KUALA LUMPUR: The conditional mandatory takeover offer that loss-making Tanco Holdings Bhd has received from its major shareholders is deemed “not fair” but “reasonable” by independent adviser BDO Capital Consultants Sdn Bhd.

Recommending that Tanco’s shareholders reject the offer of 8.12 sen a share and RM1.624 per redeemable convertible note (RCN), it said its “not fair” view outweighs the “reasonable” view.

It said in a circular yesterday that the takeover offer is deemed reasonable as it would provide an opportunity for Tanco’s minority shareholders to realise their investments in an efficient manner — without incurring transaction costs  — as Tanco shares are deemed illiquid, with an average trading volume of 3.87% of the free-float recorded in the last one year. As for the RCNs not publicly traded, the takeover offer provides an opportunity for the RCN holders to realise their investments in cash, it added.

However, it said the share offer price and RCN offer price represent a significant discount of 73.4% against the estimated fair value per offer share of 30.54 sen and estimated fair value per offer RCN of RM6.108 respectively.

BDO Capital Consultants valued Tanco’s offer price based on its net assets, which stood at RM162.31 million as at Dec 31, 2016, equivalent to a fair value of 30.54 sen per share.

Tanco’s RCNs, whose valuation was done on a “see-through” basis as they are convertible into Tanco shares, are valued at RM6.108, based on a conversion factor of one-for-20 at a price of not less than five sen.

All four of Tanco’s non-interested directors concurred with BDO Capital Consultants’ evaluation and recommended that holders reject the offer. The four are Datuk Dr Mohd Aminuddin Mohd Rouse, Datuk Dr Mohd Noordin Keling, James Wong Kwong Yew and Koay Ghee Teong.

The offer was made last month by Tanco’s controlling shareholders Datuk Seri Tan Jing Nam, Andrew Tan Jun Suan and Datuk Tan Lee Sing, after their collective holdings of 143.41 million units of irredeemable convertible unsecured loan stocks were mandatorily converted into Tanco shares, boosting the trio’s collective shareholdings in Tanco to 34.1% of the total issued capital, from 23.8% previously, triggering the mandatory takeover offer.

The trio intend to maintain Tanco’s listing status on Bursa Malaysia.