Privatisation matters

[ghchua]

I think these guys missed the point. i see these changes will definitely result in less unfair offers to succeed. Offerers have to think twice about their offer price and strategy now, because it takes real money to make an offer. Whether it translate to higher exit offers or not, that's beside the point. Exit prices are dependent on the environment and as long as the door is firmly against unfair offers, then it builds the foundation for something wonderful to happen. If the value investor has the temperament to slog it out with the majority shareholder, history has shown wonderful things generally happen.

Definitely, I agree with you on this point. As long as a company is still listed (even if it is suspended), there is a chance for minorities.

Allow me to quote you another SGX listed case study, Indiabulls Properties Investment Trust. In April 2016, the offeror made an attempt to GO minorities with a 25cts per unit offer. After the offer closes, some unit holders accepted the offer, the trust lost its free float and SGX suspended the trust. But the offeror could not compulsory acquire the remaining minorities and the trust stay listed. In October 2017, offeror made another attempt to GO minorities at 90cts per unit, a whopping 259% above the offer price around 1.5 years ago. Although the trust had been suspended for trading for around 1.5 years, it it worth the wait for minorities who hold on? I guess the answer is a resounding yes!

[karlmarx]

Taking listed firms private has been a key theme in Singapore’s equity market over the past few years as major shareholders, institutional investors and industry peers buy up companies due to low multiples. Fourteen companies are undergoing privatization or in the process of being bought out this year, the highest number since 2016, according to a report from DBS Group Holdings Ltd. this month.


“New rules will not entirely derail the trend of delistings in Singapore. In fact delistings may continue at a similar rate,” said Nirgunan Tiruchelvam, head of consumer equity at research firm Tellimer Research. “Premiums can rise but not beyond what’s affordable.”

https://www.bloomberg.com/news/articles/...markets-vp

...

Yet more delistings to come. Good news, right? 

In the rumour/analyst mill: SIAEC, Fu Yu, Unusual, Frencken, Hour Glass. I wonder how they came up with these names.

[slowandsteady]

IFA for Raffles United just concluded the offer to be "NOT FAIR and NOT REASONABLE".

Independent Directors have the same conclusion: "The Independent Directors, having carefully considered the terms of the Offer and the advice given by the IFA to the Independent Directors as set out in the IFA Letter, CONCUR with the advice of the IFA in respect of the Offer. Accordingly, the Independent Directors recommend that Shareholders REJECT the Offer."

https://links.sgx.com/FileOpen/Raffles%2...eID=571822

[angelzsoul]

Hi karlmarx,

The new rules allow minorities to have a say in delisting, even if the offer is deemed "fair and reasonable" by the IFA. Because the offeror and related parties cannot vote on delisting, therefore even a small turnout of minorities can defeat the resolution. Previously, the offeror can vote and it is a big ask to gather 10% or more to block the resolution.

The recent LTC Corp and Challenger delisting attempt case studies are good examples. Even though in both cases the IFA deemed those offers "fair and reasonable", most minorities voted against the resolution. Unfortunately, for LTC Corp minorities, the new rules came too late for them.

As for GO, previously without the new rules in place, even if an offer is deemed "not fair but reasonable", minorities might have no choice but to accept the offer since they knew that if the free float of the stock drops below 10%, SGX is going to delist the company if it does not wish to restore its free float. With the risk of holding a unlisted company hanging over the head of minorities, they might have tendered their shares until it hits compulsory acquisition level. Therefore, having hit compulsory acquisition level without the new rules in place previously does not meant that the "fair and reasonable" rule is not important.

[/url][url=https://www.businesstimes.com.sg/companies-markets/offer-for-raffles-united-not-fair-and-not-reasonable-ifa]https://www.businesstimes.com.sg/companies-markets/offer-for-raffles-united-not-fair-and-not-reasonable-ifa

Offer for Raffles United 'not fair and not reasonable': IFA
"But Raffles United is slated to be delisted; its free float has already fallen below 10 per cent."

https://www.businesstimes.com.sg/compani...ive-market
perhaps a good case study for TSMP?

[ghchua]

Offer for Raffles United 'not fair and not reasonable': IFA
"But Raffles United is slated to be delisted; its free float has already fallen below 10 per cent."

I think SGX will have a final call on whether Raffles United is slated to be delisted, or remain suspended indefinitely after the offer closes if the offeror could not execute compulsory acquisition. As highlighted in my case study on Indiabulls Properties Investment Trust earlier in this topic, the trust was suspended for around 1.5 years due to loss of free float, before another better offer was tabled by the offeror. Shareholders of Raffles United should not be in a hurry to accept a "not fair and not reasonable" offer and take the advice of independent directors of the company to reject the offer.

After all, even if the company is suspended from trading, it has to comply with listing requirements since it is still a listed company. It is certainly much better than holding an unlisted public company.

[ghchua]

Offerors cannot rely on loss of public float alone to delist a stock: SGX
https://www.businesstimes.com.sg/compani...-stock-sgx

[karlmarx]

A very educational visual illustration on the possible delisting routes, by Marissa Lee:

https://www.businesstimes.com.sg/sites/d...795681.pdf

[BRT]

this is great, thanks. i wish theres something similar for dual listings.

[dreamybear]

COMMENTARY: PRIVATISATION OFFERS TOO OFTEN A DILEMMA FOR SHAREHOLDERS
Date: March 27, 2023
First published in Straits Times on 27 March 2023
https://sias.org.sg/latest-updates/comme...reholders/
'''....A radical rethink is needed, starting with companies acknowledging that low-ball offers will simply not wash because of improved investor sophistication and Sias’ presence, to independent financial advisers who render less-than-useful opinions, to the need to ensure true independence among these advisers and directors....."

[weijian]

COMMENTARY: PRIVATISATION OFFERS TOO OFTEN A DILEMMA FOR SHAREHOLDERS
Date: March 27, 2023
First published in Straits Times on 27 March 2023
https://sias.org.sg/latest-updates/comme...reholders/
'''....A radical rethink is needed, starting with companies acknowledging that low-ball offers will simply not wash because of improved investor sophistication and Sias’ presence, to independent financial advisers who render less-than-useful opinions, to the need to ensure true independence among these advisers and directors....."

Personally, I feel that rather than trying to lament at or wait for the system to change, the OPMI is probably better served working according to the system.

Buying at 60-70% NAV does not give a margin of safety

Structure is more important than the assets on the balance sheet or business prospects

OPMIs are outsiders anyways. [i]The chance to extract full value together with the major shareholder is the exception.[/i]

Look for people who have more to lose in reputation than money (eg. Chairman Goh as a director of Temasek Foundation)