Penguin International

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Thank you fellow buddies for the insightful analysis as usual. My thought process is a lot simplier;

1) If the GO is successful, ie, Penguin is delisted (which is unlikely), minority SH will get $0.65c, which is the maximum they will get (unless the offer is revised). SH who sells in the market now can get this amount straight away, though there is a transaction cost.

2) If the GO is unsuccessful, ie, Penguin remains listed (which is quite likely), SH need to ask if the share price will drop below $0.65c. IMO, I think it will. In that case, based on probability, it is better to sell the shares or accept the offer

3) If (2) happens, then Penguin may declare a dividend (which is possible). However, after XD, the share price will correct accordingly, leaving SH no better off than before. And in fact, most counters correct more than the declare dividend after XD. So it is also possible that the share price will falls after a failed privatisation exercise, and falls further after XD.

So overall, SH should ask if it is better to accept the $0.65c now, vs the possible scenarios. Or sells now and buy back after (2), or after (2) & (3) above.

But of course, for a long term confident holder, then just forget about all the above scenarios and continue to hold this counter until it hit your estimated fair value.
Reply
Thank you fellow buddies for the insightful analysis as usual. My thought process is a lot simplier;

1) If the GO is successful, ie, Penguin is delisted (which is unlikely), minority SH will get $0.65c, which is the maximum they will get (unless the offer is revised). SH who sells in the market now can get this amount straight away, though there is a transaction cost.

2) If the GO is unsuccessful, ie, Penguin remains listed (which is quite likely), SH need to ask if the share price will drop below $0.65c. IMO, I think it will. In that case, based on probability, it is better to sell the shares or accept the offer

3) If (2) happens, then Penguin may declare a dividend (which is possible). However, after XD, the share price will correct accordingly, leaving SH no better off than before. And in fact, most counters correct more than the declare dividend after XD. So it is also possible that the share price will falls after a failed privatisation exercise, and falls further after XD.

So overall, SH should ask if it is better to accept the $0.65c now, vs the possible scenarios. Or sells now and buy back after (2), or after (2) & (3) above.

But of course, for a long term confident holder, then just forget about all the above scenarios and continue to hold this counter until it hit your estimated fair value.
Reply
(16-02-2021, 12:26 PM)lonewolf Wrote: My interpretation is that both Jeffrey and James (which held the 21.56% of the shares and has given the undertaking to tender the shares for the offer) are acting in concert with the Offeror and has hence should not be excluded in the calculation.

But reading the document again, there was no mention of 'working in concert' for compulsory acquisition, so you may be right.

Hi lonewolf,

"Acting in concert" is used to determine whether one needs to do a mandatory offer under the takeover code of the Singapore Companies Act. It is also used to determine whether the offer can be unconditional or not. Basically, it adds up all the shares that the offeror and those acting in concert with him holds to determine whether it reaches 30%, 50% or whatever percentage to reach certain milestone for the offer.

For compulsory acquisition rule, it is not under the takeover code. Rather, it is under Section 215(1) of the Singapore Companies Act. And yes, as you have mentioned correctly above, this rule doesn't mention anything about "acting in concert". The exact wordings you can read from the offer document so I shall not repeat here. The key words are "other than those already held by the Offer". As mentioned in my previous post here, the Offeror holds 0% of the shares before they made this offer. Providing undertaking to tender one's shares to the Offeror doesn't mean that the Offeror holds any shares before he makes this offer.

I hope that the above doesn't confuse you. Yes, its a bit too technical and I apologize if you felt that way.
Reply
(16-02-2021, 12:26 PM)lonewolf Wrote: My interpretation is that both Jeffrey and James (which held the 21.56% of the shares and has given the undertaking to tender the shares for the offer) are acting in concert with the Offeror and has hence should not be excluded in the calculation.

But reading the document again, there was no mention of 'working in concert' for compulsory acquisition, so you may be right.

Hi lonewolf,

"Acting in concert" is used to determine whether one needs to do a mandatory offer under the takeover code of the Singapore Companies Act. It is also used to determine whether the offer can be unconditional or not. Basically, it adds up all the shares that the offeror and those acting in concert with him holds to determine whether it reaches 30%, 50% or whatever percentage to reach certain milestone for the offer.

For compulsory acquisition rule, it is not under the takeover code. Rather, it is under Section 215(1) of the Singapore Companies Act. And yes, as you have mentioned correctly above, this rule doesn't mention anything about "acting in concert". The exact wordings you can read from the offer document so I shall not repeat here. The key words are "other than those already held by the Offer". As mentioned in my previous post here, the Offeror holds 0% of the shares before they made this offer. Providing undertaking to tender one's shares to the Offeror doesn't mean that the Offeror holds any shares before he makes this offer.

I hope that the above doesn't confuse you. Yes, its a bit too technical and I apologize if you felt that way.
Reply
(16-02-2021, 01:30 PM)Ben Wrote: Thank you fellow buddies for the insightful analysis as usual. My thought process is a lot simplier;

1) If the GO is successful, ie, Penguin is delisted (which is unlikely), minority SH will get $0.65c, which is the maximum they will get (unless the offer is revised). SH who sells in the market now can get this amount straight away, though there is a transaction cost.

2) If the GO is unsuccessful, ie, Penguin remains listed (which is quite likely), SH need to ask if the share price will drop below $0.65c. IMO, I think it will. In that case, based on probability, it is better to sell the shares or accept the offer

3) If (2) happens, then Penguin may declare a dividend (which is possible). However, after XD, the share price will correct accordingly, leaving SH no better off than before. And in fact, most counters correct more than the declare dividend after XD. So it is also possible that the share price will falls after a failed privatisation exercise, and falls further after XD.

So overall, SH should ask if it is better to accept the $0.65c now, vs the possible scenarios. Or sells now and buy back after (2), or after (2) & (3) above.

But of course, for a long term confident holder, then just forget about all the above scenarios and continue to hold this counter until it hit your estimated fair value.

I agree thinking this way is better for minority shareholders, rather than considering the probable actions of the offeror. I think the offeror could have other options like finding new investors to inject capital into their funds other than thinking of using the company's cash to pare down borrowing. 

Along the lines of Corgitator's previous post, everyone is in it for the money, trying to get the most out of it.

I think one way to mitigate privatization scenarios would be to diversify and always have potential targets, i.e. recycle the capital from the offer to other stocks. Another like I mentioned(learnt from observation) is to invest enuff to take a board seat and ensure your investment is better "looked after". 

It's really not easy being a retail investor, Sigh ...
Reply
(16-02-2021, 01:30 PM)Ben Wrote: Thank you fellow buddies for the insightful analysis as usual. My thought process is a lot simplier;

1) If the GO is successful, ie, Penguin is delisted (which is unlikely), minority SH will get $0.65c, which is the maximum they will get (unless the offer is revised). SH who sells in the market now can get this amount straight away, though there is a transaction cost.

2) If the GO is unsuccessful, ie, Penguin remains listed (which is quite likely), SH need to ask if the share price will drop below $0.65c. IMO, I think it will. In that case, based on probability, it is better to sell the shares or accept the offer

3) If (2) happens, then Penguin may declare a dividend (which is possible). However, after XD, the share price will correct accordingly, leaving SH no better off than before. And in fact, most counters correct more than the declare dividend after XD. So it is also possible that the share price will falls after a failed privatisation exercise, and falls further after XD.

So overall, SH should ask if it is better to accept the $0.65c now, vs the possible scenarios. Or sells now and buy back after (2), or after (2) & (3) above.

But of course, for a long term confident holder, then just forget about all the above scenarios and continue to hold this counter until it hit your estimated fair value.

I agree thinking this way is better for minority shareholders, rather than considering the probable actions of the offeror. I think the offeror could have other options like finding new investors to inject capital into their funds other than thinking of using the company's cash to pare down borrowing. 

Along the lines of Corgitator's previous post, everyone is in it for the money, trying to get the most out of it.

I think one way to mitigate privatization scenarios would be to diversify and always have potential targets, i.e. recycle the capital from the offer to other stocks. Another like I mentioned(learnt from observation) is to invest enuff to take a board seat and ensure your investment is better "looked after". 

It's really not easy being a retail investor, Sigh ...
Reply
(16-02-2021, 02:14 PM)ghchua Wrote: I hope that the above doesn't confuse you. Yes, its a bit too technical and I apologize if you felt that way.

No apologies are necessary. I appreciate the clarification. I probably have read the relevant sections a few times myself. But it is still easy to misinterpret some of the terms.

And no. It is not too technical. Just need to make the effort to understand. I'm one of those who like to make the distinction between units/shares and dividends/distributions even though most people used those terms interchangeably. Wink
Reply
(16-02-2021, 02:14 PM)ghchua Wrote: I hope that the above doesn't confuse you. Yes, its a bit too technical and I apologize if you felt that way.

No apologies are necessary. I appreciate the clarification. I probably have read the relevant sections a few times myself. But it is still easy to misinterpret some of the terms.

And no. It is not too technical. Just need to make the effort to understand. I'm one of those who like to make the distinction between units/shares and dividends/distributions even though most people used those terms interchangeably. Wink
Reply
The IFA has released its recommendation (emphasis mine)

Quote:“Having considered the aforementioned factors set out in this letter and summarised in this section, we are of the opinion that the financial terms of the Offer are not fair but reasonable. Based on our opinion, we advise the Independent Directors to recommend that Shareholders accept the Offer, unless Shareholders are able to obtain a price higher than the Offer Price on the open market, taking into account all the brokerage commissions or transactions costs in connection with open market transactions.

Full Circular: Link Here
Reply
The IFA has released its recommendation (emphasis mine)

Quote:“Having considered the aforementioned factors set out in this letter and summarised in this section, we are of the opinion that the financial terms of the Offer are not fair but reasonable. Based on our opinion, we advise the Independent Directors to recommend that Shareholders accept the Offer, unless Shareholders are able to obtain a price higher than the Offer Price on the open market, taking into account all the brokerage commissions or transactions costs in connection with open market transactions.

Full Circular: Link Here
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