Hanwha Group’s offer of 60 cents for Dyna-Mac lacks an “attractive control premium”, says the estate of Dyna-Mac’s founding shareholder, Desmond Lim Tze Jong, in an Oct 10 statement.
The estate issued a follow-up statement stressing that the offer is not “compelling” after Hanwha issued its offer document on Oct 2. In the offer document, the group kept its offer price, although it did not say that it was the final offer.
“The offer from Hanwha of 60 cents represents only a 6.2% premium to the one-month volume weighted average price (VWAP) and 14.1% premium to the three-month VWAP,” says the estate. “This does not appear to have factored an attractive control premium, which according to the Corporate Finance Institute2 would average between 20% to 30% of a target’s share price.”
In its latest announcement, the late founder’s estate pointed out that Dyna-Mac’s share price has been consistently trading over Hanwha’s offer price since the offer was made on Sept 11. According to the estate, this reflects Dyna-Mac’s investors’ confidence in the company’s growth potential.
Referring to the analysts’ share price targets of between 64 cents to 71.5 cents, the estate attributes Dyna-Mac’s accomplishment to its current management team and its “foresight and approach to customers and contracts”.
However, in its offer document, Hanwha pointed out that no other party has announced an offer for Dyna-Mac and added that there were “volatility risks” present in the economy and industry. Furthermore, there are low barriers to entry in Dyna-Mac’s business, which is in the upstream market for the fabrication of offshore topside modules.
That said, the Korean conglomerate noted that Dyna-Mac now requires a “global scale” to continue to grow in the current industry landscape.
“Like Hanwha, the Estate believes that Dyna-Mac possesses all the right qualities to become a global player in the offshore marine industry and it is clear that both Hanwha and the Estate share a common aspiration for the group to reach greater heights as a Singapore home-grown enterprise,” reads the announcement,” says the estate in its Oct 10 statement.
It adds that Dyna-Mac’s positioning in Singapore is a “good fit” with Hanwha’s strategy of having multiple yards in strategic locations like the city-state.
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“Dyna-Mac’s intrinsic, additional and synergistic value to Hanwha should be given extra consideration when computing the control premium. Securing control of Dyna-Mac could enable Hanwha to realise synergies that can be created, including economies of scale, improving productivity and cost efficiency, as well as strengthening engineering competencies,” adds the estate’s spokesperson.
As at 4.05pm, shares in Dyna-Mac are trading 0.5 cents lower or 0.79% down at 63 cents.
See also:
- Hanwha Group makes tender offer of 60 cents per share for Dyna-Mac (update)
- ZICO Capital appointed as IFA for Dyna-Mac's offer
- Estate of Dyna-Mac’s founding shareholder does not find Hanwha’s cash offer compelling
- Hanwha Group explains rationale behind Dyna-Mac’s offer price
- Standoff as Hanwha keeps 60 cents offer price for Dyna-Mac in offer document
- Hanwha Group announces ‘final offer’ of 67 cents for Dyna-Mac (update)
- Dyna-Mac’s IFA deems offer to be ‘fair and reasonable’
- Estate of Dyna-Mac’s founding shareholder to accept Hanwha’s offer
- Hanwha Group's offer for Dyna-Mac turns unconditional with acceptances; offer to remain open till Nov 20
- CCCS clears proposed acquisition of Dyna-Mac by Hanwha Ocean
- Hanwha to exercise compulsory acquisition rights after stake in Dyna-Mac crosses 90%
