A special purpose vehicle (SPV) established by Usaha Tegas Sdn Bhd and its concert parties, Tanjong Capital Sdn Bhd has served a notice of conditional takeover offer to acquire all the ordinary shares of Tanjong at a cash offer price of RM21.80 apiece, hence valuing the company at RM8.8bil and minorities’ shares at RM4.7bil.
The offer price is also at a premium to analysts’ average target price for Tanjong of RM19.08, according to Bloomberg data. The head of research of a local brokerage said that the offer price was fair and attractive given the long gestation period of many of Tanjong’s green field projects.
Datuk Seri Nazir Razak in discussion with Tanjong Capital executive director Augustus Ralph Marshall (left) during the press conference.The offer price represents a premium of 21.92% of Tanjong’s last traded price of RM17.88 per share on Wednesday, and 21.99% over the volume-weighted average share price of RM17.87 per share over the last six months.
“This is a good opportunity for shareholders to exit at an attractive premium,” Nazir said.
The takeover offer is conditional upon the SPV successfully receiving acceptances of at least 90% of Tanjong shares.
Tanjong, which has been suspended since Wednesday pending yesterday’s announcement, would resume trading on Monday.
The group Thursday also issued a statement to Bursa Malaysia to announce the cancellation of its standard listing on the London Stock Exchange, which was due to take effect from Aug 27.
Tanjong is 30.9%-owned by Usaha Tegas, the private vehicle of tycoon T. Ananda Krishnan. Collectively, Usaha Tegas and its concert parties own 46.96% of the total existing issued ordinary shares in Tanjong.
The rationale to take Tanjong private is simple.
Firstly, shareholders believe the market has undervalued the company, and its current price is not reflective of its fundamentals, Nazir said.
In Nazir’s words, the group suffers from “conglomerate discount valuation”, despite the group having a vast range of businesses from power to gaming and leisure.
On the other hand, however, the presence of the gaming business in the group has restricted the participation of syariah-compliant investors to participate in the growing potential of Tanjong’s business, especially in the power sector.
So this raises the question whether Tanjong will exit from gaming business anytime soon.
Not immediately, apparently.
According to Nazir, the first step is to take the company private, and this means the company will have a new shareholding structure. Then, the new shareholders will visit those pertinent questions and decide at a later date.
Nazir said a privatised Tanjong would facilitate the future expansion plan of Tanjong in the power business.
“Looking for a new strategic partner is also a possibility.”
“Private ownership will provide greater flexibility,” he explained, adding that the future substantial outlay for the expansion of Tanjong’s business would hinder dividend payments to shareholders, and hence, would further dampen sentiment towards the counter.
It also makes sense that being a private entity, Tanjong can be free from the lengthy process of getting approvals from shareholders, directors and regulators, for business expansion.
Tanjong is looking at doubling its power generation capacity over the next four to five years. It presently boasts of a total net generating capacity of 3,951MW from the 13 power plants it operates in Malaysia, Egypt, Bangladesh, Pakistan, Sri Lanka and the United Arab Emirates. The group had earlier expressed its intention to deploy mergers and acquisitions and greenfield projects as part of its strategy to expand its power business, focusing on the Middle East, North African, South Asian and South-East Asian markets.
The cost of expanding its power capacity is estimated at US$1mil for 1MW.
An analyst remarked: “As widely expected, what we would be witnessing here is a repeat of the privatisation episodes of Maxis Communications Bhd in 2007, Astro All Asia Networks plc four months ago and Measat Global Bhd on Wednesday.
“It’s pretty clear that this is part of Ananda’s clean-up exercise to strengthen the organisation and capital structure of companies under his stable,” he said.
Ananda took Maxis Communications private in 2007, and relisted the mobile telecommunications company as Maxis Bhd last year. Whether he will do the same to the other companies he took private remains to be seen.
As for Tanjong, Nazir said that even if the company were to be relisted again in the future, it would return to the bourse in a restructured form.
Tanjong is a favoured stock due to its defensive nature and attractive dividend yields.
For its first quarter ended April 30, Tanjong made RM945.8mil in revenue, of which about 70% came from its power business and about 19% from gaming.
Net profit for the quarter was RM193.4mil. In the previous corresponding period, its revenue was RM978.8mil and net profit RM216.3mil.
By CECILIA KOK
cecilia_kok@thestar.com.my
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