by Yantoultra Ngui Yichen
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KUALA LUMPUR: Boustead Holdings Bhd (BHB) is offering RM5.50 per share via cash or share swap in its voluntary takeover (VTO) offer for its 65%-owned subsidiary Boustead Properties Bhd (BPB), representing an 18.53% premium over the latter’s last traded price of RM4.64.

It is offering to acquire the remaining 89.3 million shares in BPB for a total of RM491.15 million and all outstanding RM35 million redeemable convertible bonds (RCB) at RM1.33 per RCB for a total of RM46.55 million. The total consideration amounts to RM537.7 million.

In lieu of cash, BPB shareholders could opt to receive BHB shares at an issue price of RM6.25 per share on the basis of 0.88 BHB share for every Boustead Properties share or 0.21 BHB share for every RCB unit.

The offer price of RM5.50 per share is a 30.95% premium to BPB’s five-day weighted average market price up to May 13 of RM4.20 and a 4.56% premium to the audited net asset per share of RM5.26 as at March 31, 2008.

BHB said yesterday that Lembaga Tabung Angkatan Tentera (LTAT), which holds an 8.6% stake comprising 21.94 million shares in BPB, had given its irrevocable undertaking to accept the offer. LTAT is the largest shareholder in BHB, owning a 57.5% stake comprising 361.7 million shares in the group.

“Once the VTO is successfully completed, the group will be further strengthened as the entire earnings contribution from BPB will be fully realised at BHB level,” its group managing director Tan Sri Datuk Lodin Wok Kamaruddin said in a statement yesterday.

BHB, whose shares had increased 20% over the last two week to its last traded price at RM5.25, said among the other factors leading to the takeover included the relatively illiquid trading of BPB shares, he said.

“It will be more meaningful to consolidate BPB in BHB particularly given the liquidity levels at the holding company,” Lodin added.

BPB, with a market capitalisation of RM1.2 billion, has a paid-up capital of RM255.2 million. The property firm’s net income for its first quarter ended March 31, 2008 (1QFY08) rose 20.44% to RM30.78 million from RM25.55 million a year earlier driven by the strong performance from its plantation and hotel divisions.

Earnings per share rose to 12.06 sen from 10.01 sen a year earlier, while net asset per share stood at RM5.26 versus RM5.14. Cash and cash equivalents was RM147.12 million.

Meanwhile, HLG Research said BHB would able to capture BPB’s cash flow and streamline the group structure via the buyout of the property firm. In FY07, BPB generated some RM200 million in free cash flow (FCF), in which only RM37 million went to BHB in dividend payments.

With the confusing spread of property and plantation assets between the two, the research house said BPB’s scale-down of property development activities following the near completion of Mutiara Damansara also reduced the attraction for maintaining its listing status.

“We think BHB’s end-game is to spin off BPB’s property investment assets, such as the Curve, Cineleisure Damansara and Royal Bintang hotels into a new REIT (real estate investment trust), bundled with other LTAT and BHB’s properties,” it said.

HLG Securities said the buyout would be earnings per share (EPS) dilutive with BPB trading at a FY08 price-to-earnings (PE) ratio of 13 times versus BHB’s nine times consensus PE.

“But we think this deal should be looked at from a cash flow and asset-revaluation angle, not on earnings. On balance, we think the deal should be marginally positive for BHB, though not enough for us to raise BHB’s stock to a buy from hold currently,” the research house said.

This entry was posted on Friday, May 16th, 2008 at 10:52 pm and is filed under Newsclipping. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.