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Majority shareholder offers to delist Rotary Engg

S$0.46-per share bid launched jointly by Chia family and Oman Investment Fund is 61% above NTA at June 30

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Rotary Engineering is the latest oil and gas-related counter to seek delisting from the Singapore Exchange as stock valuations in the sector remain challenged despite marked improvements in oil prices towards late September.

Singapore

ROTARY Engineering is the latest oil and gas-related counter to seek delisting from the Singapore Exchange as stock valuations in the sector remain challenged despite marked improvements in oil prices towards late September.

The controlling family behind Rotary Engineering announced before the market opened on Monday a joint bid with the investment arm of the Oman government to take the company private at a cash offer of S$0.46 per share.

The offer is made through Orochem Pte Ltd, which is 64.7 per cent held by the controlling Chia family and 35.3 per cent by Oman Investment Fund.

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It is priced at a 25 per cent premium over the volume weighted average price of S$0.368 for the three months leading up to Rotary's trading halt on Sept 29 and 61 per cent premium over the company's net tangible asset value per share as at June 30.

Rotary cited three key motivations behind its delisting bid: it does not need to raise cash in the capital markets, the compliance costs of maintaining a listing and the greater management flexibility a delisting would bring.

One source who declined to be named said that above all, the valuations of the company's shares hardly justify the resources and costs of up-keeping the listing status.

Along with those of other O&G stocks, Rotary's share price began a steep descent when the first signs of a multi-year oil price trough first emerged in the second half of 2014.

The company managed to stay afloat amid the headwinds although its profit margins have drastically narrowed.

The stock had hovered at about half its five-year high in the past year, ranging between S$0.34 and S$0.425 over the last 52 weeks. As at June 30 2017, its net asset value per share stood at 28.5 Singapore cents.

The Chia family together with their investment vehicle REL Investments Pte Ltd hold about 39.25 per cent of Rotary's shares. Oman Investment Fund holds another 21.38 per cent of the company.

Both shareholders have given irrevocable undertakings to accept the offer. DBS Bank has been appointed as sole adviser for the delisting.

Rotary's delisting bid comes after a spate of buyout offers tabled for Singapore-listed entities, including two yard operating entities exposed to the O&G downturn. Otto Marine's shareholders have voted in support of an offer by executive chairman and controlling shareholder Yaw Chee Siew, to take the entity private.

But minority shareholders have resisted Italian shipbuilding group Fincantieri's attempt to privatise Vard Holdings. Both Otto Marine and Vard operate shipyards that were exposed to newbuilding orders secured from the beleaguered oil-linked offshore support vessel sub-sector.

Rotary's shares closed at S$0.45, up four cents, on Monday.