KUALA LUMPUR: The proposed disposal of Leong Hup Holdings Bhd to Emerging Glory Sdn Bhd for a total consideration of RM318.65 million, or RM1.80 per share, is deemed to be “not fair” by an independent adviser. Nevertheless, the offer is deemed “reasonable” in the absence of other offers and shareholders are advised to vote in favour of the deal.

TA Securities Holdings Bhd, the independent adviser for the proposal, in Leong Hup’s circular to shareholders dated Dec 27, said “based on our evaluation on the disposal consideration...and the financial effects of the proposals (in particular, the loss on disposal to Leong Hup arising from the proposed disposal), we find the offer not fair to the non-interested shareholders”.

It arrived at its opinion after making comparisons of the offer price of RM1.80 with, among others, Leong Hup’s net assets (NA), price-to-book ratio (PBR), price-to-earnings ratio (PER), as well as comparable companies. The comparable companies are Huat Lai Resources Bhd and Lay Hong Bhd.

Nevertheless, TA Securities said that after taking into consideration of an evaluation of other factors, namely historical market price and the salient terms of the disposal and there being no alternative offers currently, it found the offer to be reasonable.

In the circular, TA Securities said Leong Hup’s share price had been consistently trading at a discount to the offer price for the last three years prior to the offer, and comparing with its NA.

Hence, the non-interested shareholders would be able to use this disposal as an opportunity to realise their investment in Leong Hup at a higher return than they would obtain in disposing of the same in the open market, it said.

Given this, TA Securities recommended that the shareholders of Leong Hup vote in favour of the proposals. The proposals will be tabled at the upcoming EGM to be held on Jan 19, 2012. The resolution regarding the proposed distribution is required to be passed by a majority of at least 75% of the non-interested shareholders at the EGM.

Leong Hup started out in the early 1960s as a small farm and was listed on the Main Market of Bursa Malaysia on Oct 29, 1990.

Besides its business in poultry, which includes the rearing and distribution of parent-stock day-old chicks, Leong Hup is also an investment holding company.

Some of the directors of Leong Hup are also shareholders of Emerging Glory, a special-purpose private limited company, and they include Datuk Lau Bong Wong, Datuk Lau Eng Guang and Tan Sri Lau Tuang Nguang. Each of them owns 25% of Emerging Glory. The directors and Leong Hup Management Sdn Bhd have a combined 46.74% direct interest in Leong Hup.

If the proposals were approved and the disposal goes through, Leong Hup is expected to be delisted by the end of March next year.

Leong Hup shares have seen an increase in price since their  six-month low on Sept 26, which closed at RM1.51. The stock ended unchanged yesterday at RM1.70, on volume of 206,900.