Maypak, Alcom minorities urged to reject general offers

Kuala Lumpur

MINORITY shareholders of two listed companies have been urged to turn down general offers because of overly steep discounts of 60-70 per cent to the companies' RNAVs (revalued net asset values).

Mercury Securities, the independent adviser for the Malaysia Packaging Industry (Maypak) and Aluminium Company of Malaysia (Alcom) offer, has urged minorities of both companies to reject the offers as it deemed them to be not fair, and in Alcom's case, also not reasonable.

Although underperforming, Phillip Capital chief investment officer Ang Kok Heng was of the view the offerors were using it as an excuse to press down the price unduly. "They may not be profitable immediately but if the value is so low, who would want to accept?"

In both cases, the controlling shareholders had triggered a mandatory general offer after acquiring stakes of more than a third in the company.

Towerpack Sdn Bhd acquired 79.23 million shares or 59.16 per cent of Alcom from Novelis Inc for RM47.72 million (S$15.7 million) or 61 sen a share in August and was required by the exchange regulations to extend the offer to minorities. Towerpack is owned by Yeoh Jin Hoe, who is the managing director of can maker Kian Joo Can Factory as well as corrugated carton manufacturer Box-Pax (M).

In the case of loss-making Maypak, Japan's Taisei Lamick Co Ltd (TLC) had in July acquired some 23 million shares representing almost 55 per cent of the company from Toyo Seikan Co Ltd for RM3.83 million or 16.6 sen a share. After the sales and purchase agreement became unconditional, it made an unconditional mandatory general offer for the remaining shares - but at 65 sen apiece, nearly four times more.

Even so, Mercury reckoned the offer was at a 63 per cent discount to Maypak's estimated RNAV of RM73.86 million or RM1.76 a share.

Although it viewed the offer as reasonable, as Maypak directors would not be seeking a competing offer plus the shares are illiquid and provide an exit opportunity, Mercury said, "We are of the view that our 'not fair' view outweighs our 'reasonable' view as the offer price represents a significant discount ..." It recommended holders reject the offer.

Maypak closed at 65 sen on Monday.

According to Mercury, the offer for Alcom was at a steeper discount of 69 per cent to its RNAV of RM1.96 a share.

Mercury said the offer was unreasonable as Towerpack intends to maintain Alcom's listing status, and moreover, Mr Yeoh would be able to leverage his interest in Kian Joo to improve Alcom's operational efficiency and business.

A supplier of aluminium rolled products, its profit for the first quarter to end-June improved to RM1.1 million from RM36,000 a year ago. It is currently trading at 97 sen.

Hong Leong Investment analyst Daniel Wong said because there are many ways to value a company, valuations can be very subjective - especially if the subject lacks comparable peers. "It also depends on market conditions and whether minorities think the company can turn around or not."

In June, ECM Libra Financial Group controlling shareholder Lim Kian Onn's mandatory general offer received lukewarm interest from minorities. Independent adviser BDO Capital Consultants gauged his 37 sen a share offer represented a 23 per cent discount to its estimated fair value of 48 sen and adjudged the offer "not fair but reasonable". On Monday it closed at 39 sen.