Privatisation offer by Fu Yu for Malaysian unit 'not fair but reasonable': adviser

THE proposed selective capital repayment (SCR) exercise by Fu Yu Corporation to privatise its Bursa Malaysia-listed subsidiary, LCTH Corporation, is 'not fair, but reasonable', said independent adviser Mercury Securities in a circular.

As such, it is recommending that entitled shareholders vote in favour of the deal at an upcoming extraordinary general meeting (EGM) in March.

"We are of the view that the proposed SCR is not fair in view that the SCR cash amount of RM0.58 is lower than the value per LCTH share of RM0.64," said Mercury, explaining its rationale.

However, it views the offer as reasonable due to various factors. The SCR amount represents a premium over the 1-year volume weighted average price up to the last traded market price of LCTH's shares on Dec 6, the day before the announcement, it said. In addition, it highlighted that the shares are illiquid and there has been no alternative offer for LCTH.

Manufacturer of precision plastic components Fu Yu's proposed selective capital repayment (SCR) exercise is valued at around RM61.3 million.

Entitled shareholders will receive a total capital repayment of RM61.3 million, which represents a cash repayment of RM0.58 for each LCTH share.

The entitled shareholders hold about 29.36 per cent of the total LCTH shares in issue, while Fu Yu Investment and parties acting in concert with it collectively hold approximately 71.84 per cent. Fu Yu Investment, on its own, has a 70.64 per cent stake.

Fu Yu said that upon successful completion of the SCR, the 106 million LCTH shares held by entitled shareholders will be cancelled and LCTH will become a fully owned subsidiary of the group.

The SCR cash amount represents a premium of 31.82 per cent over the last transacted market price of RM0.44 per share on Dec 6.

Reasons offered for the privatisation include factors such as LCTH's declining performance and low trading liquidity. In addition, LCTH has not undertaken any fund raising activities since the initial public offering of LCTH in 2004, but has to pay costs to maintain its listing status.

The proposed SCR is conditional, among other things, the approval of shareholders by vote at an EGM which will take place in Johor on March 8. Under the proposed time-line, the cash payment for each share would take place in May and the delisting of the stock by June.