KUALA LUMPUR: The second largest shareholder of Lay Hong Bhd, QL Resources Bhd, has made a conditional voluntary takeover offer for the poultry firm at RM3.50 per share.

However, the takeover offer is expected to meet with resistance from the Yap family, which founded the poultry firm and is the single largest shareholder with a 43.09% stake. The family controls the board, with Yap Hoong Chai being Lay Hong’s managing director.

Yap had told The Edge Financial Daily in a recent interview that if there was a takeover offer, it had to be at a price “we can’t refuse”.

QL Resources served a notice of takeover offer to Lay Hong’s board yesterday, saying the rationale of the acquisition is to safeguard its investment.

Its sole board representitive, Chia Mak Hooi, was voted out at the annual general meeting on Monday. According to the announcement to Bursa Malaysia, some 22.8 million shares or 62.9% voting shares had voted against Chia’s re-election. Chia was appointed non-independent non-executive director of Lay Hong in July 2011.

“This decision has direct adverse consequences on QL Resources’ investment in Lay Hong as QL Resources will no longer be able to influence its corporate direction. Furthermore, without board representation, QL is concerned about its ability to safeguard the interests of its shareholders, and realise business synergies between Lay Hong and QL Resources,” said QL Resources in the announcement on the takeover offer to the exchange.

QL Resources, one of Asia’s largest egg producers and surimi manufacturers, currently holds a 26.81% stake or 13.4 million shares in Lay Hong. The conditional takeover offer is expected to cost the company about RM128 million. It bought a 23.29% stake in Lay Hong from London Biscuits Bhd at RM1.05 per share in August 2010.

The takeover offer is conditional upon QL Resources receiving acceptances which will result in it holding in aggregate more than 50% of the voting shares in Lay Hong.

The offer price of RM3.50 per share represents a 1.8% premium over Lay Hong’s last done share price of RM3.44. The stock jumped 78 sen or 29.32% yesterday before it was suspended for the announcement.

The offer price represents a 38.89% premium over a five-day volume weighted average price (VWAP) of Lay Hong up to and including Sept 23 of RM2.52, and a 91.26% premium over a 12-month VWAP of RM1.83.

Based on Lay Hong’s unaudited net assets of RM2.43 as at June 30, the offer price stood at a premium of 44%.

QL Resources said it is confident that the takeover — if successful — will create greater value through integration synergy and efficiency improvement, and the acquisition will contribute positively to its earnings for the financial year ending March 31, 2015.

QL Resources will fund the offer via internal funds and/or borrowings.

Assuming the offer will be financed entirely via borrowings, QL group’s net gearing will increase from 0.31 times to 0.41 times after the takeover (with net borrowings of RM532.1 million), based on the latest audited consolidated financial statements of QL group as at March 31.

The offer will remain open for acceptances for at least 21 days.

Both Lay Hong and QL Resources will resume trading today.


This article first appeared in The Edge Financial Daily, on September 25, 2014.