KUALA LUMPUR (May 10): Shares of Sungei Bagan Rubber Co (Malaya) Bhd (KL:SBAGAN) rose as much as 76 sen or 15.29% to a new record high on Friday, following news of a privatisation bid for Great Eastern Holdings Ltd, in which it owns a 1% stake.

Earlier on Friday, Oversea-Chinese Banking Corp (OCBC) announced a voluntary offer for a 11.56% stake it does not own in Great Eastern for S$1.4 billion (RM4.9 billion) or S$25.60 per share.

Sg Bagan owns 4.763 million shares in Great Eastern, which has a value of S$121.93 million or RM426.88 million, based on OCBC’s offer price.

Sg Bagan's shares rose to its new record high of RM5.73 on the news. At 5pm, shares of Sg Bagan pared some gains to close at RM5.60, still up 63 sen or 12.68%.

Should Sg Bagan take up the offer, the estimated proceeds of RM426.88 million is more than its existing market capitalisation of RM371.46 million, based on its last trading price of RM5.60.

The cash proceeds would amount to RM4.556 per Sg Bagan share, based on its outstanding share base of 93.7 million shares.

Sg Bagan’s stake in Great Eastern was initially just 1.73 million shares. However, it acquired another 3.03 million shares in the insurer from sister company Kuchai Development Bhd (KDB)(KL:KUCHAI) this year.

The acquisition is part of a restructuring involving the two companies, where KDB divested RM275.47 million worth of assets (including the 3.03 million Great Eastern shares) and liabilities to Sg Bagan in return for 27.51 million new Sg Bagan shares. The corporate exercise was approved by shareholders this week.

Kuchai Development, who will distribute the Sg Bagan shares to shareholders, similarly saw its share price rise as much as 24.59% or 45 sen to a high of RM2.28, before paring gains to close at RM2.14, still up 16.94% or 31 sen. It will distribute the shares on the basis of 222 Sg Bagan shares for every 1,000 Kuchai Development shares held. 

At RM5.60, Sg Bagan trades at a discount of 43.34% to its net book value of RM9.88 per share at end-December. Great Eastern share price averaged at just S$17.08 in 2023, which, for Sg Bagan shareholders, amounted to a carrying value of RM3.04 per share.

This year, Great Eastern shares saw a gradual climb to S$18.70 prior to OCBC’s privatisation offer.

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