Recall in an earlier
posting that yours truly has speculated on the possible bumper dividends
for the 2nd time coming from Hwang.
In a surprise turn of events, Hwang had announced on Bursa
Malaysia that its major shareholders, holding about 30% of total shares outstanding
in Hwang Capital intend to launch a conditional takeover offer for the
remaining 70% shares outstanding for Hwang Capital at RM2.65 per share, a
decent premium of about 16% from current share price of RM2.21.
The share price had a brief run up in late March, almost
breaching the RM2.65 levels before share price took a dive following an
announcement that it will be extending timeframe for acquisition of new
business for another year to April 2017.
Shareholder wishing to sell back their shares to Hwang at
RM2.65 can do so should Hwang able to control more than 50% of voting shares
after tabulating all valid acceptances to the offer.
A quick check on the shareholder register showed another
substantial shareholder, DBS bank, which is in turn controlled by Temasek,
Singapore’s sovereign wealth fund, with the potential in becoming the kingmaker
in this deal. Its stake at a price of RM2.65 is valued at approximately SGD61 million,
chump change compared to its huge asset base. The author is of the view that likelihood
of DBS selling away the stake is high, thus paving way for an eventual
delisting, which is incidentally the major shareholder’s desired intention.
Minority resistance may surface due its substantial discount
of 21% compared to its NTA of RM3.22 per share. However, low interest rate
environment and a continued delay may force shareholders to sell in view of the
dimming prospects for its only core moneylending business.
Ultra patient shareholders may finally see light at the end
of tunnel after holding on to Hwang shares. Since the bumper dividend on April
2014, share price has been on a steady uptrend from a low of RM1.80, and
shareholders may have the chance to dispose its shares for a total of 47%
capital gains after 2 and a half years.
Share price movement post announcement of the deal when the
stock begins trading may present further opportunities for risk arbitrage.
Final thoughts:
Pros: Opportunity for unlocking share value for shareholders,
higher offer price
Cons: Failure to obtain requisite valid acceptances pass
conditions precedent.
Note: This is not an investment advice. Buy and sell any
securities at your own risk.
Disclosure: None.
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