KUALA LUMPUR (March 9): The independent adviser for DKSH Holdings (Malaysia) Bhd (KL:DKSH)’s proposed privatisation concluded that the exercise is “not fair but reasonable”, and recommended that minority shareholders vote in favour of the proposal at the upcoming extraordinary general meeting (EGM).

Asia Equity Research Sdn Bhd said the offer price of the company’s selective capital reduction and repayment (SCR) of RM6.15 per share is below the estimated fair value of the company’s shares. 

However, the proposal remains reasonable when taking into account its premium over market price, illiquid trading nature of the shares and the absence of alternative offers, according to its circular issued on Monday. 

“We are of the view that the justification for the proposed SCR (reasonableness) outweighs the valuation gap (fairness),” the adviser said.

Accordingly, the adviser recommended that non-interested directors advise shareholders to vote in favour of the special resolution, and that disinterested shareholders support the proposal at the forthcoming EGM.

The privatisation plan, which could lead to DKSH's delisting, was initiated on Dec 9, 2025, when DKSH Resources (Malaysia) Sdn Bhd, the company’s controlling shareholder, submitted a proposal for DKSH Malaysia to undertake an SCR exercise.

As at the latest practicable date, DKSH Resources and parties acting in concert collectively own about 74.36% in DKSH Malaysia. It is part of the wider DKSH Group, whose ultimate parent company is Switzerland-listed DKSH Holding Ltd.

However, DKSH Malaysia's largest minority shareholder Pangolin Investment Management Pte Ltd is expected to reject the takeover bid by the market expansion services provider’s Swiss parent at the upcoming EGM as Pangolin believes the offer is low.

Pangolin, through its long-term value fund Pangolin Asia Fund, holds 2.71% of DKSH Malaysia, representing 10.55% of the 40.5 million shares held by minorities.

If the SCR is approved, minority shareholders — who collectively hold about 40.5 million shares, representing 25.69% of the company — will receive a total capital repayment of about RM249.1 million.

Asia Equity Research said the offer price is deemed “not fair” because it is lower than the estimated intrinsic value of DKSH Malaysia — the distributor of Fortune 500 companies’ consumer goods, healthcare, and materials — based on valuation methodologies used in its analysis.

The adviser estimated the fair value of the shares at RM7.31 each, meaning the SCR price represents a discount of RM1.16 or about 15.87% based on sum-of-parts valuation analysis. As a secondary valuation benchmark, the offer price is also below the company’s net asset value of RM7.06 per share, implying a discount of about 12.89%.

However, the adviser noted that there are several factors supporting the reasonableness of the proposal, including that the RM6.15 cash offer represents a premium to DKSH Malaysia’s historical trading prices, ranging from 16.7% to 24% above the company’s recent closing price and volume-weighted average prices prior to the offer announcement.

Next, the offer also provides minority shareholders with an opportunity to exit a relatively illiquid stock. The company’s shares recorded an average monthly trading liquidity of about 1.39% of free float, significantly lower than the 7.47% average liquidity of comparable consumer-sector companies on Bursa Malaysia.

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