Neratel

[Jared Seah]

Hyom,

Vote no

But at the same time start looking for another horse to switch to.

Don't hold your breath as the majority shareholder has already jumped in bed with STE.

This way, in the words of Lao Lee, heads we win; tails we win too!

---

Yes KopiKat,

I was scratching my head when Eltek sold the distribution rights to the lucrative Middle-East and North Africa region to Nera Tel...

That was the first sign of "weakness" with Eltek on hindsight. Giving up 100% of the profits to the MENA region in exchange for 50% back through their 50% majority stake in Nera Tel.

Now Eltek wants out completely!

Ah! Too much debt again... A bit of deja vu like some of our REITs during 2008.

This time I'm inoculated.

[hyom]

Good points raised by Jared and KopiKat. I have updated the points you bought up in my blog post. I apologize for the copyright violation.

[dzwm87]

I have written my own analysis on Nera and it's on my site.

Overall, don't think it will be a good risk arbitrage opportunity in Nera. Too little upside gain with little margin of safety.

*not vested*

[cif5000]

Don't think delisting is the intention.

Singapore, 10 February 2012 – Singapore Technologies Engineering Ltd (ST Engineering) today announced that its subsidiary, Singapore Technologies Electronics Limited (ST Electronics) has entered into a conditional agreement with Nera Telecommunications Ltd (NERA) for the acquisition of all the shares of NERA (Acquisition), which will see NERA delisted from the Singapore Exchange Securities Trading Limited and privatised.

[bluechipstamp]

Found Eltek's 9mth FY11 financials.
Looks healthier, with Profits in FY11 (9mths) vs Losses in FY10. Debts NOK 1037Mil vs Cash NOK 518Mil.

U have to bear in mind that Eltek consolidates Nera's balance sheet.

Out of the NOK 518m cash, NOK 220m belongs to Nera. Nera has negligible debt, so most of the NOK 1b debt belongs to Eltek. Eltek is a lot weaker than what's suggested on the B/S at first glance.

Overall, don't think it will be a good risk arbitrage opportunity in Nera.

The folks buying @ 44.5 are betting on a higher offer, possibly from others. If there aren't any, they earn their 1% spread. So, heads they win, tails they don't lose.

The deal requires 75% approval though, and Eltek only owns 50.5%. According to Lim/Tan, the next biggest is Fidelity with 2.45%. It's a tough call whether the deal will garner enough support from the fragmented minorities, so buying @ 44.5 isn't risk free.

[VestedInterest]

Can anyone tell if the annual dividend of 4 cents is included in the permitted dividend of 6 cents?
If one bought 30000 shares at $0.445 and sold it to STE at $0.45, the yield will be about 0.7%. If the deal takes 4 months (estimated) to go through from the first announcement , the annualised yield would be 0.7 X 3 = 2.1% per annum. If one bought it at $0.44, the yield goes up to 1.9% or 5.7% annualised. There is an opportunity cost here if the stock market rallies in the next few weeks. However, if the market tanks, then it is a different story. If STE raises the offer price, then it is jackpot. If the deal falls through, then one can just hold on and enjoy the dividend yield of around 8% per annum.
The deal will almost certainly be voted through at the EGM to be called as Eltek has already consented to it. All is needed is 75% of votes of shares of those present at the EGM to go through. Unless one is able to obtain enough of the 'minorities' to be present to deny the 75% 'yes' votes, the agreement will go through. It is almost impossible to herd the small time shareholders to attend the meeting and vote 'no'. The vote therefore is a foregone conclusion.

[lonewolf]

It seems that the final dividend this yr is 6 cents regardless of the takeover offer. So in that sense, I guess you can say its included.

I won't say its a foregone conclusion that it will be voted through but not sure if Eltek can vote on the resolution or not. If they can't then there is a chance of it not going through. I voted against CK Tang (twice) and Kingboard previously when there was a privatisation attempt. So I'm hopeful we can still hold on. And time permitting, I may want to attend the EGM to vote NO!

[VestedInterest]

It seems that the final dividend this yr is 6 cents regardless of the takeover offer. So in that sense, I guess you can say its included.

I won't say its a foregone conclusion that it will be voted through but not sure if Eltek can vote on the resolution or not. If they can't then there is a chance of it not going through. I voted against CK Tang (twice) and Kingboard previously when there was a privatisation attempt. So I'm hopeful we can still hold on. And time permitting, I may want to attend the EGM to vote NO!

Eltek is suppose to be regarded as party not acting in concert with the Acquiror. Does this mean that they get to vote? It appears to me that they do get to vote. Hence all they need is to send one of their reps to the meeting to vote and that will probably cross 75% mark easily, since they hold more than 180,000,000 shares. There must be at least (more than) 60 mil other shares to deny STE the 75% majority. This means at least 60 minority shareholders with 1 million worth of shares each! Is this possible?

[Jared Seah]

3 group of freeloaders:

1) Vested and who are perfectly happy to receive the meaty dividends - never mind if the share price never seem to go anyway...But after 8 to 10 years, we get all our capital back!

2) Not vested but trying to get Nera Telecoms for a great bargain price and would like to kick out all other freeloaders.

3) Not vested but trying to arbitrage by buying at 44.5 cents and selling to party 2) at 45 cents. I hope they will get stuck in traffic and missed the voting

Now why would I say or do anything to help group 3) freeloaders if I belong to group 1) freeloader?

LOL!

[KopiKat]

This G.O. (General Offer) looks interesting to me as a freeloader Cat 4 (freeload to learn). I don't see STEng mopping up the shares at $0.45 and below (no SGX Annc). I think possible reasons,

1) Their Offer Price is actually $0.39 (xtra 6ct comes from dividend payout by NeraTel). If they were to buy from the open market at $0.45, they'd be required to "up" the offer price to all NeraTel shareholders irregardless of cd or xd.

2) The G.O. is made by by their subsidiary ST Electronics. I'm not sure if STEng is required to make any SGX Annc, assuming ST Electronics is mopping up NeraTel shares.

IMO, it's very unlikely for STEng to be able to get the 75% vote (to delist) unless they're mopping up the shares from the open market. Perhaps, we'll see them doing that after NeraTel goes xd? (Assuming they're not already doing that). In the first place, I don't quite understand why they need this special scheme of arrangement ie. "allow" NeraTel to pay a dividend of 6ct. The usual G.O. I'd seen usually have the clause like Offer Price = $0.45 but those who accept after xd will only get $0.39 (less dividend). The offeror would then be happily mopping up shares during cd and after xd. To conclude, STEng may not actually be keen to delist NeraTel?? Or they are confident that Eltek's 50.05% is good enough to acquire the 75% vote for all those 'Present and Voting' as the other 50% may be too fragmented and many may not even turn up to vote or use a proxy??