Unfair but reasonable is common

Overall, when one looks at a merger, acquisition, or sale of assets, while it may be fair on paper, it may not be fair when looking at market prices of the listed securities, or vice-versa.

AT the end of the last trading day last year, little-known Kuchai Development Bhd (KDB) agreed to dispose of its entire asset and liabilities to its sister company, Sungei Bagan Rubber Co (M) Bhd (SBR) for RM275.5mil via the issuance of 27.5 million new SBR shares priced at RM10.01 each.

However, as part of the deal, the assets under the proposed disposal exclude the RM83.8mil cash at KDB. Upon completion of the transaction, KDB will distribute the new SBR shares to its shareholders on the basis of 222 new SBR shares for every 1,000 KDB shares held.