SINGAPORE (Oct 26): Private equity firm Northstar Advisors is seeking to acquire Innovalues, the manufacturer of precision machine parts, for S$331.4 million.
Through special purpose vehicle Precision Solutions Group, Northstar Equity Partners IV, a subsidiary of Northstar, is effectively offering S$1.01 for each Innovalues share it does not own in a scheme of arrangement. Shares of Innovalues last closed at 98 cents on Tuesday.
Under the scheme arrangement, Innovalues shareholders can choose either to be paid fully in cash payment or a combination of cash and shares of Precision Solutions.
In the cash-and-share option, 61 cents in cash and one share of Precision Solutions is offered in exchange for every Innovalues share.
In the joint release, Innovalues and Precision Solutions say “the acquisition of Innovalues represents an opportunity for [Precision Solutions] to acquire control of a company in the precision manufacturing sector with a regional manufacturing footprint.”
“We strongly believe in the merits of this transaction, and are pleased to present it for our shareholders’ consideration. This represents an opportunity for them to realise their investments,” says Innovalues Chairman Goh Leng Tse.
Northstar says this provides an opportunity for shareholders to realise their investments in Innovalues at a premium of 19% over its one-month volume weighted average prices (VWAP) before April 7.
A meeting of Innovalues shareholders will be convened pursuant to an order of the High Court of Singapore.
The proposed acquisition requires the approval of 75% in value of Innovalues shares held by shareholders present and voting at the scheme meeting.
Precision Solutions has already received irrevocable undertakings from chairman Goh, as well as Pung Tong Seng, Ong Tiak Beng, and Koh Boon Hwee, to vote in favour of the scheme.
Together, the quartet represents 39% of total Innovalues shares as of Wednesday.
In 3Q, Innovalues saw earnings fall 10.9% to S$6.0 million but this was mainly due to the absence of foreign exchange gain of S$3.1 million in the same quarter last year.
Excluding the one-off gain, net profit increased 55.8% y-o-y to S$5.7 million on the back of a 11.5% revenue growth to S$31.5 million.
“Innovalues continued to deliver on its earlier guidance of a strengthening business,” says Maybank analyst Gregory Yap in a Wednesday report.
Maybank Kim Eng is keeping Innovalues at “buy” with an unchanged target price of S$1.15 on the back of “good progress made”.
Yap notes that it “bodes well” for Innovalues as its major customer, Sensata, also announced robust 3Q results marked by sequential revenue and margin improvement.
In addition, Yap says Innovalues will make a good acquisition candidate for the right buyer.
“M&A, if it comes, will be a bonus,” says Yap. “Based on our analysis, we see takeout offers in the range of S$1.00-S$1.20 (9-11x FY15 EV/EBITDA), which should be acceptable to the market.”
The company requested for a trading halt at 7.34am on Wednesday morning.