KUALA LUMPUR: Perdana Petroluem Bhd’s (PPB) shareholders have been advised to accept Dayang Enterprise Holdings Bhd’s offer for PPB shares at RM1.55, as the offer is deemed “fair and reasonable” by its independent adviser, AmInvestment Bank.

In an independent advice circular yesterday, AmInvestment said (fundamental: 1.3; valuation: 1.4) the price of RM1.55 for each PPB share is higher than its range of equity value, while the 84 sen per offer warrant is higher than the theoretical value of PPB warrants.

It said that save for the offer price of 84 sen per offer warrant, which represents a slight discount of 1.18% to the historical 12-month volume-weighted average market price (VWAP), the offer price represents an overall premium ranging from 1.2% to 44.83% to the closing market price, as well as historical five-day, one-month, three-month, six-month, and 23-month VWAP of the offer securities, up to the acquisition announcement’s last full trading day and the notice’s last trading day.

“Based on the above and our overall evaluation, we are of the view that the offer is fair and reasonable. As such, we advise and recommend the holders to accept the offer,” said AmInvestment.

The board of PPB has concurred with AmInvestment’s recommendation. However, the independent adviser added that the recommendation is premised on assumptions made by PPB’s management in preparing projected cash flows which include PPB’s charter rates and utilisation rates of its vessels as well as their current market values, which were derived based on the prevailing subdued offshore oil and gas (O&G) market conditions.

“Hence, any improvement in the prospects of the offshore O&G industry may affect the charter rates and utilisation rates of the PPB group’s vessels resulting in an upward adjustment in the discounted cash flows computations as well as an appreciation of the market values of the PPB group’s vessels,” it said.

AmInvestment cautioned that there is no assurance that the outlook for the offshore O&G industry will not change substantially after the close of the offer.

To recap, Dayang entered into a conditional share sale agreement with AffinHwang Asset Management Bhd to acquire the latter’s 42.97 million shares in PPB representing approximately 5.74%.

This triggered a mandatory general offer for all the remaining PPB shares not already owned by Dayang after the proposed acquisition. However, Dayang intends to keep PPB listed on Bursa Malaysia.

This article first appeared in digitaledge Daily, on August 4, 2015.