This article first appeared in The Edge Financial Daily, on November 13, 2015.

KUALA LUMPUR: ACE Market-listed StemLife Bhd (fundamental: 1.95; valuation: 0), a pioneer in Malaysia’s cord blood bank industry, has received a conditional takeover offer from its largest shareholder Cordlife Group Ltd (valuation: 1.50, fundamental: 1.70), of 45 sen cash per share for the remaining stake it does not own.

The offer is 2.5 sen or 5.88% higher than the closing price of StemLife’s shares of 42.5 sen on the open market yesterday, which gave it a market capitalisation of RM105.19 million.

The stock, which was trading at about 41 sen on Dec 31 last year, had fallen to 33 sen on Aug 25, before climbing as much as 28.8% since.

StemLife’s board announced via Bursa Malaysia yesterday that it will hold a board meeting to deliberate on the offer and make an announcement in due course.

In the attached offer document, adviser Maybank Investment Bank Bhd (Maybank IB) said the takeover offer is conditional upon the Singapore-listed cord blood bank getting more than 50% of voting shares or voting rights of StemLife in 21 days after the posting of the offer document yesterday.

If Cordlife secures a 75% stake or more in StemLife, it does not intend to maintain StemLife’s listing status and “does not intend to address any shortfall to meet the public spread requirement”.

Cordlife triggered the mandatory general offer (MGO) yesterday after increasing its shareholding in StemLife to 33.03% from 31.81% previously, in an off-market deal for 45 sen per share or RM1.35 million in total, said Maybank IB.

With a total of 81.74 million StemLife shares in hand, a back-of-the-envelope calculation showed that Cordlife would need another RM74.59 million to fund the purchase of the remainder 165.76 million StemLife shares it does not own.

The offer of 45 sen cash per StemLife share represents a premium of 8 sen or 21.62% to StemLife’s volume-weighted average market price of 37 sen in the six-month period ended yesterday.

“Maybank IB is satisfied that the [takeover] offer would not fail due to insufficient financial capability of the offerer (Cordlife), and that every holder who wishes to accept the offer will be paid in full by cash,” said the adviser.

Cordlife became a controlling shareholder in StemLife two years ago when it bought a 31.82% stake from StemLife’s founders Datuk Sharon Low Su-Shing and Datuk Christina Lim Oi Wah, and the group’s management team.

The two companies have since formed a partnership whereby Cordlife provides the technology for umbilical cord tissue services to StemLife.

In the nine months ended Sept 30, 2015 (9MFY15), StemLife’s net profit was RM590,000 on a revenue of RM13.38 million. In 9MFY14, it made a net loss of RM108,000 on a revenue of RM11.88 million.

The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.