KUALA LUMPUR (Oct 12): A privatisation offer for Tong Herr Resources Bhd (KL:TONGHER) is 'not fair but reasonable', the appointed independent adviser said in calling for minority shareholders to accept the deal.
The RM2.55-per-share offer is unfair because it undervalues Tong Herr, Mercury Securities said in an advice circular dated Monday, noting that the company is worth RM4.13 per share while its latest unaudited net assets stood at RM3.44 per share as at June 30.
The offer, however, is reasonable as investors will have the opportunity to cash out at a premium to historical prices as Tong Herr shares are thinly traded and difficult to sell in the market, Mercury Securities said.
The Tsai family, the controlling shareholders of Tong Herr, is proposing to take private the bolts and nuts manufacturer through a selective capital reduction and repayment exercise.
The offer price represents a 34% premium to the last price before the deal was announced in August 2026 as well as a gain of between 37% and 76% over its historical average share prices ranging from five days to three years.
If the deal fails, Tong Herr’s share price could fall below the offer price, making it difficult for minority shareholders to sell their shares at such prices in the future, Mercury Securities warned.
Further, there has been no alternative offer while the controlling shareholders already hold 74.5% of Tong Herr, making it difficult for a competing proposal to succeed without their support.
Tong Herr’s non-interested directors also agreed with the assessment and recommended that shareholders support the privatisation. The proposal will be put to a vote at an extraordinary general meeting on Nov 3.