Trading above offer price, Cycle & Carriage looks set to fail in second privatisation bid

TheEdge Mon, Apr 19, 2021 06:00pm - 2 years View Original


THE second bid by Singapore’s Jardine Cycle & Carriage Ltd (JCCL) to privatise Cycle & Carriage Bintang Bhd (CCB) — the dealer of Mercedes-Benz vehicles in Malaysia — may be facing a roadblock yet again.

This is in view of CCB’s share having traded above the offer price of RM2.40, which CCB says is the final price from the offeror. The latest bid values CCB at RM241.79 million.

Clearly, some parties have been accumulating CCB shares with a possible intention to block the deal, as JCCL is not allowed to buy the shares at above RM2.40.

On March 19 — two days after the takeover offer was proposed — the stock even shot up to an intraday high of RM2.48.

Logically, minority shareholders who wish to cash out would sell their shares on the open market, rather than accepting the offer by JCCL.

In fact, the share price of CCB had not exceeded RM2 since the first privatisation attempt by way of selective capital reduction and repayment at RM2.20 per share more than a year ago.

Asked to comment on this “unusual” share price movement, a CCB spokesperson says: “We are not going to speculate on the outcome of this offer … JCCL has stated in the offer document that the offer price is final and that it will not revise the offer price.”

The RM2.40 offer price represents a premium, ranging from 46.23% to 65.12%, above its five-day to one-year volume weighted average prices, prior to the serving of the takeover notice.

Last Friday, CCB’s share price closed unchanged at RM2.42. Over the past year, Singapore-listed JCCL has been tightening its grip on CCB, raising its shareholding to the current 66.47% from 59.1% previously. JCCL is a unit of Jardine Matheson Group, a diversified business entity focused on the Greater China and Southeast Asia.

This time around, will Muar Ban Lee Group Bhd (MBL) — which was the main stumbling block to the first privatisation bid — maintain its stance that CCB is undervalued? Note that the RM2.40 offer price has already exceeded its net assets per share of RM2.34 as at end-December 2020.

While it is not immediately known how significant MBL’s stake in CCB is right now, interestingly, the former had in the last week emerged as a substantial shareholder of property developer Symphony Life Bhd, with direct and indirect stakes of 3.63% and 4.28%, respectively. MBL also proposed to buy an additional 10.6% stake in Symphony Life.

MBL, a palm kernel oil expeller manufacturer, held 3.31% in Symphony Life as at July 22, 2020, according to the latter’s annual report.

Symphony Life’s net profit fell 43.9% year on year to RM46.37 million for the first nine months ended Dec 31, 2020, owing mainly to lower contribution from its Star Residences project in the KLCC area in Kuala Lumpur. It had RM202 million in unbilled sales, with total assets of RM1.2 billion, as at the end of last year.

Why is JCCL determined to delist CCB?

It is unclear why JCCL is so eager to take CCB private, having failed in its first privatisation attempt in February 2020.

CCB explains that the voluntary takeover offer was triggered by economic uncertainty and tough business prospects.

“Given the market conditions and ongoing headwinds CCB faces, the business will require significant capital expenditure to support its continued operations and longer-term capital investments.

“Considering global and local economic environment uncertainties, high household debt levels, moderation in consumer spending and the continuation of strict lending guidelines for hire purchase loans by financial institutions, JCCL believes the outlook for CCB will continue to remain sluggish and trading conditions are expected to remain challenging, with continued pressure on profit margins,” the CCB spokesperson tells The Edge in an email reply.

Owing to poor consumer sentiment, CCB’s financials remained weak. In the financial year ended Dec 31, 2020, it incurred a lower net loss of RM12.99 million compared with RM39.2 million in FY2019.

The local premium luxury car segment has been dampened by softer demand, with CCB’s vehicle unit sales and after-sales volume declining 2% and 12% respectively in 2020, compared with 2019.

With gross borrowings of RM131.2 million, this puts CCB in a net debt position of RM106.6 million as at end-December 2020.

The company has 12 outlets in Malaysia, according to its website. Its land assets are spread across Kuala Lumpur, Selangor, Perak, Pahang and Penang.

According to the Capital Markets and Services Act,  if an offer receives an acceptance level or more than 90%,  the offeror may compulsorily acquire all the remaining shares.

The first closing date for the offer is April 28. Affin Hwang Investment Bank Bhd has been appointed the independent adviser for the privatisation.

 

The content is a snapshot from Publisher. Refer to the original content for accurate info. Contact us for any changes.






Related Stocks

2925 0.000
KLCC 7.440
MBL 0.440
SYMLIFE 0.350

Comments

Login to comment.