TIH takeover offer 'not fair and not reasonable': Tata Capital Markets

INDEPENDENT financial adviser Tata Capital Markets has deemed the takeover offer by Indonesia's Lippo Group of mainboard-listed TIH as "not fair" and "not reasonable" and has recommended that the company's independent directors advise shareholders to reject the offer.

Tata Capital cited several factors that led to the recommendation, not least because shareholders will not be receiving the offer price fully in cash.

The takeover offer that was first announced on Jan 8 by Lippo Group, a group led by tycoon Stephen Riady, and in part led by TIH chairman Kin Chan of Hong Kong hedge fund Argyle Street Management involves a part-cash, mostly bonds-offer at 57 Singapore cents apiece - 12.5 Singapore cents in cash and 44.5 Singapore cents through the issue of three-year unsecured notes with a 2.25 per cent interest rate per annum.

"If we were to discount the future cashflows from the offeror notes to their present values using the mean three-year historical return of the Selected Bond Funds of 2.9 per cent and the mean yield-to-maturity of the Selected Corporate Notes of 3.43 per cent respectively, the effective offer consideration will decrease to S$0.562 and S$0.555 respectively," said Tata Capital in a circular to shareholders released on Monday.

Furthermore, while the offer price represents a premium of 11.8 per cent, 17.3 per cent, 20.5 per cent and 16.8 per cent over the volume-weighted average price of TIH shares for the one, three, six and 12 months periods prior to the announcement, such reference points may not be the most suitable gauge as the shares drew low trading liquidity (as compared to its free float) prior to the offer announcement.

In this context, Tata Capital said that it was generally accepted that the more actively traded the shares, the greater it would be to rely on market prices to determine their fair value.

The offer will close on Feb 20. TIH shares shed 0.5 Singapore cent or nearly 1 per cent to finish at 50.5 Singapore cents on Monday.