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UMS Holdings' offer for JEP Holdings "not fair and not reasonable": IFA

The independent financial adviser (IFA) for Catalist-listed JEP Holdings said on Monday after trading hours that the financial terms of the S$0.15 per share offer and the S$0.074 warrants offer by Mainboard-listed precision engineering firm UMS Holdings’ are “not fair and not reasonable”.

In a circular to JEP Holdings’ shareholders, IFA Provenance Capital advised independent directors to recommend that shareholders reject the offer and for warrant holders to take no action and let the warrants offer lapse.

Warrants expire on 20 December 2019, and if not exercised prior to the date, will lapse and cease to be valid.

JEP Holdings’ independent directors are concurring with the advice of the IFA in respect of the offer, recommending that security holders reject the offer and to take no action and let the warrants offer lapse.

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According to Provenance Capital, JEP’s shares were last traded at S$0.172 prior to the release of the offer announcement. This represents a discount of 12.8 per cent to the last transacted share price.

Based on the revalued adjusted net asset value (RNAV) per share of S$0.2042 as at 31 December 2018, the offer price of S$0.150 represents a discount of 26.5 per cent to the RNAV per share.

The IFA also flagged that the offer and warrants offer are separate and mutually exclusive, with the offer conditional upon the minimum acceptance Level, and the warrants offer unconditional in respects.

Warrant holders who exercise their warrants into warrants shares in order to accept the offer, will not be permitted to accept the warrants offer. Conversely, warrant holders who accept the warrants offer will not be allowed to exercise their warrants into warrants shares in order to accept the offer.

The IFA said that in view of the higher warrants offer price which translates to an equivalent offer price of S$0.154, it will “not make economical sense” for warrant holders to exercise their warrants into warrants shares so as to accept the offer at the lower offer price of S$0.150.

In light of its opinion that the offer price at S$0.150 and the equivalent offer price at S$0.154 is not fair and not reasonable, the IFA added that it is therefore of the view that the financial terms of the warrants offer are also not fair and not reasonable even though the warrants offer price of S$0.074 is at a slight premium above the “see-through” price of S$0.07.

UMS Holdings made a mandatory conditional cash offer for the shares and an unconditional cash offer for the warrants of JEP Holdings in May, after it acquired additional shares in JEP Holdings to raise its stake to 38.8 per cent.

UMS had said it intends to preserve the listing status of JEP, but added that it maintains the flexibility to assess its options in the event the public float falls below 10 per cent.