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JPMorgan Securities (Malaysia) Sdn Bhd reckons the fair value of Astro All Asia Networks plc shares is between RM3.60 and RM4.20, thereby indicating that the takeover offer by T. Ananda Krishnan at RM4.30 per share is priced fairly.

JPMorgan and Public Investment Bank had been engaged as independent advisers by Astro’s board of directors. The bank also advised investors to accept the offer.

However, JPMorgan had clarified that its valuation of Astro’s fair price did not take into account the arbitration award that Astro had won against its Indonesian partner.

JPMorgan Malaysia managing director Didi Yahya, in a letter dated May 7, said the valuation did not take into account any amounts to be received by or which were due to Astro.

To recap, arbitrators in Singapore had ordered James Riady’s Lippo Group to pay RM782mil to Astro after the company lost RM1.16bil in a failed Indonesian pay-TV venture. However, observers have raised doubts that Astro would be able to recover the entire amount.

Astro Holdings made a conditional takeover of Astro on March 17 for RM4.30 per share. Astro Holdings is a special-purpose vehicle in which Ananda has a 58% stake via Usaha Tegas Sdn Bhd, with another 30% held by Khazanah Nasional Bhd and the remainder by a number of bumiputra companies.

Meanwhile, Astro’s  board of directors said in a circular to shareholders yesterday that the offer price was above the highest traded price achieved in the two-and-a-half years preceding the notice for the takeover offer and was at a premium of 23.6% over the company’s last traded market price on March 12.

Public Investment Bank said the offer provided an avenue for shareholders to realise their investment at a reasonable premium and enable them to avoid a period of substantial capital outlay the company expected to encounter in the short to medium term due to expansion plans in the domestic and foreign businesses.

However other commentators have opined that the offer price of RM4.30 per share is too low, considering the fact that Ananda had managed to extract more value out of Maxis after the latte’s privatisation in 2007. Furthermore, Astro has a growing business in India, a country whose assets are among the most sought after.

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Ananda Krisnan relisted Maxis but taking Astro private.

Tycoon T. Ananda Krishnan, Khazanah Nasional Bhd and partners have offered to buy out minority shareholders of Astro All Asia Networks plc in a cash deal that values the pay-television operator at RM8.5 billion.

Shareholders stand to get RM4.30 (5076) for each share held, which is a 21 per cent premium to the stock’s last traded price of RM3.56.

The offer was made late yesterday by special purpose vehicle Astro Holdings Sdn Bhd, whose main shareholders are Ananda’s Usaha Tegas Sdn Bhd and affiliates, Khazanah and Bumiputera foundations. Together, they own 72.9 per cent of Astro.

The company does not intend to keep Astro listed and, if all goes well, it will be delisted sometime in the middle of June, said CIMB Investment Bank, the adviser to Astro Holdings.

The move to take Astro private is to facilitate plans to make it a leading regional integrated media group.

Astro needs to spend substantially – between RM3 billion and RM3.5 billion over the next three years – to accelerate its domestic and international growth, inclu-ding in migrating to high-definition television, said Datuk Seri Nazir Razak, group chief executive of CIMB Group Holdings Bhd, which owns CIMB Investment.

The substantial investments would strain the company’s gearing and limit its ability to pay dividends, he added.

“A private status would give us greater flexibility to achieve this goal of expansion. We believe the deal offers minority shareholders an attractive price while not subjecting them to the associated risks of the company’s next growth phase,” Nazir told reporters at a briefing late yesterday.

Taking it private will also let the owners have more freedom in making corporate decisions without having to seek shareholders’ approval.

The reasons for the exercise were similar to that cited when another of Ananda’s companies, Maxis Communications Bhd, was taken private in 2007.

Maxis, after being privatised, took on a foreign partner in the form of Saudi Telecom, and a revamped version of the company, comprising only the domestic operations, was listed just last year.

Nazir said a relisting of Astro would be considered once it achieved a more stable earnings profile.

The Astro privatisation will go through if there is acceptance of more than 90 per cent of the shares.

Astro Holdings will have to come up with some RM2.4 billion to buy the minority portion. CIMB is leading a consortium of banks to arrange the financing.

Nazir is confident the deal will go through as the offer price is “fair”, coming in above analysts’ average targets of about RM3.70 for the stock.

“It’s a good price. I think they’ll have no problems taking it private,” said Yeonzon Yeow, head of research at Kenanga Research, which had a target price of RM3.65 for Astro.

RHB Investment Bank Bhd and UBS Securities Malaysia Sdn Bhd are the advisers to Astro in the deal, while the independent financial advisers are Public Investment Bank Bhd and JPMorgan Securities (Malaysia) Sdn Bhd.

Meanwhile, Astro chairman Datuk Badri Masri said the company would continue to be managed by the current board and management.

Astro owns 20 per cent of India’s Sun Direct TV, a direct-to-home service which is still loss-making, as well as businesses in China (library and content development) and a new Internet Protocol television initiative in Australia, the Middle East and North Africa.

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Astro All Asia Networks Plc posted a pre-tax loss of RM372.373 million for the financial year ended Jan 31, 2009 compared with a pre-tax profit of RM136.631 million the previous year.

However, its revenue rose to RM2.971 billion from RM2.602 billion previously due to higher subscriber additions in Malaysia pay-TV business, Astro said in a statement to Bursa Malaysia here today.

“Gross subscriber additions in the year were at a new high of 612,000 resulting in 374,000 net new customers,” it said adding that “good progress was also made in the pay-TV business in India”.

Meanwhile, Astro said it has accounted for RM687 million of cost incurred in providing services and support to a previously proposed joint venture in Indonesia.
It said various legal actions have commenced in respect of developments in Indonesia and the group is required to account for costs associated with these actions as they incur.
Chairman Datuk Badri Masri said Astro will be more cautious and manage the business with a high regard for conserving cash and minimising costs amid the current economic uncertainties.

“We can continue to grow the Malaysian pay-TV, radio and content businesses by strengthening their value propositions to achieve better market share and implementing effective cost management measures to sustain margins and profit growth,” he said. – Bernama

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