KUALA LUMPUR (Dec 12): Analysts with OldTown Bhd on their radar have recommended shareholders accept the takeover offer for the group by global coffee maker Jacobs Douwe Egberts BV (JDE) as the offer is deemed reasonable and fair.

Yesterday, OldTown announced it has received a pre-conditional voluntary general offer for its shares at RM3.18 apiece from JDE, which was made via the latter's indirect wholly-owned unit Jacobs Douwe Egberts Holdings Asia NL BV (JDE Asia).

OldTown's shareholders — Old Town International Sdn Bhd (42.58%), OldTown's management director Lee Siew Heng (1.34%) and Mawer Investment Management Ltd (7.52%) — who collectively hold a stake of 51.45% in the group, have provided irrevocable undertakings to accept the cash offer.

Should the offer materialise, JDE Asia has no intention to maintain the group's listing status for greater control and management flexibility in implementing any strategic initiatives and operational changes.

"The offer price of RM3.18 is in line with our RM3.15 target price (TP) for the group, which is pegged to 19x 2018 price-earnings (PE) ratio (21x 2018 PE based on consensus estimates). We deem the offer to be reasonable and fair. We tilt our TP to RM3.18 to match the offer price," Cheah King Yoong of AllianceDBS Research said in a note today.

Cheah maintained his 'buy' call on the counter.

Meanwhile, MIDF Research, in its note, said OldTown will consider leveraging on JDE's deep global expertise in addressing the challenges faced by OldTown and forge a highly successful partnership with the company.

MIDF Research pointed out OldTown is now facing a tougher exposure going forward due to the challenging outlook for its café outlet operation with the reduction in the number of local outlets as well as tapering growth of the beverage manufacturing segment in light of the stronger ringgit, as this will have a stronger downside impact on export sales than the benefits set to be gained from lower raw material costs.

"Our TP for OldTown is at RM2.60 per share valuation which [is] premised on FY19 earnings per share (EPS) of 13 sen pegged to FY19 forward PE of 20x. JDE's valuation of RM3.18 per share represents an attractive premium of 22.31% over our last TP," its analyst Nabil Zainoodin said.

The research firm has changed its call on OldTown from 'neutral' to 'accept offer'.