Bonvests Holdings has proposed to acquire the remaining shares it does not own in Colex Holdings with an offer of 23 cents per share in cash and an intention to delist the latter.
Bonvests Holdings also owns shares in Colex through its wholly-owned subsidiary, Coop International.
Catalist-listed Colex is the 78.94%-owned subsidiary of Bonvests Holdings. Coop International owns a 0.74% stake in Colex.
According to the joint statement released by Bonvests and Colex, the offer comes as Colex faces an “increasingly challenging operating environment ahead”.
The challenges include increased competition in participation for the National Environment Agency’s (NEA) tenders for public waste collection (PWC) licences for domestic and trade premises in Singapore with the next tender cycle only commencing in 2025. According to both Bonvests and Colex, there is “no certainty” of the latter returning to profitability in the near-term.
Other challenges include increased competition in the contract cleaning segment, as well as Colex’s loss-making year in the FY2021 ended Dec 31, 2021. The overall profitability of the company is expected to face “further downward pressures”.
In addition, Colex’s listing status serves “limited purpose”, according to both companies, as it has not tapped on the equity capital markets to raise funds and is unlikely to do so, in addition to incurring the costs of maintaining its listed status.
To be sure, Colex’s costs of remaining listed come close to $150,000 a year, which is “significant” relative to its current earnings.
Finally, privatisation will allow Colex’s management more flexibility to manage the business and facilitate the implementation of any operational change (if required), without the corresponding costs and regulatory restrictions associated with a listing on the Singapore Exchange Securities Trading Limited (SGX-ST), reads the statement.
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Scheme consideration a premium to last traded price
The scheme consideration of 23 cents per share premium of 25.0%, 13.9%, and 13.3% to the last traded price, as well as the one-month, and three-month adjusted volume weighted average price (VWAP) up to and including the last trading date, which was on Oct 12.
The offer is also a total return of 80.2% for Colex’s shareholders if they had acquired shares in the company three years (or 36 months) prior to Oct 12.
In addition, the offer represents a price to net asset value (P/NAV) of 1.62x. According to Bonvests and Colex, this exceeds the average P/NAV of regional precedent waste management transactions and listed regional waste management peers of 1.44x and 1.20x respectively.
As at Colex’s last-traded share price of 18.4 cents on Oct 12 and the company’s NAV per ordinary share of 14.23 cents as at June 30, Colex’s P/NAV is around 1.29x.
“Considering the low historical trading liquidity of [Colex’s shares] on SGX-ST, the proposed privatisation represents an opportunity for shareholders who may otherwise find it difficult, to exit their investment immediately,” say Bonvests and Colex.
“Trading volumes on [Colex’s shares] have been low with no trades being done for the majority of trading days with the counter experiencing low average daily trading volumes and average daily turnover,” they add.
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Ding Chek Leh, executive director of Colex Holdings says, “We recognise the challenging operating environment ahead and the uncertainties facing Colex Holdings Limited. Together with Bonvests Holdings Limited, the proposed privatisation provides us the best chance of navigating Colex Holdings Limited through this period.”
“Having evaluated the offer put forth by Bonvests Holdings, we believe that the proposed privatisation is the best option for scheme shareholders to immediately realise their investment,” he adds.
Gary Xie, joint managing director, Bonvests Holdings, says that the privatisation offer is a “credible” one for Colex’s shareholders to consider.
“We believe that the privatisation of Colex Holdings is necessary in providing it with the operational and financial flexibility to navigate this challenging operating environment,” he adds.
Shares in Bonvests and Colex last traded at 93 cents and 18.4 cents respectively before both companies called for trading halts before the market opened on Oct 13.
