Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on October 5, 2018

KUALA LUMPUR: Minority shareholders of DBE Gurney Resources Bhd have been advised to accept its largest shareholder Doh Properties Holdings Sdn Bhd’s takeover offer for the rest of the shares in the Perak-based poultry firm for 3.5 sen per offer share and one sen per offer warrant.

In its independent advice circular to DBE shareholders on Bursa Malaysia yesterday, Mercury Securities Sdn Bhd said it is of the view that Doh Properties’ offer to acquire DBE is “fair” and “reasonable”. As at Sept 28, Doh Properties held a 34.91% stake in DBE.

According to Mercury Securities, the offer is deemed fair as the 3.5 sen per offer share represents a premium of 16.67% over the last traded market price of the DBE shares on Aug 30 and a premium of 4.79% over the five-day volume weighted average price (VWAP) of the DBE shares up to Aug 30.

It added that the offer warrants are fair as the one sen per offer warrant represents a nominal amount which may be offered by the offeror for the offer warrants pursuant to the requirements of the rules and is higher than the negative “see-through” price and the nil intrinsic value of DBE warrants.

Mercury Securities said it also finds the takeover offer to be reasonable as it provides an exit opportunity for shareholders to realise their investments in the offer shares and offer warrants in cash at the respective offer prices.

In a separate letter from the board of directors, DBE said its non-interested directors — Datuk Ding Chong Chow, Datuk Ding Seng Huat, Datuk Cheng Lay Miew, Ungku A Razak Ungku A Rahman, Raja Azlan Shah Raja Azwa and Sandeep Singh Gurbachan Singh — have concurred with the Mercury Securities’ recommendation for Doh Properties’ offer in respect of the offer shares.

However, one of them, Raja Azlan Shah, said the offer is not fair in respect of the offer warrants as he believes the warrant’s offer price of one sen is at a steep discount to the theoretical valuation of DBE warrants as derived using the trinomial option pricing model of 2.64 sen and historical market prices of the DBE warrants of up to 1.7 sen based on one-year VWAP of the DBE warrants up to Aug 30.

Nonetheless, he noted that the DBE warrants are currently out-of-the-money as the exercise price of the DBE warrants of five sen is higher than the market price of DBE shares as at Sept 28.

The DBE warrants are also thinly traded on Bursa Malaysia with a simple average monthly trading volume-to-free float for the past 12 months up to Aug 30 of 3.13%, of which the percentage had declined to less than 1% in the recent months of June, July and August 2018.

The board has also not received any competing takeover offer for the offer shares or any other offer to acquire the assets and liabilities of the DBE.

“Taking these into consideration, Raja Azlan Shah is of the view that the offer is reasonable. Accordingly, he recommends that sharesholders accept the offer,” said DBE.

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