Sime Darby Bhd is open to increasing its stake and making a general offer (GO) for Eastern & Oriental Bhd (E&O) shares at the right time, having recently purchased a 30% stake in the latter at RM2.30 per share, said its president and group chief executive Datuk Mohd Bakke Salleh.
Bakke told StarBizWeek that Sime Darby was comfortable with its stake and purchase price of E&O shares, adding that it was the logical step for Sime Darby to take up a 30% block first, given that E&O was a listed company and it would not be able to carry out a due diligence or feasibility study on E&O.
Thus, its entry into the company with a 30% stake and the signing of a three-year collaboration agreement allowed Sime Darby to get a feel of E&O's operations and evaluate the dynamics of the working relationship, he added.
“At an appropriate time, we will consider a GO. It could happen sooner or later but that will be a business call,” he said in an interview yesterday.
When asked if a GO was ever on the cards when the deal was being discussed between Sime Darby and the three vendors, Bakke said that was never a consideration.
“Otherwise, we would have bought the three vendors' total stake. Our intention was to have a stake of below 33% (which would then trigger a mandatory general offer),” he said.
Sime Darby announced on Aug 28 that it would buy 273 million shares and 60 million irredeemable convertible secured loan stocks, or a 30% stake, for a total of RM766mil.
The RM2.30 offer price represented a 60% premium to E&O's then market price.
The vendors of the block are E&O managing director and founding member Datuk Tham Ka Hon, Tan Sri Wan Azmi Wan Hamzah and Singapore-listed GK Goh Holdings Ltd. Post-acquisition, the trio will collectively own 11.5% of E&O.
Bakke stressed that Sime Darby was comfortable with its offer price of RM2.30, which was a 60% premium to market price, as Sime Darby was going in as a long-term investor.
Aside from this, many deals have been done at a premium to market price and shareholders have been rewarded down the line due to the value creation in the company, he added. He denied that there was any pressure on Sime Darby to do the deal.
“By taking a stake, we are looking at working with a company to create synergistic benefits and value in our investment. The issue of price is (essentially) between both parties,” he added.
Firm discussions over the deal were held two weeks before Hari Raya, after deal adviser CIMB Investment Bank Bhd informed interested parties that the three vendors were looking to pare down their stakes. The initial asking price was RM2.50 per share.
Bakke said the strategic stake in E&O would allow Sime Darby to expand its property play beyond the Klang Valley and move into high-end property products.
Meanwhile, Bernama reported that Sime Darby had completed the proposed acquisition of a 30% stake in E&O. In a filing with Bursa Malaysia, Sime Darby said the completion process was implemented yesterday with settlement due on Sept 14.
By JEEVA ARULAMPALAM
jeeva@thestar.com.my
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