This article first appeared in The Edge Financial Daily on September 26, 2019

KUALA LUMPUR: Legion Master Sdn Bhd, the major shareholder of jewellery manufacturer DeGem Bhd, is offering minorities RM1.10 a share in a bid to take the group private.

Legion controls a 58.83% direct stake or 76.97 million shares in the company and together with persons acting in concert, collectively control 83.09% of DeGem or 108.71 million shares.

In a filing with Bursa Malaysia yesterday, DeGem said Legion’s offer entails a proposed selective capital reduction and repayment exercise (SCR). Under the proposed SCR, the entitled shareholders who collectively hold the remaining 22.12 million shares will receive a total capital repayment of RM24.33 million, or a cash payment of RM1.10 a share.

DeGem shares were last transacted at 83 sen on Tuesday.

DeGem said the proposed exercise offers an opportunity for investors to exit and realise their investments in DeGem at a premium, given that the liquidity of the shares has been low.

The offer price of RM1.10 is a 32.53% premium to its last transacted price of 83 sen as at Sept 24, and a 33.9% premium to its five-day volume weighted average market price of 82.15 sen. It is also at a 28.16% premium to the three-month volume weighted average market price of 85.83 sen.

DeGem said its listing status had minimal value-add to the company and its shareholders as the company has not undertaken any equity fundraising through the platform over the last 10 years.

Privatisation would provide greater flexibility for DeGem to develop its existing business while exploring opportunities without having to incur compliance costs as a listed entity, it added.

As there is no intention to maintain DeGem’s listing status on the Main Market of Bursa Malaysia, the offeror will not address any shortfall in the company’s public shareholding spread — currently at 16.91% — at the close of the offer.

Trading in DeGem’s shares was suspended yesterday and will resume today at 9am.

Shares in the company were last traded at 83 sen, with a market capitalisation of RM111.22 million.

Over the past 12 months, the stock has traded between 76 sen and RM1.05.