SIAS has asked the Ong family, which is trying to take Lian Beng Group private, to come up with a better offer than the 62 cents per share on the table.
In an open letter to the company's board, controlled by the Ongs, David Gerald, founder, president & CEO of Securities Investors Association (Singapore), acknowledges a “basic truth” in privatisation offers – that while shareholders will want to receive the full value for their shares, offerors will always pitch their offers as low as possible in order to extract maximum benefit from their purchase.
As such, the final price will always lie somewhere in between these two extremes.
“Both parties will therefore have to compromise and come to a mutually agreeable price, one that the authorities have mandated must be ‘fair and reasonable’,” says Gerald.
He notes that Lian Beng, as at end of Nov 2022, has reported a net asset value of $1.54 per share, which means the offer price of 62 cents is a discount of 60%.
In contrast, Chip Eng Seng Corp, another construction and property firm, was privatised recently at a discount of 25% off the NAV.
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“Companies that have wooed investors at IPO and have made promises of good returns, should not short-change those who have put their trust in them,” says Gerald.
“SIAS will not stand by and allow companies, which can afford to pay, to get away with lowball offers that are not fair and reasonable,” he adds.
Given that Lian Beng is financially strong with retained earnings of $721.2 million and cash of $246.9 million as at end-November, an upward revision is clearly warranted.
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“SIAS calls upon the offerors to do so and table a fair and reasonable offer price,” says Gerald.
Lian Beng shares last traded at 66 cents, down 0.75%.
