Friday, September 14, 2012

Glenealy Shareholder: "It is the rape of the century on the minority shareholders"

Posted on the Edge:

  • Disgruntled shareholders fail to scuttle Glenealy privatisation Written by Chong Jin Hun of 
    Friday, 14 September 2012 17:00

    KUALA LUMPUR: Standing in front of the board of Glenealy Plantations (M) Bhd at the court convened meeting (CCM), minority shareholder Cho Kwai Lin told other shareholders who were present to cast their vote that the company’s privatisation exercise was “the sale of the century in Malaysia”.

    “If I may be allowed to say so, it is the rape of the century on the minority shareholders,” Cho said in her speech which was read at the CCM and made available to reporters.

    Cho told other minority shareholders that the offer price of RM7.50 per share essentially values Glenealy’s plantation sites at a book value of RM25,000 per hectare.

    “This is a discount to the estimated RM36,000 per hectare which Glenealy paid for a tract in Indonesia”, she said, referring to figures from analysts’ reports.

    At RM36,000 per hectare, Cho argues that Glenealy shareholders should be entitled to at least RM10.26 a share under the privatisation. She said should major shareholders insist on taking over Glenealy, the offer price “should be not less than RM10 a share and that the company’s entire cash pile should be entirely distributed to shareholders”.

    “For all the above reasons, I stand here to call on all minority shareholders present today to join me in voting against the resolution in its present form,” she told those at the CCM.

    Nonetheless, the controlling shareholder, Samling Strategic Corp that held 53.68% equity interest in Glenealy, garnered enough votes to take over the company at RM7.50 per share.

    Analysts noted that Glenealy’s board declared a special dividend of 52.75 sen per share two days before the CCM. This might have to some extent have helped convince some minority shareholders to accept the offer as the dividend narrowed the value gap. The CCM lasted for about four hours at the Prince Hotel.

    Some disgruntled shareholders were voicing their dissatisfaction to the media. Shareholder Lim Thian had asked why wasn’t there a valuation report for the plantation land owned by Glenealy.

    He said having a valuation report is crucial to ensure shareholders get a fair price for the privatisation of the firm. He said the estimated RM25,000 per hectare for the company’s tracts significantly undervalues the company based on previous transactions involving other plantation firms.

    “If there was a valuation report on the deal, shareholders will most likely not approve the proposal. “This is material information but Bursa Malaysia and Securities Commission have not said anything so far,” Lim told reporters.

    Minority shareholder Leong Lau Chew, 71, was outside the hotel ballroom, where other shareholders had deliberated and the voted on the proposed privatisation yesterday.

    Leong, a seasoned investor, said he did not want to attend the meeting as he was unhappy that the unfair privatisation offer price would deny the minorities’ opportunities to ride on the company’s future growth. “I don’t want to go into the meeting … I’m afraid I will probably shout [at the board].

    If the company is not good, why would the major shareholders want to privatise it?” Leong told The Edge Financial Daily while the CCM was in progress. He said Glenealy should remain listed as investors like him had enjoyed dividends from the company all these years.

    When it is taken private, minority shareholders would not be able to reap the gains from Glenealy’s future expansion plans. Leong is one of the many disgruntled minority shareholders of Glenealy who had opposed the privatisation exercise as they viewed the offer price of RM7.50 per share undervalued the plantation company.

    The value of its parcels of plantation land has not been appraised since 1998. The offer price values Glenealy at RM865.2 million, which works out to about RM16,067 per hectare.

    Independent adviser Hwang-DBS Investment said in a circular to shareholders that Glenealy’s implied enterprise value/planted area of RM23,628 per hectare is below the average of RM39,261 per hectare among comparable companies but still within the range of RM18,380 and RM54,940 per hectare.

    As the meeting was ongoing, some shareholders walked out without voting on the proposal as some felt that the RM7.50 per share offer price does not reflect the true potential of the company.

    Some contended that whether they cast their votes or not, the company would still be taken private by major shareholders. The shareholding in Glenealy was fragmented.

    The pass on the resolution on the privatisation exercise once again indicates that a concerted effort by all the minority shareholders is still a rare occurrence in Malaysia corporate scene.

    This article is appeared in The Edge Financial Daily on 14 September, 2012.


Heineken Pilsener said...

This is indeed a sad day for small time malaysian investors. How many times have we seen minority shareholders getting bullied out of their wonderful investments in the last decade? Smart business owners are taking advantage of every cyclical and temporary undervalued situations of their own common stocks. Minority shareholders should really be given more protection in this market. All of such cheap privatizations are perfect case studies for the topic - "The Perils of Value Investing in Malaysia". It is not difficult to spot undervalued and well managed businesses in Malaysia. The greatest challenge for investors is placing your trust on the controlling shareholders for not ripping you off during market downturns for their own good.