Catalist-listed Singapore Medical Group (SMG) has received a privatisation bid that will value the company at $180.0 million based on the 486.38 million shares in the company’s issued and paid-up capital. The offer is made with a view to delist and privatise the company.
On Sept 13, TLW Success (the offeror) has, through Ernst & Young, made a voluntary conditional general offer of 37 cents per share in cash to SMG’s shareholders.
The shareholders in TLW Success are Tony Tan Choon Keat, Dr Beng Teck Liang and Dr Wong Seng Weng. Tan is the non-executive chairman of SMG, Dr Beng is the executive director and CEO of SMG, while Dr Wong is the executive director of SMG. As at Sept 13, TLW Success has an issued and paid-up share capital of $3 comprising three ordinary shares held equally by the trio. Tan and Dr Beng are on the board of directors in TLW Success.
Cash price is a premium of 18.1% over the one-month VWAP of shares traded on the SGX
The cash price exceeds all of the previous closing prices of SMG’s shares over the last three years except for the period from Dec 18, 2020 to April 15, 2021, where SMG was in preliminary discussions regarding a possible transaction involving its shares. The price also represents a premium of 18.1% over the one-month volume weighted average price (VWAP) of shares traded up to Sept 8, which is the last full day on which the shares were traded on the SGX.
SMG’s shareholders may also accept one new ordinary share in the capital of the offeror for each offer share. The issue price per share in the offer will be the same as the cash price offered.
Based on the company’s net assets as at Dec 31, 2021, the implied price-to-net asset value (NAV) per share ratio is 1.1 times while the implied price-to-net tangible assets (NTA) per share ratio is 4.2 times.
According to the offerors, the cash consideration provides SMG’s shareholders with a “clean” opportunity to realise their investment into the company.
It adds that the trading volume of shares in SMG has historically been low with an average daily trading volume of approximately 1.0 million shares in the one-month period and 533,172 shares in the 12-month period. This comes even as the company has consistently shown a strong track record of profitability and operational execution.
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Growing SMG into a pan-Asian healthcare player
Upon its successful privatisation, the offeror has indicated that it will review and “carefully examine” the business opportunities afforded to SMG with the intention to grow and develop the company into a pan-Asian healthcare player.
“Such opportunities may involve entering into joint ventures, collaborations, investments and acquisitions or may involve the restructuring or reorganisation of the company or a combination thereof which can result in [an] increased operating risk to the company especially given the current global operating and economic environment,” reads the statement released on Sept 13.
“There is therefore no assurance that such plans can be successfully implemented or when, if at all, positive returns can be generated if such plans are pursued,” it adds. Furthermore, the offer will provide the offeror with the ability to “immediately reduce its regulatory and compliance related costs and to execute its future plans for the company without exposing public shareholders to the increased risks that may arise as a result”.
At present, the offeror also sees that the SMG is facing “significant headwinds” due to a “challenging macro-economic and operating environment driven by operational cost increases, shortage of skilled healthcare labour and wage increases in the midst of an inflationary environment and as a result of the ongoing Covid-19 pandemic”.
“In light of the foregoing, the offeror believes that the company will face significant operating and financial constraints in executing its strategies and plans for growth. The offeror also believes that while investment opportunities are still available to pursue organic and inorganic growth with synergistic partners, the environment in which such opportunities can be realised will become more challenging in the short to medium term,” it adds.
Irrevocable undertaking
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As at Sept 13, Tan, Dr Beng and Dr Wong have a total interest in 80.2 million shares in SMG, or a collective 16.49% stake in the company’s total share capital. Each of them have since executed an irrevocable undertaking to accept the offer made by the offeror.
The trio will receive the share consideration in the offeror’s share capital in lieu of the cash offer.
The rest of SMG’s major shareholders have also executed irrevocable undertakings in favour of the offeror as at Sept 13. These shareholders include CHA Healthcare Singapore, Silver Mines Global, Red Ancient Global, Cheng Yong Liang, Vertical Assets Holdings, Richard Yong Chin-Wee and Joyce Ooi Eu Huey (the promoters). In total, the shareholders which have undertaken an irrevocable undertaking, hold a total of 251.3 million shares in SMG, or 51.67% of its total stake.
SMG was incorporated in March 2005 and listed on the Catalist board in July 2009. Its privatisation offer will go through should shareholders holding 90% of the shares in the company vote in favour of the offer.
Shares in SMG last closed at 32.5 cents on Sept 8 before its trading halt on the morning of Sept 9.
