KUALA LUMPUR (Aug 23): Shareholders of LTKM Bhd have been advised to accept the takeover offer extended by the company's managing director Datuk Tan Kok and his family.
Mercury Securities Sdn Bhd in an independent advice circular today said the offer is deemed "not fair", as its offer price of RM1.35 is at a discount of between RM1.09 (44.67%) and RM1.20 (47.06%) over the range of estimated value per LTKM share derived using the SOPV (sum-of-parts valuation) model of RM2.44 to RM2.55.
However, the offer is viewed as "reasonable", as it provides an exit opportunity to shareholders, especially those holding a significant number of LTKM shares, to realise their investment in cash, at the offer price which represents a considerable premium against its historical market prices.
According to Mercury Securities, the offer price is higher than the daily volume weighted average prices (VWAPs) of LTKM shares for all the market days for the past 12 months before the commencement of the offer period and up to the latest practicable date of Aug 19.
It also represents a premium of 24 sen or 21.62% over the last traded market price of the stock on the last full trading day (LTD) of July 18, and a premium of between 12.16% and 30.74% over the five-day, one-month, three-month, six-month and one-year VWAPs of the shares up to the LTD.
Additionally, Mercury Securities noted that LTKM shares are illiquid with a simple average monthly trading volume-to-free float of 2.23%, for the past 12 months up to July 2019.
"Further, in view that the joint offerors and persons acting in concert (PACs) hold the majority stake of approximately 75.21% in the LTKM shares as announced on Aug 21, 2019, any alternative proposal will not be successful unless with their support.
"Premised on the above and our evaluation, we are of the view that although the offer is not fair, the offer is reasonable. Accordingly, we recommend that the holders accept the offer," it added.
On July 22, Tan and his family offered RM1.35 a share for the remaining shares of the chicken egg producer not owned by them, under a conditional voluntary takeover offer.
The joint-offerors, who hold a total stake of 68.26% of the issued shares, do not intend to maintain the company's listing status on the Main Market of Bursa Malaysia upon completion of the takeover.
The joint offerors are Tan Kok, Datin Lim Hooi Tin (Tan Kok's spouse), Tan Chee Huey (daughter-in-law of Tan Kok and Hooi Tin), Tan Yee Boon, Tan Yee Siong and YBJ Capital Sdn Bhd.
LTKM shares have been hotly pursued since the announcement of the offer. Its trading volume ballooned while share price has risen 37% since the beginning of July to RM1.35 as at the time of writing.