KUALA LUMPUR (March 13): The conditional mandatory takeover offer that loss-making Tanco Holdings Bhd has received from its major shareholders have been deemed "not fair" but "reasonable" by independent adviser BDO Capital Consultants Sdn Bhd.

In 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 the takeover offer was deemed reasonable as it would provide an opportunity for Tanco's minority shareholders to realise their investments in an efficient manner, as Tanco shares are deemed illiquid, with average trading volume of 3.87% of the free float recorded in the last one year.

As for the RCN, which is 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.

As for the valuation of Tanco's RCN, it was done on a "see-through" basis as they are convertible into Tanco shares. The RCN was valued at RM6.108, based on a conversion factor of one-for-20 at a price of not less than 5 sen.

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 the irredeemable convertible unsecured loan stocks (ICULS) have been mandatorily converted to Tanco's ordinary shares on the basis of two ICULS for one Tanco shares.

The conversion boosted the trio's shareholdings in Tanco to 34.1% of the total issued capital from 23.8% previously, triggering the mandatory takeover offer. Jing Nam is Tanco's adviser and the father of Jun Suan, the company's group managing director. Lee Sing, Tanco's executive director, is Jing Nam's sister and Jun Suan's aunt.

Meanwhile, all four Tanco's non-interested directors concurred with BDO Capital Consultants' evaluation and recommendation, 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.

Listed on the Main Market of Bursa Malaysia since 1961, Tanco shares slipped half sen or 5.88% to settle at 8 sen today, giving it a market capitalisation of RM42.51 million.