PETALING JAYA: Jardine Cycle & Carriage Limited is proposing to take Cycle and Carriage Bintang Bhd (CCB), the dealer of Mercedes-Benz vehicles in Malaysia, private via a selective capital reduction (SCR) and repayment exercise at RM2.20 per share.
The offer price represents a whopping 91 sen or 70.5% premium against its last trading price of RM1.29. CCB shares was suspended today pending the material announcement.
In a Bursa Malaysia filing, the group said the offer price is also at a premium of 94.66 sen or 75.52% above its five-day volume weighted average price of RM1.2534.
“The proposed SCR will be funded by way of an advance from Jardine. Jardine confirms that the proposed SCR will not fail by reason of insufficient financial capability of CCB.”
“Upon the completion of the proposed selective capital repayment, Jardine will own 100% equity interest in CCB and Jardine does not intend to maintain the listing status of CCB on the Main Market of Bursa Malaysia,” the filing said.
As of Nov 8, Jardine held 59.54 million shares, representing a 59.1% stake in CCB.
According to the filing, Jardine said the rationale for the proposed SCR came on the back of several reasons, namely: a challenging operating and trading environment, a long term commitment by Jardine and additional capital investments expected for CCB, an opportunity for entitled shareholders to realise their holdings, and seeing a minimal benefit from the listing status.
“Despite a competitive product line-up and the tax holiday in 2018, CCB could not generate satisfactory sales and returns in the recent years. The tax holiday in 2018 brought forward many car buying decisions resulting in the decline in sales in 2019.
“The above has adversely impacted CCB’s financial performance and resulted in CCB incurring a net loss after taxation from continued operations of RM28.2 million for the financial period ended Sept 30, 2019,” it said.
For the nine-month period up to September 2019, the sales for Mercedes-Benz models experienced a sharp correction with a decline in sales volume by about 26% with 7,764 units in 2019 compared to 10,461 units in 2018.
During the period, CCB incurred a net loss of RM16.95 million against a net profit of RM17.82 million in the same period last year.
The filing also noted that maintaining the listing status of CCB was of minimal benefit, as the company had not undertaken any fund raising activity from the capital market over the past 15 years.
Meanwhile, Jardine said that as the controlling shareholder of CCB, it is committed to continue investing in network upgrades and to operate the dealerships to the required standards.
“The capital investments required to maintain the network at the requisite standards is high with long payback periods, especially in the current challenging market conditions.
“The initiatives to appropriately address these challenges are likely to require additional capital investments in the longer term...which Jardine can better address strategically in the context of CCB as a private company and as part of a larger regional network,” it said.
The acceptance period for the proposed SCR will close on Dec 6, 2019.
