KUALA LUMPUR (Dec 10): Shares in DKSH Holdings (Malaysia) Bhd (KL:DKSH) climbed to their highest level in more than a decade on Wednesday, as an analyst called the privatisation offer by the company's major shareholder a fair exit for minorities.
DKSH Holdings’ share price rose as much as 73 sen or 13.85% in morning trade — the highest level since June 20, 2014. At 10.30am, the counter was trading at RM5.94, valuing the distributor of Fortune 500 companies’ consumer goods, healthcare, materials, and technology at RM936.49 million.
“The SCR [selective capital reduction] offers shareholders a fair and immediate opportunity at a notable premium, particularly given DKSH’s persistently low liquidity and the offeror’s clear intention to delist the company,” Hong Leong Investment Bank (HLIB) said in a note on Wednesday.
“We recommend that minority shareholders accept the offer, rather than remain exposed to potentially prolonged share price stagnation should the proposal not materialise,” HLIB said.
Parent company DKSH Resources (Malaysia) Sdn Bhd proposed on Tuesday to take DKSH Holdings private via a RM249.1 million SCR exercise. DKSH Resources currently owns 74.3% of DKSH Holdings.
Under the proposal, shareholders will receive RM6.15 per share, representing a 16.7% premium to Monday’s closing price of RM5.27 and a 24% premium to DKSH Holdings’ 12-month volume-weighted average price of RM4.96. The SCR involves 40.5 million shares, or 25.7% of the company’s issued share capital.
As the repayment exceeds DKSH Holdings’ paid-up capital, DKSH Resources has also proposed the issuance of approximately 58 million bonus shares from retained earnings to lift the company’s share capital to a level that enables the SCR. The announcement did not specify the bonus share entitlement ratio per shareholder.
As at end-September, DKSH Holdings held RM50.9 million in cash and bank balances, against total borrowings of RM536.6 million.
HLIB viewed that the privatisation would give DKSH Holdings’ parent company “greater operational flexibility” to navigate external challenges such as geopolitical risks and weaker demand visibility, free from the constraints of public market reporting.
HLIB has lowered its fair value to match the offer price of RM6.15 from RM6.95 previously, to align it to the privatisation offer.
Post-privatisation, DKSH Holdings will become a wholly owned subsidiary of DKSH Resources and will be delisted from Bursa Malaysia. The parent company stated that it does not intend to retain DKSH Holdings’ listing status.
The privatisation proposal is now pending deliberation by DKSH Holdings’ board of directors.