TTJ directors recommend shareholders reject offer, after IFA deems it ‘not fair, not reasonable’
Uma Devi
IN A surprising move, 4 directors of structural steel specialist TTJ Holdings are recommending that shareholders reject the recent privatisation offer of S$0.23 in cash per share made by THC Venture, an investment holding company held solely by TTJ’s executive chairman Teo Hock Chwee.
The directors in question are, according to TTJ’s website, executive director and chief financial officer Chiong Su Been, lead independent director Lim Yian Poh, as well as independent directors Ling Chien Yien and Leong Yee Yew.
Buried in a lengthy 222-page circular document posted to the bourse on Friday (Jun 24), the directors said they concur with the independent financial adviser (IFA) – Zico Capital – who advised shareholders to reject the offer on the grounds that it is “not fair and not reasonable”.
The IFA had cited a number of reasons for its judgment. Some of the reasons include the hefty discounts that the offer price had from the company’s unaudited net asset value (NAV), adjusted NAV and revalued adjusted NAV as at Jan 31. These discounts range from 37.5 per cent to 50.1 per cent.
The offer price is also lower than Zico Capital’s estimated value range of between S$0.37 and S$0.46 per share.
Other reasons include the fact that the offer price is below the historical trailing NAV per share during the reference period, and the shares consistently trading at a discount to the historical trailing NAV per share from Sep 26, 2017.
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Zico Capital noted that Teo has been holding about 84.4 per cent of the company’s total share capital since September 2015. This means TTJ is just 6 percentage points shy of crossing the 10 per cent free float threshold required by the Singapore Exchange’s listing manual.
“The reduction in free float may have had an effect on the share price performance and trading liquidity of the shares,” said Zico Capital.
Teo has also provided an irrevocable undertaking to accept the offer, and with some 294.9 million shares to his name, Zico Capital said it is “highly unlikely” that there will be any competing offer from a third party. However, it noted there is no indication that the offer is a final one from Teo.
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As far as TTJ’s business goes, the IFA noted that the group is in a net cash position and reported relatively robust current ratio of 5.5 times as at end-January. TTJ also has no bank or other borrowings as at the latest practicable date, and its core steel structure business remained operationally viable and financially sound during the Covid-19 pandemic.
The group’s revenue in FY2020 and FY2021 remained relatively consistent, compared with its performance in FY2019, noted the IFA, adding that the company has a consistent track record of paying dividends to its shareholders from FY2018 to FY2021. The average dividend per share over the last 4 fiscal years was about S$0.006.
“We wish to highlight that such asset-based analysis of the Group only provides an estimate of the value of the group based on a hypothetical liquidation scenario, and has not taken into consideration other factors that may affect the value that can ultimately be realised by the group,” said Zico Capital.
The IFA also highlighted that the acquisition cost for all the shares not already held by Teo and the concert parties would amount to S$12.6 million, which is “significantly lower” than the group’s net cash of S$34.8 million.
Shareholders could also be disadvantaged in the context of the offer. Zico Capital noted that Teo and the concert parties have “effective statutory control” over the company with an aggregate shareholding of 84.5 per cent of the total shares.
This places the parties in a position to “significantly influence” the management, operating and financial policies of the company, as well as the ability to pass all ordinary or special resolutions at the group’s general meetings where they are not required to abstain from voting.
The privatisation offer will close at 5.30 pm on Jul 8.
Shares of TTJ closed at S$0.235 on Friday, up 4.4 per cent or S$0.01.
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