AmInvest Bank advises Lafarge minority shareholders to reject YTL offer

YTL Corp subsidiary YTL Cement

KUALA LUMPUR: AmInvestment Bank has advised minority shareholders of Lafarge Malaysia Bhd to reject YTL Group's takeover offer at RM3.75 a share.

The independent adviser said on Monday the offer price was lower than and represented a discount from 2.2% to 18.5% over the range of fair values of RM3.83 and RM4.60 per share based on the sum-of-parts valuation.

It said this method primarily based on the discounted cashflow valuation after taking into consideration of the revival/ resumption and on-going review of large infrastructure projects.

AmInvest Bank also said the takeover would see the emergence of the enlarged YTL Cement Group as a clear market leader with capacity share of about 63% in Peninsular Malaysia which may potentially increase the demand and average selling price of cement (currently at the lowest level since last 10 years).

It also said one of the main reasons for the current low market price of Lafarge shares which has been trading below the Offer Price since May 2018 due to the suspension announcements. 

“Hence, the implementation of large infrastructure projects and/or fruitful initiative of the Malaysian government in promoting affordable housing may potentially increase cement demand and contribute positively to the financial results of LMB Group and share price movement of Lafarge shares,” it said.

It also said the offer is “not reasonable” as it is the intention of YTL Cement to maintain the listing status of Lafarge on the Main Market of Bursa Securities and keep the shares traded on Bursa Securities unless YTL Cement either individually or jointly with its associates hold in aggregate 90% or more of the Lafarge shares and Lafarge does not comply with the public spread requirement.

AmInvest Bank also said notwithstanding that the Lafarge shares are relatively illiquid, holders who hold small blocks of Lafarge shares may still have the opportunity to dispose of their shares in the open market subsequent to the closing date as the offeror intends to maintain the listing status.

“Premised on the above, AmInvestment Bank is of the opinion that the offer is not fair and not reasonable to the holders.  Accordingly, AmInvestment Bank recommends that you reject the offer.

“The non-interested directors concur with the recommendation of AmInvestment Bank that the offer is not fair and not reasonable. Accordingly, the non-interested directors recommend that you reject the offer,” it said.