Auric Pacific Group

[VIChris]

Voluntary Conditional Offer for Auric Pacific Group Limited - S$1.65 in cash for each Offer Share ("Offer Price")

RHB Securities Singapore Pte. Ltd. (“RHBSEC”) announces, for and on behalf of Silver Creek Capital Pte. Ltd. (“Offeror”), an entity jointly owned by Dr. Stephen Riady (“SR”) and Dr. Andy Adhiwana (“AA”), that the Offeror intends to make a voluntary conditional cash offer (“Offer”) for all the issued and paid-up ordinary shares (“Shares”) in the capital of Auric Pacific Group Limited (“APGL”), other than those which are owned, controlled or agreed to be acquired by the Offeror or by parties acting in concert or deemed to be acting in concert with the Offeror in relation to the Offer (“Concert Parties” and such Shares, “Offer Shares”), with a view to delist APGL from the Mainboard of Singapore Exchange Securities Trading Limited (“SGX-ST”)...

Can't help not to comment.
Delist at cheap price. Indonesian businessman really know how to do calculate.

[noon]

so the question is how badly they want to succeed in first attempt , if so they will have to cough out more. With 79 million cash , they can easily afford another 0.3 per share which cost them 10 m , still have plenty left for the Riadys .

[holymage]

Auric Pacific estimated annual cash flow before changes into working capital for 2016 is $40m. Definitely a cash cow. With a current market cap of $200m at $1.65 and low capex. P/CF = 5, excluding cash, this smells dirt cheap to me.

As of yesterday, they owned closed to 80% of the company, and declared no right of compulsory acquisition of shares and no put right by shareholders. They definitely know what they are doing..

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[dydx]

Auric Pacific as a group of established cash-cow businesses should be worth quite a lot more, otherwise why would the Riady's choose to buy out the minority shareholders in a rather hurry by way of a GO with the first offer at $1.65/share. Now that their intention to privatise Auric Pacific for their own benefits has been made absolutely clear, it is reasonable to believe that the Riady's would do whatever - short of crossing to the other side of the law - to raise their stake to over the critical 90% mark, which will allow them to trigger compulsory acquisition of the remaining shares. That's way the Riady's wasted no time yesterday after the formal GO was announced in the morning at 8:55AM, in mopping up another 1.85% (2,325,800 shares) after trading resumed at 11:00AM until market closed at 5:00PM, by paying the full GO price of $1.65/share....
http://infopub.sgx.com/FileOpen/Dealing%...eID=438263
In fact, the Riady's paid more than $1.65/share yesterday if we include brokerages and another related transaction fees and duties/GST.

IMHO, each Auric Pacific share has an intrinsic value of minimum $2.00, and the prospects of the group's businesses remain positive. Therefore, it is difficult for me to accept such a low-ball offer, especially since it is from the Riady's as the controlling shareholders, who are also the executive management and supposed to manage and grow the group businesses and profits properly for the benefit of all shareholders.

[specuvestor]

Auric Pacific estimated annual cash flow before changes into working capital for 2016 is $40m. Definitely a cash cow. With a current market cap of $200m at $1.65 and low capex. P/CF = 5, excluding cash, this smells dirt cheap to me.

As of yesterday, they owned closed to 80% of the company, and declared no right of compulsory acquisition of shares and no put right by shareholders. They definitely know what they are doing..

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I was wondering how they can declare no right of CA or put right which is mandated by Companies Act.

The trick is that Silvercreek will own less than 90% of the company thus no trigger. Hence it will be an unlisted public company if opmi don't tender. Interesting move.

[Big Toe]

1. Auric PAcific is turning around its business, no doubt.
2. Everyone agrees that the business is undervalued at GO.
3. Not sure how many actually bought it before the GO if since many are saying it is way undervalued.
4. GO may be undervalued but it is a trigger for share price to reach closer to its fair value.
5. Many a times, I just tell myself to just be happy that the appreciation was relatively swift and returns are way above average.
6. There are a whole lot of companies that is way undervalued but without a trigger of even worse, the majority shareholders are locked in battle with minority holders and deadlock is already there for years.
7. The rules of investing is such that it is fair to everyone, but more fair to those with the means. Those who think otherwise are delusional.

[Debronic]

Some thoughts here from a corporate finance perspective:

The Offeror appears to be relying on an interesting and narrow interpretation of Section 215 of the Companies Act that governs compulsory acquisition. The Act states that the offeror will have the right to compulsory acquisition if the transfers involve 90% of all the shares in that class. And since the offer does not extend to the shares of LCR and Goldstream, there is no actual transfer of these shares, regardless of the fact that they are concert parties. The offer will never result in a transfer of 90% of the shares and thus compulsory acquisition does not apply. The no put right is also a result of the same interpretation.

This is likely to be a rather contentious point going forward as the Offeror seems to be following the letter but not spirit of the law unless this interpretation is as a result of consultation with SIC.

It is also worth noting that while this may be seem to be highly disadvantageous to minority shareholders, the Offeror by virtue of them having lost the right to squeeze minorities out, will likely have to contend with them hanging around should they succeed in delisting the company but not in getting all shareholders to tender their offer shares. Of course, once they are delisted, they can always follow up with another round to take them out.

Last but not least, this exercise also provided SR an opportunity to make large open market purchases and up his controlling stake without chasing up the price too much. This would otherwise have not been possible during normal trading days when liquidity is much lower. A good example would be yesterday, when he managed to acquire 2.325 million shares at $1.65. He would probably need several months to acquire the same amount and drive up share price beyond $1.65 under normal circumstances.

[dydx]

Today (8Feb17), the Riady's mopped up another 670,800 shares (out of the 739,800 shares transacted) from the open-market by paying the full GO price of $1.65/share, and raised their combined stake (including shares controlled or agreed to be acquired) in Auric Pacific to 79.11%....
http://infopub.sgx.com/FileOpen/Dealing%...eID=438390

I wonder why would minority shareholders choose to just sell their prized Auric Pacific shares into the mouth of the Riady's? By doing so, they would forgo their entitlement to any upward price revision later. At least they should be patient enough to wait for the evaluation/opinion of the GO by the IFA (to be appointed by the IDs), as well as the recommendation of the IDs, before deciding whether to accept the formal offer by tendering in their shares.

[kyle]

I think one of the reason is due to liquidity. Auric's liquidity is really a big issue if CEO didn't collect from open market. With close to 80% shared controlled by Riady family, in the future the liquidity is going to be even worse. The company may be worth 2.0sgd/share or even more in the future. But considering a significant liquidity discount, it's not too far away from 1.65.

[hailstorm87]

Some thoughts here from a corporate finance perspective:

The Offeror appears to be relying on an interesting and narrow interpretation of Section 215 of the Companies Act that governs compulsory acquisition. The Act states that the offeror will have the right to compulsory acquisition if the transfers involve 90% of all the shares in that class. And since the offer does not extend to the shares of LCR and Goldstream, there is no actual transfer of these shares, regardless of the fact that they are concert parties. The offer will never result in a transfer of 90% of the shares and thus compulsory acquisition does not apply. The no put right is also a result of the same interpretation.

This is likely to be a rather contentious point going forward as the Offeror seems to be following the letter but not spirit of the law unless this interpretation is as a result of consultation with SIC.

It is also worth noting that while this may be seem to be highly disadvantageous to minority shareholders, the Offeror by virtue of them having lost the right to squeeze minorities out, will likely have to contend with them hanging around should they succeed in delisting the company but not in getting all shareholders to tender their offer shares. Of course, once they are delisted, they can always follow up with another round to take them out.

Last but not least, this exercise also provided SR an opportunity to make large open market purchases and up his controlling stake without chasing up the price too much. This would otherwise have not been possible during normal trading days when liquidity is much lower. A good example would be yesterday, when he managed to acquire 2.325 million shares at $1.65. He would probably need several months to acquire the same amount and drive up share price beyond $1.65 under normal circumstances.

Regarding the compulsory acquisition comments, I don’t think I’ve seen an instance where Section 215 has such a wording in an offer announcement. Nevertheless, I see Section 215 as a provision that is pro-Offeror since it allows the Offeror to take full control of the Company if the dissenting shareholders refuse to ‘give up’ their minority stakes. Since the Offeror is disavowing any right to look to Section 215, I think substantively, it affects the Offeror’s view of the offer more than any thing else. 
Hypothetically, it may result in a higher offer price to incentivize all shareholders to accept the offer since the Offeror cannot rely on a lower price which is sufficient to get 90% of the votes.  So on the price front, it may be ‘pro-minority shareholders’. 

That said and without having all the details of the offer, I do agree that this is a rather unusual result. We should also note that the provision lies in the Companies Act and not the Takeover Code  and I wouldn’t know if the SIC would be able to render the confirmation of the Offeror’s view of Section 215 even if they were consulted on this. 

In sum, I don’t think the minority shareholders are disadvantaged – Section 215 is a sweep up provision designed to allow the Offeror to rip the shares out of the hands of the minority where the requisite 90% of all shares they do not already own is met. What this means is: minority shareholders who are content with holding illiquid shares in a private company are not given the option to. Such minority (stubborn) shareholders usually exist much to the chagrin of the majority shareholders since they just want to hold 100% of the shares of the target; rather than 99.xxx%.   

With regard to the point on driving the shares beyond $1.65, I don’t think the on-market purchase by the Offeror can be beyond $1.65 (since this is the Offer price). If this happens, the OSIM thing will happen again (see para 4 of http://www.mas.gov.sg/News-and-Publicati...l-Ltd.aspx).  Of course, this may be vastly different if what you mean is that he can drive the price up after the offer. 

(not vested)