EDMI

(28-03-2011, 09:19 PM)dydx Wrote: The big buyer today is none other than SMB United itself.....
http://info.sgx.com/webcoranncatth.nsf/V...10044CBDE/$file/Dealings_Announcement_2803.pdf?openelement

SMB United's purchase of 8.691m shares at $0.36/share today amounted to 97.26% of the total 8.936m shares transacted. Including today's purchase, and other purchases of directors' personal shareholdings, SMB United now has 66.54% of EDMI. The ferocious purchase today simply means SMB United has activated Plan A (formal offer), Plan B (buying from concerted parties), and Plan C (buying from the open-market) concurrently. Isn't this clear enough SMB United wants to privatize EDMI very badly?

Now that SMB United has shown its hand, I guess there is no reason why the remaining informed minority shareholders should still want to sell their shares into the open-market from tomorrow onwards.

SMB United should know very well that to cross the crucial 90% mark will not be easy. If the remaining shareholders stand firm and refuse to sell, SMB United will have to consider raising the offer price at some point.

doesn't buying in the open market make sense in any case? they save the extra $0.005-brokerage on the shares purchased

(28-03-2011, 11:45 PM)jamzc Wrote: doesn't buying in the open market make sense in any case? they save the extra $0.005-brokerage on the shares purchased

But it doesn't appear quite fair and 100% proper, as
(1) SMB United's formal offer is supposed to be subject to approval by its own shareholders in an EGM to be convened together with the issue of a circular providing all details of the offer; and
(2) Minority shareholders of EDMI are supposed to be able to first vote for or against the privatization in an EGM to be covened together with the issue of a circular containing the IFA's opinion on the fairness of the privatization offer together with the IDs' recommendation.

SMB United buying from the open-market today seems to run in contradiction with (1) above, and pre-empt (2) above for those EDMI shareholders who have sold their shares to SMB United today.

I am quite sure someone from SIC or SGX will pick this up if it is deemed improper conduct.

(29-03-2011, 12:19 AM)dydx Wrote: But it doesn't appear quite fair and 100% proper, as
(1) SMB United's formal offer is supposed to be subject to approval by its own shareholders in an EGM to be convened together with the issue of a circular providing all details of the offer; and
(2) Minority shareholders of EDMI are supposed to be able to first vote for or against the privatization in an EGM to be covened together with the issue of a circular containing the IFA's opinion on the fairness of the privatization offer together with the IDs' recommendation.

SMB United buying from the open-market today seems to run in contradiction with (1) above, and pre-empt (2) above for those EDMI shareholders who have sold their shares to SMB United today.

I am quite sure someone from SIC or SGX will pick this up if it is deemed improper conduct.

I don't think SMB is restricted to purchase from the open market at below the offer price. The EGM is for the delisting and the open market purchase would not have triggered the delisting anyway.

Business Times - 29 Mar 2011

SMB offers to take unit EDMI private

Exit offer of 36.5 cents a share values subsidiary at $78.12m

By KELLY TAY

INVESTMENT holding company SMB United Limited (SMB) yesterday proposed to delist EDMI Limited - a metering solutions subsidiary - from the Singapore Exchange (SGX).

SMB will make a cash offer to acquire all EDMI shares at 36.5 cents each. The offer values the company at $78.12 million, based on the total number of about 214.03 million issued EDMI shares.

Since the move would constitute a major transaction for SMB, an extraordinary general meeting of its shareholders will be convened to obtain their approval.

Lee Kwang Mong, a non-executive director of SMB and the chief executive officer and managing director of EDMI; Lee Phuan Weng, the executive chairman of SMB and EDMI; Lee Yong Heng, an executive director of SMB; and Lee Wee Hian, an executive director and the chief executive officer of SMB, have all provided their irrevocable undertakings, amounting to a stake of 2.71 per cent in EDMI, to accept the offer.

Offeror SMB, which had a stake of 59.77 per cent, disclosed its purchase on the open market yesterday of a 4.06 per cent at 36 cents a share, raising its stake to 63.83 per cent. The total stake owned by the offeror and the undertaking shareholders is therefore 66.54 per cent.

Thirteen SMB shareholders, who hold about 38.15 per cent of the total issued SMB shares, have also pledged to vote all their SMB shares in favour of the delisting.

Reasons for the proposed delisting include an upfront premium, low trading liquidity and listing compliance costs.

Until yesterday's closing of 36 cents, the offer of 36.5 cents per share was a premium of 14.1 per cent to EDMI's last traded price of 32 cents on Thursday last week.

The joint announcement yesterday also noted that trading liquidity of EDMI shares in the past year has been thin. Average daily trading volume for the last three months and six months was 0.32 per cent and 0.4 per cent of the total number of issued EDMI shares respectively.

EDMI's lack of fund raising exercises since 2007 was also cited as a reason for the delisting, since the company has not taken advantage of its listed status in accessing capital markets. Because EDMI is unlikely to require access to capital markets to finance its operations in the foreseeable future, it believes that a listing on the SGX is no longer relevant.

EDMI is also said to be able to gain cost-savings as a non-listed entity, since costs of compliance with listing regulations will be eliminated, allowing EDMI to focus its resources on its business operations.

According to the joint announcement, SMB has no current intention of making material changes to the existing business of EDMI, or of re-deploying its fixed assets, or of discontinuing the employment of EDMI employees other than in the ordinary course of business.

SMB does not intend to list the EDMI shares on another stock exchange. It also does not intend to revise the exit offer price.

SMB shares rose 2 cents to close at 25 cents yesterday, up 8.7 per cent.

EDMI's BOD has today (29Mar11) appointed Provenance Capital P/L as IFA to the IDs for the purposes of the Delisting Proposal and the Exit Offer from SMB United......
http://info.sgx.com/webcoranncatth.nsf/V...2000F543B/$file/Announcement_of_IFA.pdf?openelement

In the same announcement, the IDs have added the following para as advice to EDMI's minority shareholders -

"In the meantime, EDMI Shareholders are advised to exercise caution when dealing in their
EDMI Shares and refrain from taking any action in relation to their EDMI Shares which may be
prejudicial to their interests until they or their advisers have considered the information and
the recommendations of the Independent EDMI Directors as well as the advice of the IFA set
out in the Delisting Circular to be issued in due course."

Some background info on Provenance Capital P/L and its senior management team.....
http://www.provenancecapital.com/directors.htm

EDMI is ramping up production of smart meters in China and Malaysia. In China it bought PCSoft which has a manufacturing licence, and incurred some $1m start-up loss last year (EDMI's profit would have been higher without this). In Malaysia, it bought a factory and teamed up with another company to produce meters.
EDMI has devoted considerable resources developing smart metering systems for the residential sector. It is one of the major suppliers providing homes in New Zealand with smart meters. Globally, demand for smart meters is on the rise, especially in the EU, and EDMI is an early mover in the Europe.
SMB's offer of 36.5c is far too low as it is only 8 times of EDMI's 2010 profit. EDMI should perform very well this year, and SMB is rushing to have it privatised before it becomes an expensive proposition.

Today (29Mar11), SMB United managed to add another 2,431 lots (out of the total 2,618 lots transacted) by raising the price to $0.365 - similar to the announced offer price in the formal offer or GO.....
http://info.sgx.com/webcoranncatth.nsf/V...200420BB4/$file/Dealings_Announcement_2903.pdf?openelement

Adding brokerage, in effect today SMB United has paid higher than $0.0365/share in total cost.

Including today's purchase, SMB United has raised its total interest in EDMI by 1.14%, to 67.68% - still a long, long way to the crucial 90% mark.

From this point onwards, it should be a more difficult, uphill situation for SMB United. If SMB United decides to pay a higher price in its open-market purchases, it will lead to an automatic upward revision of the offer price of the GO.

(29-03-2011, 07:09 AM)Musicwhiz Wrote: Offeror SMB, which had a stake of 59.77 per cent, disclosed its purchase on the open market yesterday of a 4.06 per cent at 36 cents a share, raising its stake to 63.83 per cent. The total stake owned by the offeror and the undertaking shareholders is therefore 66.54 per cent.

Thirteen SMB shareholders, who hold about 38.15 per cent of the total issued SMB shares, have also pledged to vote all their SMB shares in favour of the delisting.

Based on the extract from the article above, doesn't it seem like SMB's already 'secured' the delisting? i.e. Their own stake plus the 13 SMB shareholders' stake that's been pledged.

Or is this a bluff usually used by Offerors?

(30-03-2011, 08:56 AM)kazukirai Wrote: Based on the extract from the article above, doesn't it seem like SMB's already 'secured' the delisting? i.e. Their own stake plus the 13 SMB shareholders' stake that's been pledged.

Or is this a bluff usually used by Offerors?

If what was written in the article is true, to ride on the expansion smart meters business of EDMI. Is it better to invest in parent SMB United?

Some data on SMB United:
Total Current Asset(S$'000) 194,680
Toatl Current Liability(S$'000) 62,943
Total Non-Current Liability(S$'000) 10,476
Net Asset Value(S$'000) 121,261
Total Number Of Shares ('000) 479,752
Net Asset per Shares 0.252757675

Total Cash(S$'000) 56198
Total Debt(S$'000) 18574

Net Cash(S$'000) 37624
Net Cash per Share(S$'000) 0.078423852
Dividend Per shares FY2010 1 cents or 4%

Vested in SMB United.

(30-03-2011, 08:56 AM)kazukirai Wrote:

(29-03-2011, 07:09 AM)Musicwhiz Wrote: Offeror SMB, which had a stake of 59.77 per cent, disclosed its purchase on the open market yesterday of a 4.06 per cent at 36 cents a share, raising its stake to 63.83 per cent. The total stake owned by the offeror and the undertaking shareholders is therefore 66.54 per cent.

Thirteen SMB shareholders, who hold about 38.15 per cent of the total issued SMB shares, have also pledged to vote all their SMB shares in favour of the delisting.

Based on the extract from the article above, doesn't it seem like SMB's already 'secured' the delisting? i.e. Their own stake plus the 13 SMB shareholders' stake that's been pledged.

Or is this a bluff usually used by Offerors?

SMB is required to obtain approval from its shareholders to delist EDMI. This approval is necessary but not sufficient. For delisting to take place, SMB’s shareholding in EDMI must cross 90%.
SMB now has only 67.68%, and is finding difficulty in buying more EDMI shares at 36.5c. At this price, EDMI’s PE is 8 only.
EDMI has good presence in EU and New Zealand where gradual rollout of smart metering will enhance its profit. In fact, EDMI has recently increased its production capacity to meet anticipated demands.
If SMB is keen on delisting EDMI now, it may have to raise its offer price soon. If it fails in this round, it has to wait one year to launch another offer; by then the offer price has to be very much higher than 36.5c to take account of excellent profit.