Hwa Hong substantial shareholders make S$0.37 per share cash offer to privatise company
SUBSTANTIAL shareholders of property player Hwa Hong Corporation have made a voluntary conditional cash offer of S$0.37 per share to take the company private.
The offeror, Sanjuro United, is the bid vehicle of a consortium formed by shareholders of the company that collectively hold around 20 per cent of its shares.
It comprises Ely Investments, which is wholly-owned by former group managing director Ong Choo Eng and his family, and Ergonomix, which is wholly-owned by Dymon Asia Private Equity (South-east Asia) Fund II. Other members of the consortium include Roswell Assets and Crystalic Star Global.
The offer provides an opportunity for shareholders to realise their investment at a “compelling premium” amid low trading liquidity; the company is also facing a challenging macro and operating environment driven by Covid-19, geopolitical tensions and Brexit, Sanjuro United said on Tuesday (May 17).
The offer price represents a premium of 29.8 per cent over the counter’s net asset value per share as at Dec 31, 2021, and is 27.6 per cent over its last traded price of S$0.29 on May 12, which was the last full trading day of the shares prior to the offer announcement. The price also exceeds all previous closing prices of the counter’s shares in the 9-year period up to May 12.
Sanjuro United said that the offer also provides “a viable exit alternative for shareholders who do not wish to be subject to the risk of uncertainty in the direction and strategy of the company”.
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It noted that the company currently has no independent directors, and recent board changes have resulted in a need for an independent review of the company's internal controls, process and practices.
On May 6, Hwa Hong received a notice of compliance from the Singapore Exchange Regulation, requiring the company to appoint an independent reviewer to review the internal controls, process and practices relating to its board nomination process, including the selection and appointment of independent directors.
Ong Eng Yaw, director of the offeror and former acting group managing director of Hwa Hong, said the current state of affairs of the company is “highly unsatisfactory”, adding that the company’s recent changes in management may lead to uncertainty in executing any strategy.
The offeror noted that the company has had leadership changes in recent years, with 3 managing directors since March 2021.
As for its operations, Sanjuro United noted that some of Hwa Hong’s office investment properties in the UK are ageing, and that refurbishments and redevelopments amid the current inflationary environment may hit its future income. Leasing risks and potential delays may also affect future occupancies and its rent outlook.
Sanjuro United intends to make Hwa Hong its wholly-owned subsidiary and does not intend to preserve the listing status of the company.
The offeror has received irrevocable undertakings from shareholders of the company – which include members of the consortium – holding around 24.3 per cent of its shares, to accept the offer. The offer is conditional upon the offeror and its concert parties holding more than 50 per cent of the total number of shares.
Gerald Chiu, director of the offeror and a founding partner of Dymon Asia Private Equity, said: “The offer will allow the offeror, including Dymon Asia Private Equity, to take a more active role in managing the challenges the company faces amid the uncertain operating environment.”
OCBC Bank is the sole financial adviser to the offeror in connection with the offer.
In a response to the offer, Hwa Hong said that its board would appoint an independent financial adviser (IFA) to advise the company’s directors, who are considered independent for the purposes of the offer. The company added that prior to the offer, it had been “deliberating the appointment of a financial adviser to assist the company in unlocking and maximising shareholder value, as the board has been of the view that the company’s shares are undervalued”.
The board has thus appointed Evercore Asia as the company’s exclusive financial adviser — separate from the IFA to be appointed — to assist Hwa Hong in “maximising shareholder value, including soliciting other potential offers and evaluating” any offers that may emerge against the Sanjuro United offer.
Shares of Hwa Hong closed flat at S$0.29 on May 12, before it called for a trading halt on Friday.
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