PETALING JAYA: Lien Hoe Corp Bhd’s minority shareholders have been advised to reject the takeover offer by its managing director Datuk Yap Sing Hock, as the offer price of 25.5 sen is sharply below the fair value.
Independent adviser Mercury Securities Sdn Bhd said in a circular yesterday that the offer price was lower and at a discount of RM1.245 or 83% over the value of the offer price and was unfair to the minority shareholders. The offer is open until Oct 2.
Based on a sum-of-parts valuation model, Mercury Securities has derived an estimated value for the entire stake in Lien Hoe at RM499.58mil or RM1.50 per share.
On Aug 21, Yap and his daughter Christine Yap Tse Yeeng, who is the executive director and chief executive officer of Lien Hoe, had made a conditional mandatory take-over offer.
The offer was made through Christine Holding Sdn Bhd when it held 46.10% or 153.25 million shares.
They then made an offer to acquire all the remaining shares comprising 179.16 million shares or 53.9%, excluding 29.32 million treasury shares, for 25.5 sen cash.
Mercury Securities said the offer price was lower than the volume weighted average price (VWAP) of 82% of the total market days for the past 12 months.
The offer price was a discount of between 3.08% and 10.5% over the five-day, one-month, three-month, six-month and one-year VWAP of the shares.
“The offer is not fair in view that the offer price of 25.5 sen is lower than the estimated value and market price of the Lien Hoe shares.
“The offerer intends to maintain the listing on the Main Market, ” it said.
Mercury Securities said the offer was not reasonable, as the shares would remain tradable on the Main Market and the holders can realise their investment by disposing of the shares in the open market.
However, it also noted that Lien Hoe shares are illiquid.
The non-interested directors – comprising Lien Hoe chairman Yeoh Chong Keat, executive directors Allen Cheong Marn Seng, independent directors Dr Teoh Kim Loon and Datuk Tea Choo Leong – also concurred with Mercury Securities’ evaluation that the offer was not fair and not reasonable and recommended that the minority shareholders reject the offer.
Lien Hoe posted a net loss of RM16.49mil in the first half ended June 30,2019 while in financial year 2018 (FY18), its net loss was RM35.53mil.
It suffered net losses of RM2.41mil in FY17 and RM49mil in FY16.