Thursday 28 Mar 2024
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KUALA LUMPUR: Delloyd Ventures Bhd’s proposed selective capital reduction and repayment (SCR) exercise at the adjusted offer of RM5.15 per share is deemed “not fair”, but “reasonable”, said independent adviser (IA) Affin Hwang Investment Bank Bhd.

Nonetheless, the IA is recommending entitled shareholders to vote in favour of the proposed SCR at Delloyd’s upcoming extraordinary general meeting (EGM).

In its IA letter released today, Affin Hwang said the fair value of Delloyd shares stood at RM7.60 per share. Thus, the adjusted SCR cash amount of RM5.15 per share represents a discount of RM2.45 or 32.24% to the fair value per share.

It, however, noted that Delloyd shares have never traded above the adjusted SCR cash amount since the announcement of the offer in May up to Dec 15.

To recap, Delloyd had first announced to Bursa Malaysia the proposed SCR exercise on May 17 by its major shareholders Chung & Tee Ventures Sdn Bhd and persons acting in concert.

On Aug 11, Chung & Tee revised the cash consideration for the proposed SCR, which will take the firm private, from RM4.80 to RM5.20 per Delloyd share. On Sept 9, the SCR amount was readjusted from RM5.20 to RM5.15 per Delloyd share in view of the dividend approved by shareholders of Delloyd on Sept 8, it said.

Affin Hwang said the offer of RM5.15 per share represents a premium of 25% over the highest closing market price of Delloyd shares and 69.97% to the lowest closing market price of Delloyd shares for the past one year up to the last trading day on May 14, prior to the receipt of the principal request letter.

“Although the adjusted SCR cash amount is higher than the historical market prices of the Delloyd shares, it is lower than the fair value per Delloyd share of RM7.60. Accordingly, the adjusted SCR cash amount is not fair,” the independent adviser explained.

Still, Affin Hwang deems the proposed SCR as reasonable, as it presents entitled shareholders an opportunity to dispose of their Delloyd shares without transaction costs and to realise their investments in Delloyd at a price higher than the historically traded market prices of Delloyd shares.

In evaluating the "reasonableness" of the offer, Affin Hwang also brought to light the low trading liquidity of Delloyd shares and the absence of an alternative offer and/or bid for Delloyd shares.

As at Dec 15, major shareholder Chung & Tee Ventures Sdn Bhd (Chung & Tee) and its persons acting in concert (PAC), own approximately 63.58% in Delloyd.

“As such, it is unlikely that any alternative offer, unless with prior discussion with and/or support from Chung & Tee and its PAC, to acquire the Delloyd shares or its assets and liabilities (with the intention to control Delloyd) will be successful,” Affin Hwang noted.

It added that it had also taken note of the challenging prospects of the group in the immediate to medium term in making its recommendation.

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