This article first appeared in The Edge Financial Daily on June 6, 2017 - June 12, 2017

KUALA LUMPUR: China’s largest producer of sanitary napkins, baby diapers and tissue papers, Hengan International Group Co Ltd, has acquired a 50.4% stake in Wang-Zheng Bhd and has made an offer to take over the remaining shares in the Malaysian company.

The offer is made at RM1.14 a share — a four sen or 3.64% premium to Wang-Zheng’s closing price of RM1.10 last Friday. Wang-Zheng shares have since risen to close at RM1.14 yesterday.

Wang-Zheng manufactures and distributes processed paper and disposable products like diapers and sanitary napkins. Its products are sold under its own brands, including Drypro, Dryplus, Carina and Carefeel. Wang-Zheng is also an original equipment manufacturer for various local and foreign brands.

In a filing with Bursa Malaysia, Wang-Zheng said Hengan launched the takeover after its indirect wholly-owned subsidiary, Hengan (M) Investments Co Ltd, inked agreements with four parties — Wang-Zheng Resources Sdn Bhd, Macro-Link Sdn Bhd, Charost Ltd and Zhong Xin Ltd — to buy their collective 80 million shares in Wang-Zheng at RM1.14 apiece, for a total of RM91.2 million.

Currently, Wang-Zheng Resources owns a 31.5% stake in Wang-Zheng, followed by Charost (10.14%), Macro-Link (6.3%) and Zhong Xin (2.5%).

As result of the share purchase, Hengan’s stake in Wang-Zheng rose from 0% to 50.4%, which triggered the mandatory offer requirement under the Rules of Take-Overs, Mergers and Compulsory Acquisitions and the Capital Markets and Services Act (CMSA).

Hengan said the takeover offer is not conditional upon any minimum level of acceptances as it already holds more than 50% of voting shares in Wang-Zheng.

“The offeror (Hengan) intends to maintain the listing status of Wang-Zheng on the Main Market of Bursa Malaysia,” Hengan said in the takeover notice issued via AmInvestment Bank Bhd. It added that it does not intend to invoke the provision in CMSA to compulsorily acquire any outstanding offer shares.

“The offeror confirms that the offer will not fail due to insufficient financial capability and that every holder who wishes to accept the offer will be paid in full by cash,” said Hengan.

As Wang-Zheng had announced a final dividend of three sen per share for the financial year ended Dec 31, 2016, Hengan said the offer price will be reduced to RM1.11 for any holders intending to accept the offer whose name appears on the record of depositors on June 30.

Established in 1985, Hengan has been listed on the Hong Kong Stock Exchange since 1998. It is a constituent of the Hang Seng Index, Hong Kong’s equity barometer, with a market capitalisation of HK$65.91 billion (RM35.67 billion).