Confirming The Edge Financial Daily’s report on June 29, Malaysian Mosaics Bhd (MMosaics) announced yesterday that the company has received a privatisation proposal from its major shareholder Gek Poh (Holdings) Sdn Bhd at RM2.30 cash per share.
The privatisation will be done via a selective capital repayment exercise whereby all minority shareholders of MMosaics (except for Gek Poh and its subsidiary, Pembangunan Melati Sdn Bhd) will receive a cash payment of RM2.30 per share.
The existing paid-up share capital of MMosaics will be reduced by cancelling all the ordinary shares issued, and the company will be delisted.
Gek Poh is a private entity controlled by Datuk Seri Panglima Lau Cho Kun, and is the holding company and substantial shareholder of MMosaics, with a stake of 73.07% as at March 10, 2010. Gek Poh is also the holding company of Hap Seng Consolidated Bhd.
MMosaics had total issued shares of 78.4 million as at Dec 31, 2009. Gek Poh would have to compensate for about 21.1 million shares it does not own, for a total cost of RM48.5 million, to obtain full ownership of the company.
As at March 10, 2010, the minority shareholders of MMosaics included Philip Securities (Hong Kong) Ltd and Liew Soong Cheng, with 3.88% and 2.8%, respectively.
MMosaics, a leading manufacturer of mosaic and ceramic tiles, closed at RM1.88 on July 9, its last day of trading. The offer price of RM2.30 represents a premium of 22% over its recent closing price and 62% over the price when The Edge Financial Daily first highlighted the story. At that time, the stock was trading at RM1.42.
Based on the announcement to Bursa Malaysia Securities, the offer is also priced at 30% and 41% higher than the five-day and three-month prices of RM1.77 and RM1.63, respectively.
The stock traded between RM1.18 and RM1.42 from Jan 18 to June 23, before rising to a high of RM1.88 last Friday.
Although the offer price is at a significant premium to the traded prices, Gek Poh’s offer still remains 18% below the company’s net asset value (NAV) of RM2.79 per share, based on the latest quarterly report dated March 31, 2010.
An analyst commented that in lieu of the company’s long-term potential growth in the export market, Gek Poh’s offer was on the low side, as shareholders should be compensated at a price higher than the NAV to account for the company’s future earnings.
In April, managing director Ronald John Delaney said MMosaics planned a progressive three- to five-year strategy which included reinvesting and upgrading the technology used by the group to increase its production capacity.
“We have significant growth in the export market (last year) in countries like the UK, Belgium, Germany,” Delaney had said.
Based on the audited accounts for the financial year ended Dec 31, 2009, MMosaics posted a net profit of RM14.5 million on revenue of RM322.2 million.
This is an increase of 8.8 times over the previous year’s net profit of RM1.6 million and was mostly due to higher revenue, gross profit and a reduction in interest expenses.
For the first quarter ended March 31, 2010, the company also posted a higher net profit of RM1.04 million on revenue of RM63.6 million.
This compares with the net loss of RM2.4 million a year earlier, mainly due to lower operating expenses.
This article appeared in The Edge Financial Daily, July 14, 2010.
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