Fabchem China's independent directors recommend shareholders reject offer

FABCHEM China's independent directors are recommending that shareholders reject a 15.8 cents per share mandatory conditional general offer by Singapore businessman Henry Wee for all the shares he does not already control, in a circular on Thursday after the market close.

This was after independent financial adviser CEL Impetus Corporate Finance said it was of the opinion that "on balance, the financial terms of the offer are not fair and not reasonable".

The offer closes at 5.30pm on May 3. It is being made via Triple Vision, which is owned by Mr Wee and currently holds a 39.55 per cent stake in Fabchem China. Fabchem China, an explosives maker, is currently on the Singapore Exchange's watch-list.

In its advice to the independent directors, CEL noted that Fabchem China's closing price was higher than the offer price for more than 118 market days out of 250 market days, over the 12-month period before the last traded day.

With the offer price equal to the last transacted price, it is not within the range of premia for selected comparable transactions, said CEL.

CEL also looked at the premiums implied by the offer price over the volume-weighted average price for one, three and six months prior to the offer announcement date of March 15, which were 23.9 per cent, 23.7 per cent and 20.4 per cent respectively. All three were "within the range but lower than the mean and median of premia" for selected comparable transactions.

The price-to-net tangible assets ratio of 0.1 times is also not within the range of ratios of selected comparable companies, which is between 1.7 times and 4.9 times.

CEL advised Fabchem China's independent directors to recommend that shareholders reject the offer.

The independent directors said that having considered, among other things, the offer terms and the advice, they concur with CEL and recommend that shareholders reject the offer.

Fabchem China shares closed down 0.1 Singapore cent or 0.63 per cent at 15.9 Singapore cents on Thursday.