This article first appeared in The Edge Malaysia Weekly, on February 29- March 6, 2016.

LIM Kian Onn, co-founder of ECM Libra Financial Group Bhd, is finally showing his hand after keeping his cards close to his chest for many years.

Last week, Lim launched a mandatory general offer (MGO) for ECM Libra, which was once a renowned boutique investment bank that structured many mega corporate exercises in town. The offer is at 37 sen per share to take over the company.

The MGO was triggered after Plato Capital Ltd’s unit, Truesource Sdn Bhd, entered into a conditional agreement to acquire a 25.89% stake in ECM Libra from Amcorp Group Bhd, Hikkaya Jaya Sdn Bhd, Arab-Malaysian (CSL) Sdn Bhd and Equity Vision Sdn Bhd for RM27.45 million. Upon the completion of the share sale agreement, Lim’s holding in ECM Libra will be bumped up to 50.26%.

To finance the takeover, Lim plans to pump as much as S$10 million (RM29.8 million) cash into Plato Capital through a proposed issuance of redeemable convertible unsecured loan stocks. This is one condition attached to the share sale agreement dated Feb 23.

Lim is a director and substantial shareholder of ECM Libra and Plato Capital. He has been accumulating shares in ECM Libra since 2012. From a 9.69% stake in 2011, he raised his shareholding in the company to 14.88% at end-2012. He continued to increase his stake in the next three years and currently holds 24.37% equity interest.

Ever since ECM Libra disposed of its investment banking and securities business to K&N Kenanga Holdings Bhd in 2012, there has been continuous speculation over what the substantial shareholders will do next with the listed entity. The group’s core business was sold for RM875 million, largely satisfied by RM659 million cash.

ECM Libra chairman Datuk Seri Kalimullah Hassan said in August 2012 that the group may consider buying hotels abroad as there will be an appreciation in foreign exchange rates and property values.

In its announcement to the Singapore Exchange, Plato Capital says the proposed share acquisition is “attractively priced” because the transaction price of 37 sen per share is at a discount of 22.9% to ECM Libra’s net asset value per share of RM1.48, adjusted for the completed distribution of cash and securities amounting to about RM1 per share to shareholders as announced in November 2015.

While the deal is attractive for Plato Capital’s shareholders, would ECM Libra’s shareholders find the offer of 37 sen per share appealing?

The offer is at a 12.1% premium to ECM Libra’s last traded price of 33 sen, prior to the announcement of the deal. It is also at a 16.1% premium to the company’s one-month volume weighted average price of 31.87 sen but a 12.3% discount to the six-month volume weighted average price.

Some quarters say at the offer price of 37 sen per share, ECM Libra is a bargain.

It is noteworthy that its headquarters near Damansara Heights is a gem of a place. The 48,115 sq ft freehold parcel and building is within walking distance of a mass rapid transit station.

According to its latest annual report, the building has a net carrying amount of RM22.06 million as at Jan 31 last year.

Having started out as a boutique financial services group with just 10 professionals in 2002, ECM Libra grew and ventured into investment banking in February 2008 after it was granted a licence at end-2007. After the divestment, it is left with its fund and asset management businesses.

Earnings-wise, ECM Libra has nothing much to shout about, at least for now. For the nine months ended Oct 31, 2015, its net profit was down 35% year on year to RM16.98 million.

Interestingly, the counter took a dive in late November, plunging to a low of 31 sen from its peak of 48 sen. It closed at 35.5 sen last Friday.

While the offer price is lower than the net asset value of the group, if the minority shareholders do not take up the offer now, would another opportunity come knocking at their door later? Meanwhile, speculation over Lim’s big plans for ECM Libra — after obtaining the controlling stake — may continue since there is no mention of whether the company will be taken private.

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