This article first appeared in The Edge Financial Daily on January 30, 2018

KUALA LUMPUR: Weida (M) Bhd founder Datuk Lee Choon Chin is offering shareholders RM2.40 per share in an attempt to privatise the diversified engineering and manufacturing firm.

Lee, who is also the group executive chairman, is making the offer via 88%-owned Weida Management Sdn Bhd.

Under the proposal, Weida Management is requesting Weida to undertake a selective capital reduction (SCR) and repayment exercise.

At RM2.40 per share, the offer price is at a premium of 35 sen or 17.07% of Weida’s last traded share price of RM2.05.

 It is also at a premium of between 19.94% and 23.64% of the volume weighted average price of its shares over a one-year period up to last Friday.

However, it is at a discount of 91 sen or 27.49% to the group’s net asset value per share of RM3.31 as at Sept 30, 2017.

The offer will result in a total capital repayment of RM203.17 million for 406.34 million shares — against Weida’s existing issued share capital of 126.89 million shares representing RM63.45 million.

“In view that the number of Weida shares to be cancelled is higher than the existing issued share capital of Weida, a bonus issue is proposed to be undertaken by Weida to increase the share capital of Weida up to a level which is sufficient for the capital reduction to facilitate the proposed SCR,” said Weida Management.

Weida Management said it will fund the SCR via Weida’s internally generated funds and bank facilities to be obtained by the listed entity from a financial institution, adding that it does not intend to maintain Weida’s listing status after the exercise.

Lee, Weida Management and persons acting in concert collectively hold a 33.29% stake in the listed entity.

Among the reasons underlined for the proposal, said Weida Management, include Weida shares’ low liquidity, limited coverage by analysts, minimum value-adding from its listing status and that Weida’s market price is “not reflective of the underlying value”.

“The investors at large appear to be unable to accord Weida with a valuation in line with its net assets, and the condition is not expected to change anytime soon in view of the challenging market environment,” said Weida Management.