This article first appeared in The Edge Financial Daily on July 3, 2019
KUALA LUMPUR: The voluntary takeover offer for Yee Lee Corp Bhd at RM2.33 (including a four sen dividend) will lapse today at 5pm.
Given that the takeover bid is deemed “not fair but reasonable” by the independent adviser, some quarters are watching if the joint-offerors, namely the private equity fund Dymon Asia Private Equity (SE Asia) Fund II Pte Ltd plus Yee Lee’s founder Datuk Lim A Heng @ Lim Kok Cheong and family, will be able to obtain enough acceptance to take the 50-year-old Ipoh-based trading company private.
The closing date of the offer has been extended twice.
The extensions are an indication that the joint-offerors had not been able to obtain sufficient acceptance for them to execute a compulsory acquisition earlier.
To undertake a compulsory acquisition, the joint-offerors need to have valid acceptance of at least 90% of the shares held by non-interested shareholders. In this case, it is 90% of 74.98 million shares not owned by the offerors, equivalent to 67.48 million shares, based on Yee Lee’s share capital of 191.604 million of which the joint offerors already own 116.61 million shares or 60.86%.
Its latest filing with Bursa Malaysia on Monday shows that Langit Makmur Sdn Bhd, the special purpose vehicle set up to undertake the privatisation exercise, holds 51.08 million shares or a 26.66% stake in Yee Lee. That means the offerors are now holding a combined 167.69 million shares or 87.51% stake.
However, Langit Makmur is still short of 16.4 million shares, or an 8.55% stake, to meet the 90% threshold to trigger a compulsory acquisition.
As at press time yesterday, there was no other updates on acceptance of the takeover offer.
Yee Lee stated in its circular to shareholders that should the offerors receive valid acceptance in aggregate of more than 75% but less than 90% of the share capital, the joint-offerors, at this juncture, intend to request the company to make the necessary application to withdraw its listing status.
To do that, Yee will need to call for an extraordinary general meeting to seek the minority shareholders’ approval. To get a pass, no more than 10% of shareholdings should vote against it.
Among Yee Lee’s other substantial shareholders are the Employees Provident Fund, which holds a 3.56% stake or 6.8 million shares, PB Strategic SmallCap Fund with 2.67% or 5.12 million shares, and PB SmallCap Growth Fund with 2.09% or four million shares.
Yee Lee’s 29.87% stake in Spritzer Bhd is seen as Yee Lee’s jewel in the crown. Based on the closing price of RM2.25 yesterday, its stake in Spritzer is worth RM140.68 million.
Apart from that, Yee Lee owns the established household brand Helang (Red Eagle) for cooking oil. It also distributes exclusively Campbell and Red Bull products in Malaysia. The fast-moving consumer goods distributor took over the exclusive distribution of Red Bull energy drinks in Malaysia from Fraser & Neave Holdings Bhd in August 2015.
Yee Lee also has two aerosol can factories, with the larger one in Rawang, Selangor, while the other is in Ho Chi Minh City, Vietnam. The two plants have a combined annual production capacity of 192 million cans of which about 68% is from the Rawang factory.
Independent adviser Affin Hwang Investment Bank said the offer is not fair as it represents a discount of 31.87% to 40.71% to the estimated fair value of Yee Lee of between RM3.42 and RM3.93.
Nonetheless, the adviser noted that the offer is reasonable, given that Yee Lee shares had been thinly traded over the past 12 months up to March this year, with an average monthly trading volume of 0.89% of total shares.