Hot stock: Best World jumps 10.8% after exit offer at S$2.50 per share via selective capital reduction
BEST World’s shares jumped 10.8 per cent after the company on Wednesday (Apr 3) proposed to offer S$2.50 in cash per share by way of a selective capital reduction to eligible shareholders to privatise the business.
The offer price represents a premium of 42.9 per cent over the last traded price of S$1.75 on Mar 21, the last full trading day prior to the delisting intention announcement on Mar 22.
It also represents a 12.6 per cent premium over the latest closing price of S$2.22 on the day before the offer announcement.
This was also an 82.5 per cent premium over the net asset value per share of S$1.37 as at Dec 31, 2023.
Some 150.1 million shares of eligible shareholders, excluding the company’s major shareholders who are involved with the business, will be cancelled, subject to these shareholders’ approval at an extraordinary general meeting and the High Court’s approval of the exit offer. This will reduce the company’s shares by about 34.9 per cent to 280.3 million.
The company also said it will capitalise part of its retained earnings before undertaking the selective capital reduction exercise to finance the aggregate sum of S$375.4 million in cash arising from the scheme.
“Upon completion of the selective capital reduction, if effected, the non-participating shareholders will remain as shareholders of the company and collectively hold the remaining 280,297,500 shares that are not cancelled, representing the entire equity share capital of the company,” Best World noted.
It reiterated “growth headwinds” and macroeconomic uncertainties as reasons for the exit offer.
It added that privatisation will provide the “necessary flexibility to optimise its resources to focus on the longer-term strategies of the business”.
The company noted that eligible shareholders may find it difficult to cash out their investment at a fair market price, given the counter’s low trading liquidity, and the exit offer gives them a chance to do so. As at 9.17 am on Thursday, shares of Best World rose 10.8 per cent, or S$0.24, to S$2.46 with 2.2 million shares changing hands, logging a one-year high.
The company’s net profit for FY2023 dropped 11.7 per cent on the year on weak consumer sentiment in China. This came as its revenue for the period declined 7.7 per cent to S$514.5 million.
RHT Capital, the financial adviser to the company in respect of the selective capital reduction, confirmed that the company has sufficient financial resources to fund the cash distribution to the eligible shareholders, if the scheme becomes effective. The company added that it has opened an escrow account and a minimum of some S$375.4 million is being transferred into the account.
This is not the first time the company is making an exit offer.
Best World flagged its delisting intention back in November 2021, amid a trading suspension on regulatory concerns about its business model in China. It then conducted two off-market offers to buy back shares at S$1.36 apiece, which were both oversubscribed. The counter eventually resumed trading on Nov 14, 2022, given an improved audit opinion for FY2021 and legal opinions noting the non-compliance risk of its business model in China was remote.
Best World ’s shares were trading up 9.9 per cent or S$0.22 to S$2.44 as at 10.17 am on Thursday.
