INDEPENDENT financial adviser (IFA) KPMG Corporate Finance on Friday gave its recommendation, saying that Japanese electronics retailer Nojima Corp's offer for Courts Asia at 20.5 Singapore cents per share is "not fair but reasonable from a financial point of view".
"Accordingly ... we advise the recommending directors to recommend that shareholders accept the offer, unless shareholders are able to obtain a price higher than the offer price on the open market ..." it said in a letter.
KPMG said the offer is "not fair" because the price premium to the volume-weighted average price (VWAP) over the 12-month and 18-month periods prior is significantly lower than the average premia to VWAP for precedent transactions, such as the offers made for Healthway Medical Corporation, Auric Pacific Group and Global Premium Hotels.
The offer price is also at a discount of 45.3 per cent to the net asset value per share as at Dec 31, 2018, and the price-to-book multiple implied by the offer price is 0.55 times, which falls outside the range of multiples for comparable companies and transactions.
On the other hand, it is "reasonable" given its latest nine-month net loss, and 65 per cent slump in share price over the 18-month period leading up to the last trading date before the offer announcement.
The premium to VWAP implied by the offer price lies either higher than or within the range of average premia for the precedent transactions.
Other reasons included the company's low average daily trading volume compared to blue-chip counters, the absence of other offers on the table, and the fact that the offeror has received valid acceptances representing about 73.8 per cent of the total issued share capital of the company, resulting in the offer being declared unconditional in all respects.
The recommendations were made to directors who are considered independent for the purposes of the offer. They in turn said that they have "considered carefully" the terms of the offer and KPMG's advice and give the nod for shareholders to accept the offer.
Courts Asia ended flat at S$0.20 on Friday.