KUALA LUMPUR (Sept 22): Independent adviser MainStreet Adviser Sdn Bhd has recommended that shareholders of Eurospan Holdings Bhd (KL:EUROSP) reject the mandatory general offer (MGO) from its new controlling shareholder Samuel Ng Heng Hong, as it deemed the offer “not fair and not reasonable”.
MainStreet noted in its independent advice circular released on Monday that the offer price of RM2.30 per share, triggered after Ng acquired a 74.14% stake in Eurospan through his private vehicle EC Synergy (M) Sdn Bhd, represented a discount to the company’s historical market performance, despite being above its adjusted net asset value.
“The holders are advised to closely monitor the market prices of Eurospan shares and evaluate the offer price, before deciding whether to accept or reject the offer prior to the closing date (Oct 1),” the report read.
MainStreet’s assessment showed that the offer values Eurospan’s entire equity at approximately RM44.03 million, or 99 sen per share. This represents a premium of RM1.31, or 132.32%, over the group’s adjusted net asset value, but a discount when compared against recent trading levels.
Specifically, the RM2.30 offer price was 21.77% below the last traded price of Eurospan shares on Aug 19 (a day before the MGO was launched). It also represented discounts ranging from 4.10% to 21.43% to the five-day, one-month, three-month, six-month and one-year volume-weighted average prices (VWAPs) of Eurospan shares. Furthermore, it stood 10.16% and 13.14% below the last traded price and five-day VWAP of Eurospan shares on Sept 17.
MainStreet also concluded that the offer was not reasonable, as Eurospan shares would remain listed and tradeable on the Main Market of Bursa Malaysia, allowing shareholders to continue realising value in the open market. However, it cautioned that there was no guarantee that the current price levels and trading volumes would be sustained after the offer closes.
The adviser also reminded shareholders of their rights under Section 223 of the Capital Markets and Services Act 2007 (CMSA), which allows dissenting shareholders to require the offeror to acquire their shares under certain conditions.
“Nonetheless, the decision in respect of the offer ultimately rests on individual risk appetite and investment objectives. If the holders wish, and if liquidity permits, they may consider disposing of their Eurospan shares in the open market, should the market price be higher than the offer price, after accounting for transaction costs,” MainStreet added.
The MGO was triggered after Ng acquired the controlling stake in Eurospan from its chairman Tan Han Chuan and his sister Tan Ching Ching for RM75.75 million. The siblings are children of businessman Tan Sri Robert Tan Hua Choon, widely known as the “Casio King”.
Prior to the acquisition, Ng and EC Synergy did not own any Eurospan shares.
This is the second MGO in just over a year for Eurospan, which is primarily involved in the manufacturing and trading of furniture and wood-based products, as well as the trading of SLA and automotive batteries.
At midday market break on Monday, Eurospan’s shares traded one sen or 0.39% lower at RM2.53, giving the group a market capitalisation of RM112.39 million. Year to date, the stock has gained over 10%.