This article first appeared in The Edge Malaysia Weekly on December 30, 2019 - January 5, 2020

THE past year saw a rising number of privatisation deals amid a soft market. One that stood out was that of Main Market-listed Selangor Properties Bhd.

It was not a straightforward deal for the offerors — the Wen family who, at the time, controlled 68.23% of the company’s shares via their private investment vehicle Kayin Holdings Bhd.

Due to some dissenting voices among minorities on the offer price, the offerors had to raise their offer not once, but twice. Their offer price was first revised upwards from RM5.70 on Oct 25, 2018, to RM6 on Dec 17, 2018, and then RM6.30 on Jan 15, 2019, when it was finally accepted by Selangor Properties’ minority shareholders.

The Wen family, via their interest in Kayin, executed the privatisation via a selective capital reduction and repayment (SCR) exercise. The entitled shareholders, who collectively owned 109.17 million shares or a 31.77% stake in the company, therefore received a total capital repayment of RM688 million at an offer price of RM6.30 per share.

Some quarters felt the offer price was not fair given that it was below the revalued net asset value of Selangor Properties shares, which was RM8.28 per share.

But there were other factors at play here, such as the sluggish historical performance of Selangor Properties’ share price and the illiquidity of its shares.

The offer price of RM6.30 represents a premium of 51.1% to 55.24% to the five-day to three-month volume-weighted average price of Selangor Properties shares, prior to the privatisation offer.

The shares were also illiquid, with a  simple average monthly trading volume-to-free float for the past 12 months up to December 2018 of 0.51%. This was lower than that of the Bursa Malaysia property index, which had an average trading volume of 6.12%, and the FBM KLCI’s 6.73%.

Still, the privatisation was seen as timely for the shareholders of Selangor Properties given the soft property market. Property investment is the core business of the company with its properties located in the prime area of Damansara Heights — Menara Milenium, Komplex Pejabat Damansara, Plaza Batai — and the Taman Tunku apartments.

The privatisation offer provided an exit for disinterested shareholders to cash out on their investment in Selangor Properties shares at the SCR offer price, given the circumstances.

The SCR was eventually completed on May 23, with Selangor Properties subsequently delisted on June 11.

CIMB Investment Bank Bhd was the principal adviser on the deal, while Mercury Securities Sdn Bhd was the independent adviser.

Another privatisation worth a notable mention is that of Penang-based supermarkets operator Suiwah Corp Bhd by its major shareholder Suiwah Holdings Sdn Bhd (SHSB) — the private investment vehicle of Suiwah managing director and founder Datuk Hwang Thean Long — and parties acting in concert (PAC) with it, by way of a SCR exercise.

At the point of the offer, SHSB held a 20.97% stake in Suiwah, while Thean Long owned a 7.76% stake and was the ultimate offeror in the privatisation. The PAC were Thean Long’s wife Datin Cheah Gaik Huang with a 0.05% stake, their daughter Hwang Siew Peng (0.86%) and son Hwang Shin Hung (1.15%) — both executive directors of Suiwah — and Suiwah Supermarket Sdn Bhd (0.12%).

The privatisation saw the entitled shareholders receive a total capital repayment of RM110.74 million, or RM2.80 per share. The SCR cash amount represented a premium of 28.44% over the last traded market price of Suiwah shares of RM2.18 on Jan 23.

The illiquidity of its shares was one of the reasons the stock was privatised, with a simple average monthly trading volume-to-free float for the past 12 months up to March this year of 0.37%, which was far below the FBM KLCI’s average in the same period of 6.52 %. Suiwah’s SCR was completed in July this year, and the company was subsequently delisted the same month.

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