage to increase its shareholding in Lay Hong to the threshold level of more than 50% of voting shares by the deadline.
QL only managed to increase its shareholding in Lay Hong to 39.92% on the closing date of its offer.
QL shares fell four sen to RM3.27 yesterday, while Lay Hong gained one sen to RM3.46.
Analysts said the decline in QL share price was an opportunity for investors to accumulate shares in the company, which they believe had good growth potential.
“This news (failure to acquire Lay Hong) may have a negative knee-jerk reaction on QL’s share price,” CIMB Research said.
“We view this as a good buying opportunity to ride on the company’s strong earnings growth,” the brokerage added.
Public Investment Bank Research (PIB) concurred, saying that the failure to take over Lay Hong would not affect QL’s performance.
“We view this positively, as there is no need to undergo any integration struggles or tussles if any arises, which could affect QL’s current stellar performance,” it said, adding that QL could now focus on its current businesses and growing them.
In reiterating its outperform call on QL, PIB said: “We see QL’s ongoing growth strategies coupled with reputable branding to continue uplifting its performance.”
PIB tagged its target price for QL at RM3.85, while CIMB’s target price for the latter is RM4.29.