David Ho transformed the company from a manufacturer of traditional herbal tea business to a well-known manufacturer of pharmaceutical products
PETALING JAYA: The privatisation of Hovid Bhd, one of Malaysia’s oldest pharmaceutical company that started with the Han Yan Hor herbal tea, is likely to crystalise.
Sources said David Ho together with private equity firm Teal Partners, which is making the offer to mop up Hovid shares at 38 sen and warrants at 20 sen each, is likely to get the acceptance level of 67% this week to make the offer unconditional.
“Ho and parties acting in concert are likely to hit the 67% acceptance level which would make the offer unconditional. The offerors seek 90% to take the company private, a target which they could potentially achieve in the next few weeks,” said a source.
In October this year, Ho together with Teal Inc embarked on the corporate exercise to privatise Hovid through a private company Fajar Astoria Sdn Bhd. Ho is the chairman and managing director of
Hovid, which was founded by his father Dr Ho Kai Cheong in the 1941.
Ho started the exercise in October with a stake of 33.27% and it got off to a poor start, with the acceptance level far short of making the offer unconditional.
In the exercise proposed in the first week of October, Fajar Astoria wanted a 90% acceptance level and has stated that it wanted to take the company private.
In the document to shareholders, it was stated that Fajar Astoria reserved the right to reduce the conditional acceptance level of 90% to a lower level. It was a clause which effectively left the window open for the offerors to revise down the acceptance level to make the offer unconditional should it not get the desired target of 90%.
After the first cut off on Nov 20, Fajar Astoria received an acceptance level of just 55.46%. The offer was extended to Dec 4 and the acceptance level to make the offer unconditional was revised down to 75%.
Last week, Hovid once again revised down the acceptance level – this time to 67%. It announced that it has secured 62.32% of acceptances so far, short of about 5%.
“If Ho and others were not confident of hitting 67% mark, they would not have revised down the offer. The 67% mark is an unusual number to set as a condition for the offer to be unconditional,” said a source.
In most cases of takeovers, offerors would set targets of 51%, 75% or 90% as the condition of acceptance for the takeover to crystalise.
In Hovid’s case, it started with 90%, then revised down to 75% and now finally to 67%.
Once the offer becomes unconditional, there would be certainty for the deal to take place and this in turn would prompt fence sitters to accept the offer.
Ho and Teal are likely to get higher acceptance numbers as more retail investors are likely to accept the deal if it hits the conditional mark.
Hovid is a manufacturer of more than 400 pharmaceutical products with a rich history dating back to 1941.
It was started by Ho’s father who created and built the company around Ho Yan Hor herbal tea, which is still a household name to today.
Ho transformed the company from a manufacturer of traditional herbal tea business to a well-known manufacturer of pharmaceutical products.
However this year, Hovid ran into operational problems. In January it had to recall a product used for treatment of hypertension because of wrong labelling.
Subsequently the authorities revoked the manufacturing licences for both its plants in Ipoh.
One plant was reopened in March this year and the other in May.
Hovid closed at 37.5 sen last Friday.
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