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Hot stock: Courts Asia shares leap after offer from Nojima

SHARES in retailer Courts Asia jumped nearly 35 per cent on Friday afternoon after a trading halt was lifted, following a conditional cash offer by a unit of Japanese electronics retailer Nojima Corp at S$0.205 apiece.

The counter rose after the midday break to match Nojima's offer at 20.5 cents, before easing slightly to 20 cents or 31.6 per cent higher from Thursday's closing price. The counter was also seeing comparatively heavy trading, with around 1.69 million shares changing hands.

"Court's share price has endured a steady decline since touching S$1.14 back in May 2015," wrote analyst David Blennerhassett on independent research network Smartkarma. "It traded above the offer price as recently as late-July 2018. However, the controlling shareholder, which has maintained its stake since 2012, is cashing in. I would look to cash out also."

The offer price represents a premium of about 35 per cent above Courts' closing price on Jan 16, and a premium of about 36.1 per cent, 34.3 per cent and 23.3 per cent above the volume-weighted average price (VWAP) per share for the one-month, three-month and six-month period respectively.

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Nojima has received an undertaking from Courts' majority shareholder Singapore Retail Group (SRG), under which SRG has agreed to irrevocably tender all its 382 million shares translating to a 73.8 per cent stake in the company. Once SRG accepts, the offer will turn unconditional.

Tokyo-listed Nojima is an electrical appliance retail chain dealing mainly with the sale of consumer digital appliances, and has a headcount of over 8,000 employees worldwide. It has a market capitalisation of S$1.4 billion and earned revenues of S$6.1 billion for the financial year ended March 2018.

After the offer is completed, Nojima may undertake a "strategic and operational review of Courts, with a view to realising synergies, economies of scale, cost efficiencies and growth potential". It will also consider delisting Courts from the Singapore Exchange if it gets enough acceptances to delist.

Explaining the rationale behind the acquisition, Nojima said that it has been mulling over entering the consumer appliance retail market in South-east Asia, and that synergies can be created between the two retail groups, including cross-selling to an enlarged customer base, economies of scale, improvement of productivity and cost efficiencies, as well as knowledge sharing.

It also highlighted that shareholders can use the offer as an exit opportunity given Courts' low trading liquidity. "The closing price of the shares have not been at or above the offer price since July 27, 2018," it added.

The offer document will be dispatched to shareholders in 14 to 21 days from the date of the offer announcement.