Major shareholders reject UMW offer

PETALING JAYA: UMW Holdings Bhd’s plan for a controlling stake in Perodua hit a snag, after both MBM Resources Bhd’s major shareholders Med-Bumikar Mara Sdn Bhd and its wholly owned subsidiary Central Shore Sdn Bhd rejected the take over offer of RM501 million or RM2.56 per share.
However, UMW told Bursa Malaysia in its filing that it is convinced MBM shareholders will accept its offer with continued engagement and an extension of the offer period to April 30 in view of the “reasonableness” of the pricing.
With the rejection, it now begs the question whether UMW will raise its offer price for MBM, even after indicating that it will stand firm on its offer price at a briefing with analysts last week.
Analysts have advised MBM shareholders to reject the deal, calling the offer price unattractive. Hong Leong Investment Bank Research, for one, said it is negative on the exercise as the offer price is lower than its existing target price of RM2.70 and it also represents a 20% discount to its estimated sum-of-parts valuation of RM3.38.
Kenanga Research also noted that based on MBM’s FY18 earnings forecast, the proposed acquisition works out to 10 times price-to-earnings ratio (PER), which is a 38% discount to the sector average of 16 times PER.
Recall that UMW made an offer to Med-Bumikar and Central Shore for their 50.07% stake in MBM in a bid to tighten its grip on Perodua.
Should they have cleared that hurdle, UMW was to have extended a mandatory offer and taken MBM private, increasing its effective interest in Perodua from 38% to 60.6%.
At the same time, UMW also extended its offer to PNB Equity Resource Corporation Sdn Bhd for its 10% stake in Perodua for RM417.5 million or RM29.80 per share. If successful, that would have led to UMW owning a 70.6% stake in Perodua.
In a bid to fund the takeover offer, UMW also proposed a rights issue exercise to raise up to RM1.1 billion.
At today’s market close, MBM’s share price fell 3 sen or 1.2% to RM2.42, while UMW was down by 10 sen or 1.6% to RM6.10.