KUALA LUMPUR (May 8): Integrated poultry producer Farm’s Best Bhd is not going to appeal against the Securities Commission (SC)’s rejection of its corporate proposal, which among others included a RM380 million reverse take-over (RTO) of its business by SHH Malaysia Holdings Sdn Bhd, which has a poultry business in China.
In a filing with Bursa today, Farm’s Best said it will not appeal against the regulator’s decision that was issued on April 13, and “will continue to work with SHH towards potential business collaborations in the poultry business”.
To recap, Farm’s Best had on Jan 20, 2014 announced it had entered into a heads of agreement (HoA) with Zhu Zongying, Zheng Wendi and SHH, for their participation in FBB’s proposed corporate exercises.
The HoA had included the setting up of a special purpose vehicle, Lerfood International Bhd, which would undertake the proposed RTO of Farm’s Best by SHH.
However, the SC had in April this year, decided not to approve Farm’s Best’s application on the grounds its directors and advisers had failed to undertake a critical assessment of the information being reviewed and submitted, judging from the numerous inconsistencies, mistakes, omissions and poor quality disclosures contained in the application, as well as in its responses to the SC.
“Under the proposed securities exchange, it was disclosed that the total ascribed value of the Lerfood securities to be received of RM1.50 is higher than the value of one FBB share of 67 sen, based on the five day weighted average market price of Farm’s Best shares up to June 11, 2014.
“We had noted that the bulk of the total ascribed value of the Lerfood securities to be received by Farm’s Best shareholders is contributed by the highly theoretical value of Lerfood warrants, which have a limited lifespan and whose realisable value to Farm’s Best shareholders would be dependent on the warrants’ liquidity and market prices, as well as market conditions at the material point in time,” the SC had said.
The regulator had also noted the matter raised a serious concern as to the adequacy and reliability of the information disclosed in Farm’s Best’s application. The SC had also said disclosures on key assumptions made in the financial estimates, forecasts and projections were broad, confusing and lacked clarity.
Farm’s Best (fundamental: 0.35; valuation: 1.1) shares which were trading around 78 sen on April 13, slid by 19% after the SC’s decision to 63 sen on May 6, 2015. Its shares did not trade today.
(Note: 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.)