Hanwha Group, a substantial shareholder of Dyna-Mac NO4 , is offering 60 cents for the shares it does not own in the Mainboard-listed company. The offer price represents a 21.2% premium to Dyna-Mac’s last-traded price of 49.5 cents on Sept 10. It also represents a premium of 6.2%, 14.1%, 29.3% and 50% to the volume-weighted average price (VWAP) for the one-, three-, six- and 12-month trading period in Dyna-Mac’s shares.
According to Hanwha Group, its companies, Hanwha Aerospace and Hanwha Ocean, intend to secure management control.
The offer will be conducted through a local special purpose company (SPC) in Singapore where Hanwha Aerospace and Hanwha Ocean will fund up to 600 billion Korean won ($586 million) assuming it has 100% of Dyna-Mac’s shares at the close of the offer. The offer will be extended to all new shares unconditionally issued or to be issued before the closing of the offer. This includes the bonus warrants issued by Dyna-Mac which are exercisable into new shares. The offer also extends to the outstanding awards granted under Dyna-Mac's share award scheme made in 2021.
The tender offer is conditional upon a minimum acceptance rate of more than 50% of the shares in Dyna-Mac, including all the shares owned by Hanwha Group and the concert parties. The offer will also depend on a favourable anti-trust decision by the Competition and Consumer Commission of Singapore (CCCS).
The offer will not include Dyna-Mac's warrants. As at Sept 11, the company has 137.7 million warrants, which are exercisable into new shares. The sum amounts to 10.92% of the enlarged number of shares, which will number 1.26 billion. While Hanwha Group would have been required to make an offer to Dyna-Mac's warrant holders under rule nine of the Singapore Code on takeovers and mergers, the group obtained a waiver of the requirement from the Securities Industry Council of Singapore (SIC).
According to the group, should the offer be extended to Dyna-Mac's warrants, it would have become unconditional under its terms, and the warrants would continue to be exercisable into new shares. Furthermore, the warrants expire on Oct 22.
"Due to the anticipated timing required for the fulfilment of the merger control condition, the offer is highly unlikely to become unconditional in all respects by the expiry of the warrants. As such, the warrants will in all likelihood expire prior to the first closing date of the offer without the offer becoming unconditional in accordance with its terms, and the warrants offer will lapse upon the expiry of the warrants," reads Hanwha's statement.
In such an event, the warrant holders who have accepted the offer made for their warrants would not receive payment given that the offer would have lapsed. They would also be unable to exercise their warrants into new shares and tender the shares into the offer because they won't be allowed to withdraw their acceptances in time to do so.
Hanwha's stake
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Hanwha Aerospace and Hanwha Ocean have already invested 116 billion won as of May to secure a 25.4% stake in Dyna-Mac.
Hanwha Group first bought shares in Dyna-Mac in May this year when Keppel divested its 23.91% stake – or 250 million shares – in Dyna-Mac via a married deal. The shares were bought for $100 million or 40 cents apiece.
According to a Singapore Exchange S68
In a Sept 11 filing, Hanwha Group says it does not intend to delist Dyna-Mac from the Mainboard. However, if the free float requirement – where 10% of Dyna-Mac’s shares are to be held by the public – is not satisfied at the close of the offer and the trading of Dyna-Mac’s shares is suspended on SGX, the group will not “undertake or support any action” for the trading suspension to be lifted.
In the group's view, the acquisition of Dyna-Mac may allow Hanwha Ocean to "generate potential synergies" such as economies of scale, improvement of productivity and cost efficiency among others. The group is also seeing an increase in global demand for floating offshore plants; 83 floating production storage and offloading (FPSO) units are expected to be ordered by 2030.
The tender offer process is expected to be completed by end-2024.
Maybank Securities analyst Jarick Seet who hailed Dyna-Mac's "explosive" and "spectacular" 1HFY2024 ended June 30 results, sees that the offer is "fair" but may be "slightly on the lower end".
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"Our last target price was 64 cents," Seet points out. "There is also a good chance that they might raise the offer to cross 50% and have [a] controlling stake as they have stated this is not the final offer."
Lim & Tan Securities analyst Nicholas Yon recommends investors wait for a final offer as Hanwha Group’s offer is “too cheap,” looking at the consensus target range of 64 cents to 71.5 cents.
Noting that the offer price is lower than his target price of 71.5 cents, Yon believes that a higher price may be given eventually. He adds that Dyna-Mac’s order book has grown “considerably” and the company may fulfil even more of its orders with the completion of its new yard.
The company also has an “extremely strong” balance sheet with $308 million as of 1HFY2024 ended June 30. If the company’s warrants are all converted, Dyna-Mac will have $18 million to $20 million more in cash, implying that half of the company is in cash.
On Aug 6, Dyna-Mac reported earnings of $38.8 million for 1HFY2024, over 3.8 times higher than its earnings of $10.1 million in the corresponding period the year before. Revenue for the six-month period surged by 42.5% y-o-y to $259.7 million due to the completion of major projects during the first half of the year.
Shares in Dyna-Mac opened at 61.3 cents on Sept 12, 23.8% higher than its last closing price of 49.5 cents. Dyna-Mac's highest closing price for the last three years before the offer was 61.5 cents.
See also:
- 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
- Estate of Dyna-Mac’s founding shareholder issues follow-up statement after 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%
