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KUALA LUMPUR (May 31): SEG International Bhd’s (KL:SEG) minority shareholders should reject the takeover offer from managing director Tan Sri Clement Hii, according to its independent adviser.
The offer price of 45 sen per share is at a discount to the counter's share price, and the stock will still be traded on the open market after the offer closes, said MainStreet Advisers Sdn Bhd, which was appointed to evaluate the offer.
"We are of the view that the offer is not fair and not reasonable,” MainStreet concluded. “Accordingly, we recommend that the holders reject the offer.”
Hii, through EduEdge Equities Sdn Bhd, in which he is the sole director and shareholder, bought out private equity firm Navis Capital Partners Ltd’s 20.55% stake in SEG for RM112.98 million cash or 45 sen per share.
Following the acquisition, Hii's stake rose from 32.46% to 53.01%. Together with the 0.08% stake held by his son-in-law, Datuk Dennis Ling Sie Hieng, who is acting in concert with Hii in the deal, their collective shareholding now stands at 53.09%.
Under Malaysian takeover laws, Hii is obliged to extend an unconditional mandatory takeover offer to buy all the remaining shares at 45 sen per share in cash, even as he intends to maintain SEG’s listing status.
MainStreet noted that the offer is not fair, given that it represents a 30.77% discount to the share price of 65 sen on April 29 when the offer was made, and a 28.57% discount compared to the share price of 63 sen on May 24.
MainStreet also said the offer is not reasonable, as shareholders would still be able to trade SEG shares after the offer closes.
Nonetheless, MainStreet flagged that given the historically low liquidity of SEG shares, there is no assurance that holders will be able to sell their shares at the prevailing market prices after the offer closes.
At Friday's noon break, shares of SEG traded half a sen or 0.79% lower at 62.5 sen, giving the group a market capitalisation of RM791.1 million.