Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on October 15, 2018 - October 21, 2018

Earlier this month, PRG Holdings Bhd sold a 12% stake in Hong Kong-listed Furniweb Holdings Ltd to independent third parties for HK$30.24 million (RM15.96 million) or HK$0.50 apiece.  PRG said the disposal, which reduced its shareholding in Furniweb to 63% from 75%, enabled it to rationalise its investment in Furniweb and use the proceeds for expansion into  healthcare and for working capital.

For the record, there is no corporate governance or legal issue when a listed company sells substantial stakes in listed subsidiaries to independent third parties.

It is, however, interesting to note that in the case of Furniweb, there is a wide gap in the placement price of HK$0.50 and the current market price of HK$0. 80 — a discount of 37%.

This raises a few questions.

Why wasn’t the Furniweb stake offered to PRG shareholders? One might argue that the disposal price of HK$0.50 apiece is still 34% above Furniweb’s net tangible assets per share of HK$0.37, but who exactly are the buyers?

PRG shareholders may have been denied the opportunity to buy the 12% stake but at least they should be informed of who the buyers are.

It is worth noting that Malaysian Bulk Carriers Bhd (Maybulk), controlled by tycoon Robert Kuok, is exiting the offshore services sector via the disposal of its 21.23% stake in loss-making Singapore-listed PACC Offshore Services Holdings Ltd (POSH) to Maybulk shareholders at 65 sen a share, compared to POSH’s last traded price equivalent to RM1.08 when the announcement was made.

Maybulk’s restricted offer for sale (ROS) was oversubscribed by 17.98%. This shows that ROS of shares of listed subsidiaries can stir interest. After all, if a listed company can give its shareholders an opportunity to buy a stake in another listed company at below market price, why give it to outsiders instead?

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