Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on June 4, 2019

KUALA LUMPUR: YTL Corp Bhd’s 98%-owned unit YTL Cement Bhd’s mandatory takeover of Lafarge Malaysia Bhd is not fair and unreasonable, according to independent adviser AmInvestment Bank Bhd, who is recommending that Lafarge Malaysia’s minority shareholders reject the offer.

In its independent advice circular filed with Bursa Malaysia yesterday, the bank said the offer was not fair because the offer price of RM3.75 represents a discount of between 2.2% and 18.5% over the fair values of between RM3.83 and RM4.60 per Lafarge Malaysia share.

The fair values are derived after taking into consideration the revival of large infrastructure projects and the emergence of the enlarged YTL Cement Group as a clear market leader, with capacity share of about 63% in Peninsular Malaysia, which may potentially increase demand and average selling price of cement, it said.

AmInvestment Bank also thinks it is not fair as the current low market price of Lafarge Malaysia’s shares since May 2018, was due to suspension announcements of the infrastructure projects, notably the East Coast Rail Link, Mass Rapid Transit 2 and 3, and the Bandar Malaysia project, for which the group was one of the key suppliers.

“Hence, the implementation of large infrastructure projects and/or fruitful initiative of the Malaysian government in promoting affordable housing may potentially increase cement demand and contribute positively to the financial results of Lafarge Malaysia Group, and share [the] price movement of Lafarge Malaysia shares,” the bank said.

Meanwhile, the bank is of the view that the offer is not reasonable due to YTL Cement’s intention to maintain Lafarge Malaysia’s listing — unless the former or its associates hold more than 90% of Lafarge Malaysia shares, which will result in the group not complying with the public spread requirement.

“Notwithstanding that Lafarge Malaysia’s shares are relatively illiquid, holders who hold small blocks of LMB (Lafarge Malaysia) shares may still have the opportunity to dispose of their shares in the open market subsequent to the closing date as the offeror intends to maintain the listing status of Lafarge Malaysia on the main market of Bursa Securities,” it added.

YTL Cement emerged as the single largest shareholder in Lafarge Malaysia earlier last month, after acquiring a 51% stake from Associated International Cement Ltd. The deal triggered a mandatory takeover at RM3.75 apiece for all the shares it does not own in Lafarge Malaysia.

Lafarge Malaysia shares closed unchanged at RM3.75 yesterday, after 826,700 shares were traded, with a market capitalisation of RM3.19 billion.

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