Best Privatisation: A timely and sweet exit for OldTown shareholders

This article first appeared in The Edge Malaysia Weekly, on December 31, 2018 - January 06, 2019.
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IN a year of few privatisation deals, that of Main Market-listed OldTown Bhd stood out.

A RM1.47 billion offer by a Dutch company to take the homegrown operator of contemporary kopitiam outlets private, at a time when it was struggling with growing competition and a tougher operating outlook, gave shareholders, including minorities, the opportunity to exit before things got worse.

This timely exit — at a price analysts covering the stock said was worth accepting as it was above their 12-month target prices — makes OldTown our privatisation of the year.

The deal kicked off on Dec 11, 2017, when Jacobs Douwe Egberts Holdings Asia NL BV (JDE Asia) made a pre-conditional voluntary takeover offer for all of OldTown’s shares at RM3.18 a share.

The offer price was a 10.42% premium over OldTown’s last traded price prior to the offer being made, and a multiple of 23.63 times the company’s FY2017 earnings. The offer also represented a premium of up to 20.9% over its volume-weighted average prices for the five-day, three-month and six-month period.

What is noteworthy is that OldTown’s share price has never closed above RM3.18 in at least three years before the takeover offer, apart for a few days in May 2017. Its highest ever close was RM3.315 on May 22, 2017. Its daily average in the last three years was RM1.814.

Hence, the offer seemed a sweet way for shareholders to cash out, especially since OldTown’s latest financials were showing signs of strain. Its net profit for the third quarter of the financial year ended March 31, 2018, plunged 52.2% to RM11.6 million, owing to foreign exchange losses and higher operational costs. This took its nine-month net profit to RM43.6 million, a 14.2% decline year on year.

The company acknowledged that the outlook for both its segments — cafe chain operation and beverage manufacturing — remained competitive and challenging.

JDE Asia, an indirect wholly-owned subsidiary of Jacobs Douwe Egberts BV — a privately-owned Dutch company that is one of the leaders on the global coffee and tea scene with brands such as Jacobs, Tassimo, Moccona and Senseo — made it known during its offer that it intended to delist OldTown upon completion of the takeover.

The takeover was also a win for JDE Asia as it enabled its further expansion in the Asean region, coming on the heels of its acquisition of Singapore-listed Super Group Ltd in late 2016.

JDE Asia wanted to take OldTown private to obtain greater control and management flexibility when implementing strategic initiatives or making any changes to the company. Additionally, it could dispense with compliance costs associated with the maintenance of the listed status.

Going forward, OldTown is expected to leverage on JDE’s deep global expertise to overcome the challenges ahead.

The transaction is notable in that it was the first takeover offer in Malaysia that included pre-conditions. It sought clearance for the deal from several anti-trust authorities, including the Competition and Consumer Commission of Singapore. After those pre-conditions were met, JDE Asia made OldTown a formal offer on Jan 30, 2018.

To ensure it would get the deal through, it also got several key shareholders of OldTown that owned a collective 51.45% equity stake — Old Town International Sdn Bhd, Lee Siew Heng (a director) and Mawar Investment Management Ltd — to give an irrevocable undertaking that they would accept the offer.

Advised by CIMB Investment Bank Bhd on the deal, JDE Asia sucessfully gained control of OldTown after the offer ended on March 20 as it received valid acceptances for 456.8 million OldTown shares, representing 98.6% of the company.

Listed on July 13, 2011, OldTown was delisted on April 4, putting an end to its almost seven-year history on Bursa Malaysia.



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