Brokers' take: Vard's illiquid shares may incentivise shareholders to accept parent company's exit offer

THE proposed voluntary delisting via an exit offer for Vard Holdings by parent company Fincantieri Oil & Gas SpA at 25 Singapore cents in cash per share "looks fair" but it remains to be seen whether the shareholders who did not accept the earlier offer a year ago will agree given that the pricing is about the same, said DBS Group Research.

To recap, it has been a year since Fincantieri's last offer to privatise Vard at 24 Singapore cents per share. Through that first round, Fincantieri increased its shareholding from 55.63 per cent to 74.45 per cent but the compulsory acquisition threshold was not breached, hence delisting was not triggered then.

Fincantieri has since continued to acquire Vard shares in the open market to reach today's shareholding level of 79.34 per cent.

DBS Research said that its views on the offer are mixed at this point in time although the offer price is almost the same as its own target price for the stock at 25 Singapore cents.

"However, it must be noted that Vard's share price has not moved significantly since the close of the last offer, despite improvement in oil price, as its earnings are still in the red, and outlook for order wins is not that rosy either," it added.

The offer price translates to a 0.78 time price-to-book multiple and 0.99 time price to net tangible asset.

Delisting will proceed as long as not more than 10 per cent of total shareholders vote against it in the extraordinary general meeting (about half the minority shareholders at this point in time). If Fincantieri crosses the 90 per cent ownership threshold, it can compulsorily acquire all the remaining shares.

The research house also pointed out that Vard shares have been quite illiquid with only 175,437 shares on average being traded on days with trading activity over the last six months representing just 0.07 per cent of the total free float.

This might create an incentive for shareholders to accept the offer this time, it added.

The counter is up half a cent or 2 per cent at 25 Singapore cents as at 9.48am on Tuesday.