Offer for Karambunai seen not fair but reasonable

PETALING JAYA: Karambunai Corp Bhd’s (KCB) largest shareholder Tan Sri Chen Lip Keong’s proposal to take the property and tourism company private is not fair but reasonable, the independent adviser Interpacific Securities (Interpac) says.

Interpac said the share offer price of 11 sen was a discount of 14 sen or about 56% to the revalued net asset value (RNAV) per KCB share of 25 sen.

“Hence, we are of the view that the share offer price is not fair,” it said in its advice to minority shareholders yesterday.

Interpac said the market prices of the revalued property assets held by KCB were affected by various factors, including but not limited to, liquidity risk and valuation risk as the eventual transacted price may not necessarily reflect the market value of the revalued property assets ascribed by the valuer.

“Holders should note that the RNAV approach implicitly includes the assumption that the revalued property assets may be disposed of by KCB at a price determined by the valuer, on a willing buyer-willing seller basis in an arms-length transaction with a third party.

“The valuer’s valuations do not account for the effort, time, marketability, buyer demand and uncertainty relating to a property sale and potential transaction costs that would be required to dispose of the assets and realise the intrinsic value of the properties,” it said.

Interpac said as for the warrant offer price of three sen, it was a discount of five sen or about 62.5% below the theoretical value of the warrant of eight sen.

Interpac said the takeover was not conditional upon any minimum level of acceptance of the offer shares, as Chen already holds more than 50% of the voting shares. Chen holds 73.41% of the shares.

The offer will remain open for acceptance until 5pm on Nov 4, which is the first closing date.

It also said Chen did not intend to take any steps to address the shortfall in the public shareholding spread of KCB.

“Presently, KCB is also not in compliance with the public spread requirement. We recommend that the holders accept the offer.

“However, holders who intend to exit their investments in the offer securities may also consider selling their KCB shares and/or warrants in the open market if they are able to obtain a price higher than the offer price, net of related expenses.

The decision to be made would rest on the risk appetite and specific requirements of the individual holder,” it said.

Meanwhile, the non-interested directors also concurred with the evaluation and recommendation of Interpac that the offer is “not fair but reasonable”. They recommended that minority shareholders accept the offer.

To recap, on Sept 23, KCB received an unconditional voluntary takeover offer from UOB Kay Hian Securities (M) Sdn Bhd on behalf of Chen to acquire the remaining 1.54 billion shares or 26.59% interest in the company not already held by him, at a cash price of 11 sen per share.

He also offered three sen apiece for the remaining 523.5 million warrants, representing 51.57% of the outstanding warrants he does not hold.