EON Cap rejects Hong Leong’s offer
Filed Under (Business News) by Webmaster on 03-02-2010
Tagged Under : eon capital, Hong Leong
EON Capital Bhd (EON Cap) has rejected Hong Leong Bank Bhd’s (HLB) RM4.92bil cash offer to buy its entire assets and liabilities and will not table the offer for consideration and approval by shareholders, therefore lapsing it.
In a statement to Bursa Malaysia yesterday, EON Cap said after fully consulting its advisers and considering all available information, its board of directors had resolved that the offer was “not in the interests” of EON Cap and its shareholders based on, among others, the purchase consideration in relation to the offer.
“The EON Cap board rejected HLB’s acquisition offer today, because it significantly undervalues EON Capital,” the financial group said in a separate statement to the media yesterday.
In its own statement, Hong Leong Financial Group Bhd president and HLB director Raymond Choong said the financial group was “disappointed” with EON Cap’s decision.
“We are disappointed as we have made a fair and attractive offer. We were hoping that the EON Cap board would table our offer to shareholders for their decision,” Choong said.
EON Cap told Bursa Malaysia the board of directors had accordingly resolved not to table the offer for consideration and approval by its shareholders at a general meeting and not to submit an application to the relevant authorities for approval to accept the offer.
HLB said it received EON Cap’s letter yesterday informing of the latter’s decision. “Accordingly, the offer has lapsed,” it said.
In its statement, EON Cap chairman Tan Sri Syed Anwar Jamalullail said: “We have taken the time to fully consider HLB’s bid and have chosen to reject it. This decision is in line with the board’s fiduciary duty to secure the best value for all shareholders.”
Syed Anwar said the “undervalued acquisition bid” did not account for EON Cap’s significant recent and projected growth, underpinned by the company’s recently completed transformation programme.
According to EON Cap, its three-year transformation programme, completed last October, had positioned the group for “strong and sustained future growth as an independent company”.
Analysts said now that the EON Cap board had decided not to put the takeover bid up for shareholders’ vote, major shareholders of the company could call for an EGM for the proposal to be considered.
“The shareholders could call for an EGM; it really depends on how much they want it (to sell),” said an analyst with a local bank-backed brokerage.
Alternatively, they might hold off for a while to see if they “get better offers from other potential bidders or if HLB decides on another move,” she added.
According to the Companies Act, shareholders with at least 10% of EON Cap shares can call for an EGM to table the offer for shareholders to consider.
EON Cap’s major shareholders comprise Rin Kei Mei with a 15.5% stake, Tan Sri Tiong Hiew King (17.1%), Primus Pacific Partners (HK) Ltd, (20.2%), Khazanah Nasional Bhd (10%) and the Employees Provident Fund (EPF:12%) .
It is understood only a simple majority is needed from shareholders to approve the proposed transaction at an EGM.
In other words, the offer requires merely the consent of shareholders with a combined 50% plus one share of EON Cap’s paid-up capital
Rin, Tiong, Khazanah and EPF, who according to some analysts “should take the offer”, collectively hold a combined 54.6% stake.
In theory, if these substantial shareholders are willing to accept HLB’s offer, they can ask to convene an EGM to vote on the deal.
Primus, said to be the unwilling seller in the deal, is understandably not interested in the all-cash offer which would crystallise its losses.
Primus had in 2008 bought EON Cap shares at RM9.55 each, which is more than a third above HLB’s offer price of RM7.10 a share
Although HLB’s offer is lower than general expectations, it is believed that the price is still higher than Rin and Tiong groups’ cost of around RM2 per share, and Khazanah and EPF’s cost of below RM6 per share.
At RM4.92bil, HLB’s offer valued EON Cap at 1.4 times price to book value, which falls at the lower spectrum of the valuation range of previous local merger and acquisition deals.
Analysts have said that RM8 per share (1.6 times price to book value) could be a “fairer price”.
Last Wednesday, EON Cap said it had requested for an extension to Feb 2, an additional five-day extension to its seven-day deadline to decide if it wanted to accept HLB’s offer.
EON Cap’s financial advisers Goldman Sachs and Ethos & Co indicated early last week that there are other parties interested in acquiring EON Cap, apart from HLB.
