This article first appeared in The Edge Financial Daily on March 27, 2018

KUALA LUMPUR: UMW Holdings Bhd has hit a snag in its proposed acquisition of MBM Resources Bhd as the latter’s major shareholder has turned down its takeover offer.

Med-Bumikar Mara Sdn Bhd and its wholly-owned subsidiary Central Shore Sdn Bhd (CSSB) have rejected the conditional offer made by UMW for their collective 50.07% equity interest in MBM Resources, UMW said in a filing with the stock exchange yesterday.

“As the board is of the opinion that the conditional offer is reasonable, being at a premium to the traded share price, the board intends to continue to engage Med-Bumikar, CSSB, their respective shareholders and key principals,” UMW said.

The group has therefore notified the parties of the extended validity of its offer to April 30 from March 28.

UMW on March 9 made an offer to acquire Med-Bumikar’s and CSSB’s stakes in MBM Resources for RM501 million, or RM2.56 per share, representing a premium of 13.3% to MBM Resources’ five-day volume-weighted average market price of RM2.26 at the time.

Shares in MBM Resources rose after the deal was announced, appreciating as much as 28 sen or 12.73% to RM2.48 as of last Thursday. However, the stock has since declined to RM2.42, leaving the group with a market capitalisation of RM945.95 million.

Analysts earlier expressed their dissatisfaction over the proposed acquisition price, saying that it is lower than their existing target price for MBM Resources, which UMW intends to take private.

According to Bloomberg data, target prices for MBM Resources range from RM2.27 to RM3.10, with a consensus of RM2.48 for analysts tracking the stock.

In its announcement, UMW emphasised that its proposed acquisition of Perusahaan Otomobil Kedua Sdn Bhd (Perodua), in which it holds a 38% stake, is not conditional upon the MBM Resources stake purchase.

MBM Resources holds a 22.58% stake in Perodua.

UMW also stressed once again that there is no certainty that the offer would lead to any conclusive or definitive understanding among the parties.

“There is therefore no certainty that UMW will extend the proposed mandatory offer for all the remaining MBM Resources shares not already owned by UMW and persons acting in concert with it, if any,” UMW said.

Shares in UMW lost 10 sen or 1.61% yesterday to close at RM6.10, giving the group a market capitalisation of RM7.13 billion.