PLUS Expressways Bhd
(Dec 24, RM4.61)
Buy (under review) at 4.60 with target price of RM4.70: The fight for PLUS has upped a notch with two competing offers presently: UEM-EPF’s RM23 billion (RM4.60 per share) versus Jelas Ulung’s RM26 billion (RM5.20 per share). It will be even more exciting if new competing offers come in by early-2011.
Apart from its business sale, PLUS’ toll concessions will be restructured in 2011 to incorporate more socially exceptable toll rates for an extended term. Our buy call, based on RM4.70-discounted cash flow derived target price has been put on review after PLUS’ share price surged to the UEM-EPF offer price early this week.
PLUS’ shareholders yesterday approved the adjournment of the EGM (to vote for the UEM-EPF RM23 billion offer) to a date yet to be determined. The directors have also extended the deadline for potential offers (for PLUS’ business) to Jan 10, 2011, from Dec 23, 2010.
All new offers must meet the conditions of a RM50 million cash deposit, and an unconditional written confirmation that the offeror has the financial ability to complete the proposed acquisition. Also, information on the background of the offeror including directors, shareholders and parties acting in concert are essential.
PLUS’ board will next have to decide on Jelas Ulung’s offer, and whether to bring the offer up to a vote at a shareholders’ meeting (EGM). We think the board’s decision will be towards bringing Jelas Ulung’s offer up to a shareholders’ vote in fulfilling their fiduciary duties to all shareholders.
In such a case, there is a likelihood that UEM-EPF could raise their offer price — although we think that it will be at the expense of the government (and people), as the revised concession agreement for PLUS’ domestic toll roads will then be structured to incorporate a higher “entry cost” for the offerer.
Our thoughts: Deal-makers or deal breakers? Since both offers take the asset-liability route, the vote of 50%+1 share from PLUS shareholders at an EGM is sufficient to take any offer through:
(i) In the case of the UEM-EPF o fer, Khazanah-UEM-EPF, which hold a combined 67.48% of PLUS cannot vote. This means that the decision will hinge on minority shareholders holding 32.52% of PLUS of which 10.6% are foreigners (as at Sept 2010).
Assuming proxy votes are not allowed and all foreign shareholders will not be present to vote, then only 21.92% of the minorities will be voting.
The number of votes required to take the deal through will then have to come from minorities holding 10.97% of PLUS (50%+1 share).
The votes of two existing substantial shareholders: KWAP (which holds 5.05% of PLUS), and PNB (and its related funds, 8.55%), will either be the deal maker or the deal breaker.
(ii) Assuming that the Jelas Ulung offer goes for shareholders’ vote, then Khazanah, UEM and EPF should be able to vote.
Khazanah-UEM’s combined shareholding of 55.51% is sufficient to decide whether PLUS goes to Jelas Ulung or otherwise. — Maybank IB Research, Dec 24
No comments:
Post a Comment