Thursday 28 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on December 20, 2021 - December 26, 2021

Damansara Holdings Bhd joins the list of companies that would have a tight free float due to a mandatory general offer (MGO) that did not achieve the intended outcome.

At the close of a general offer at 50 sen per share, Johor Corp Bhd, which is the ultimate offerer, ended up with 82.05% of the property development company. Damansara now does not meet the free float requirement for listing on Bursa Malaysia, which states that at least 25% of the shares must be held by the public.

Neither is JCorp close to getting the 90% acceptance level that would allow the company to be suspended from trading. Once a counter is suspended, the tendency is for those holding out to sell on the open market and exit.For JCorp to get 90%, it would need to mop up shares from the market, which can be a time-consuming exercise and leads to uncertainties.

However, that is the route some major shareholders are taking to increase their stake following a less than successful MGO.

In the case of the Federal Land Development Authority’s MGO for FGV Holdings Bhd, the former is now mopping up shares from the market at higher than the RM1.30 offer price. The MGO ended in March with the government agency holding about 74%. Now, it is inching closer to the 80% mark.

Cycle & Carriage Bintang Bhd’s major shareholder, Jardine Cycle & Carriage Ltd (JCCL), is holding just above 89% of the company. But how it is going to breach the 90% mark is still uncertain.

JCCL has been buying the shares at RM2.40 on the open market. It is the price that JCCL offered in an MGO in March this year. But the sellers have dried up.

Learning from the lessons of FGV, CCB and now Damansara, major shareholders planning to take over companies should make an offer so good that it would be difficult for shareholders to refuse. That way, the privatisation would achieve its objective faster and reduce uncertainties.

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