W Capital Markets has refuted SIAS for criticising its opinion stated in its capacity as the independent financial advisor for the privatisation deal of coal miner Golden Energy and Resources .
The corporate finance firm on May 18 calls the offer tabled by GEAR’s controlling shareholders, the Widjaja family, “fair” and “reasonable”.
The offer consists of two inter-conditional steps requiring shareholders’ approval.
SGX RegCo, facing a series of earlier privatisation offers perceived as lowballs, had on Feb 24 reminded GEAR’s offerors that the IFA’s opinion must stand up to scrutiny.
In an open letter sent to the GEAR’s board on May 30, SIAS president David Gerald wrote that “disappointingly, the IFA has conflated the two corporate actions despite SIAS’ highlighting this specific concern at the meeting with GEAR”.
And “clearly, SGX RegCo’s reminder to the IFA regarding the utilization of appropriate valuation methodologies and the necessity for analysis supported by reasonable grounds and assumptions capable of withstanding scrutiny has seemingly fallen on deaf ears,” adds Gerald.
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SIAS adds that W Capital Markets, which wasn’t named in the letter, has not met expectations set specifically by SGX RegCo.
SIAS has urged GEAR’s minority shareholders to reject the offer, which has already been revised once.
In his response on May 31, Wayne Lee, executive chairman of W Capital Markets, “wish to categorically refute” the “allegations which we view to be misconceived and injurious.”
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Among others, Lee maintains that the IFA letter included in the circular to GEAR shareholders dated May 18 has complied with SGX’s direction, and that there’s no “deliberate attempt” to conflate as alleged by SIAS.
SIAS has also taken issue with the valuation methodology used by W Capital, which took into account low liquidity of GEAR shares prior to the offer.
The offer has been criticised by some parties for undervaluing GEAR, given how the value of its stakes in the various gold and coal mines have presumably increased in tandem with the strength of the overall commodities market.
In his response, Lee says in deciding which other counters to be cited as a comparison, he has taken into account historical share price, liquidity, valuation ratios of broadly comparables, sum of the parts analysis and other prior deals.
Lee maintains that combination of EV/TTM EBITDA and SOTP methodologies is the most appropriate approach to be adopted in arriving at the estimated range of values of the shares.
Lee acknowledges that that no single method of valuation will be met with universal acceptance and his firm “humbly respect differences in views and opinions”.
Having said so, Lee says that W Capital has “always been mindful and use our best endeavours to ensure that we exercise due care, skill and professional judgement in all advisory engagements and firmly”.
Lee stands by his view that this deal is based on “appropriate valuation methodologies and supported by reasonable grounds and assumptions.”
