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Hi dreamybear,
Just to answer some of your questions here.
Controlling shareholder can have an exemption to avoid this trigger, by stating that shareholders are waiving their right to a general offer at the required price from directors and parties acting in concert with them who, as a result of the company buying back its shares, would increase their voting rights to 30% or more, or, if they together hold between 30% and 50% of the company's voting rights, would increase their voting rights by more than 1% in any period of 6 months; and the names of such directors and persons acting in concert with them, their voting rights at the time of the resolution and after the proposed buy-back to be disclosed in the same circular. They have to abstain from voting for and/or recommending shareholders to vote in favour of the resolution to authorise the share buy-back.
So, it is not an issue that they cannot participate in the EAO.
As to whether EAO is a viable privatisation route, it really depends on how you price it. If you price it low, normally the acceptance rate will be low as well. To attract participation, you would have to price it at above market price, as seen in some case studies recently.
It is another way of capital management, and I won't say its an alternative to dividends. However, do take note that dividends can only be paid out of profits from a company but EAO can be executed even if the company do not have profits or retained earnings to pay out dividends.
EAO will have to be priced at above market price to attract acceptance, while SBB can be done at market price. So, it might be a more expensive way and not necessary more efficient in my view.
Just to answer some of your questions here.
(03-02-2024, 03:27 PM)dreamybear Wrote: - is it a viable privatisation route for majority SH to use "selective EAO(where only minorities participate)" to wipe out more issued shares in the mkt before an eventual voluntary offer down the road, since if controlling SH also participate in EAO, it might trigger mandatory offer immediately ?
Controlling shareholder can have an exemption to avoid this trigger, by stating that shareholders are waiving their right to a general offer at the required price from directors and parties acting in concert with them who, as a result of the company buying back its shares, would increase their voting rights to 30% or more, or, if they together hold between 30% and 50% of the company's voting rights, would increase their voting rights by more than 1% in any period of 6 months; and the names of such directors and persons acting in concert with them, their voting rights at the time of the resolution and after the proposed buy-back to be disclosed in the same circular. They have to abstain from voting for and/or recommending shareholders to vote in favour of the resolution to authorise the share buy-back.
So, it is not an issue that they cannot participate in the EAO.
As to whether EAO is a viable privatisation route, it really depends on how you price it. If you price it low, normally the acceptance rate will be low as well. To attract participation, you would have to price it at above market price, as seen in some case studies recently.
(03-02-2024, 03:27 PM)dreamybear Wrote: - cld selective EAO be alternative (of "returning cash to minorities SH") to dishing out dividends ?
- is this an especially attractive idea for a cash rich company with low capex requirements ?
It is another way of capital management, and I won't say its an alternative to dividends. However, do take note that dividends can only be paid out of profits from a company but EAO can be executed even if the company do not have profits or retained earnings to pay out dividends.
(03-02-2024, 03:27 PM)dreamybear Wrote: Sidenote : EAO is more efficient than SBB spread over the entire FY but at the same time, will increase financials per share(BVPS, EPS). So there r pros and cons.
EAO will have to be priced at above market price to attract acceptance, while SBB can be done at market price. So, it might be a more expensive way and not necessary more efficient in my view.
Curiousparty - just curious, given that BP already delisted (gotten the paper scripts last week), does it make sense to keep BP or swap to BS?