Notably, the proposed offer for PacificMas values the company at a small premium to its net asset value while the offer for Leader Universal was made at below its NAV.
PacificMas yesterday announced that it had received an offer from OCBC Capital (M) Sdn Bhd to acquire its entire equity interest in four wholly-owned subsidiaries — Pac Lease Bhd, PB Pacific Sdn Bhd, PacificMas Fidelity Sdn Bhd and PacificMas Capital Sdn Bhd — and 85%-owned unit, Pacific Mutual Fund Bhd.
OCBC Capital is a unit of Singapore-based banking group Oversea-Chinese Banking Corp Ltd (OCBC) which holds a 63.5% stake in PacificMas.
OCBC Capital’s offer of RM450 million values PacificMas’ at RM2.63 per share, a 2.33% premium to its NAV of RM2.57 as at June 30. The offer price, however, is a 14.33% discount to its share price of RM3.07 (market capitalisation of RM524.95 million) prior to the suspension yesterday.
Under the deal, the aggregate purchase consideration is to be satisfied via RM164.23 million cash and a deferred sum of RM285.76 million as an amount due and owing by OCBC Capital to PacificMas.
After the completion of the proposed acquisition, PacificMas will be a cash-rich company without its major operations, unit trust and asset management and other financing services. As such, OCBC Capital has proposed that PacificMas immediately liquidate its remaining residual assets and settle its outstanding debts and liabilities.
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“The objective of the liquidation and sale of assets is to realise the value of all remaining assets. PacificMas will use its best endeavours to distribute expeditiously the remaining cash and realisable value to all the entitled shareholders,” PacificMas said in the filing.
An analyst said the deal’s structure could see the RM164.23 million cash portion of the purchase consideration returned to minority shareholders who collectively hold 36.5% of PacificMas. Minority shareholders could receive a cash dividend of RM2.63 per share, based on a simple calculation.
In addition, PacificMas said OCBC Capital will authorise it to apply the latter’s cash entitlement to offset the deferred RM285.76 million and distribute the balance, if any, to OCBC Capital in cash.
According to PacificMas, OCBC Capital’s offer will remain open until Nov 4, unless OCBC Capital agrees in writing to an extension. The deal is subject to approval from PacificMas’ shareholders and creditors as well as the regulatory authorities of Malaysia and Singapore.
This is not the first time OCBC has sought to buyout PacificMas. In 2008, OCBC Capital made a conditional takeover offer for the remaining shares in PacificMas for RM4.30 a share, which valued the latter at RM735.27 million. However, for the exercise to go through, Bank Negara Malaysia (BNM) required that OCBC comply with two conditions that involved paring down its interests in the local insurance sector.
The conditions were for OCBC to resolve its holdings in The Pacific Insurance Bhd and Overseas Assurance Corp (M) Bhd (OAC). In addition, in the event of a merger between Pacific Insurance and OAC, OCBC was to limit its shareholding in the merged entity to no more than 51%.
OCBC Capital announced in April this year that it had complied with BNM’s approval conditions after PacificMas disposed of its entire equity interest in Pacific Insurance to Fairfax Asia Ltd for RM201 million on March 24. Thus, this appears to pave the way for its latest offer to buy out PacificMas’ assets and liabilities.
Sub head: H’ng family to buy out Leader
Leader, meanwhile received an offer yesterday from HNG Capital Sdn Bhd, a vehicle controlled by the H’ng family which is a substantial shareholder in Leader, to acquire the group’s entire business and undertakings including all assets and liabilities for RM480.1 million or RM1.10 per share.
Compared with market pricing, HNG’s offer is about a 31% premium to Leader’s closing price yesterday of 84 sen (market cap of RM366.63 million) and also 10% higher than the stock’s three-year peak of RM1.01 on March 25, 2010.
However, if measured against the group’s asset value and earnings potential, the offer has came in below Leader’s NAV of RM1.36 per share as at June 30, and values the group’s businesses at 8.6 times annualised earnings for FY11 ending Dec 31 of RM55.83 million (1HFY11 net profit was RM27.92 million).
As stated in the announcement to Bursa Malaysia, HNG will satisfy 85.6% of the total purchase consideration via RM410.94 million cash with the remaining 14.4% in the form of a RM69.16 million debt due to Leader.
The RM69.16 million will first be owed to Leader and subsequently offset, as the H’ng family, who owns a 14.4% stake in Leader, will not be entitled to the cash distribution of RM410.94 million to be made to shareholders, who will receive RM1.10 cash per share.
The announcement states that Leader will undertake to distribute the entire cash proceeds of RM410.94 million to its shareholders -- other than the H’ng family. This will be facilitated via the implementation of a capital reduction and repayment exercise, according to the announcement.
Such a level of cash distribution, though 19% below NAV, may appeal to shareholders due to Leader’s heavy balance sheet, some market observers said.
Leader, which is involved in the manufacturing of wire and cables for the telecommunications and power industry, had total net total borrowings of RM609.39 million as at June 30, against its shareholders’ fund of RM594.69 million.
The high gearing was to fund the cost of its inventory, which together with trade receivables totalled RM809.71 million, against the collective amount of trade receivables and short-term borrowings of RM760.09 million.
The disposal of assets to HNG is classified as a related party transaction, thus an independent adviser will be appointed to comment as to whether the offer is “fair and reasonable”.
Also, interested directors of Leader will abstain from deliberation of the offer and voting in the board meeting in respect of the offer.
“The non-interested directors of Leader will deliberate on the terms of the offer and decide on the next course of action. An announcement will be made in due course once the board has made a decision on the offer,” said the Leader announcement yesterday.
Written by Chua Sue-Ann & Siow Chen Ming, theedgemalaysia.com
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