Bonia's MGO at 2.04 per share!

Posted on Business Times on 25 Aug 2012:

• Bonia's CEO strengthens grip
  
  By ADELINE PAUL RAJ Published: 2012/08/25
  
  EYEING CONTROL: Chiang Sang Sem in talks to acquire stakes in the company at an indicative price of between RM1.80 and RM2.00 a share
  
  BONIA Corp Bhd's chief executive officer Chiang Sang Sem and his family may raise their stake in the leatherwear firm to over 50 per cent, a move that would trigger a mandatory general offer (MGO) for the rest of the shares.
  
  Bonia, in a stock exchange filing late yesterday, said Chiang is in discussion with several parties to acquire "certain stakes" in Bonia at an indicative price of between RM1.80 and RM2.00 a share.
  
  The shares last traded at RM2.59, a 6.1 per cent rise from the previous day.
  
  Observers say Chiang's move to strengthen the family grip in the entrepreneur-driven company could be to stave away a potential takeover from Permodalan Nasional Bhd (PNB).
  
  Speculation had been rife late last year that state-owned fund management PNB was eyeing a takeover of Bonia shortly after its takeover bid for property firm SP Setia Bhd.
  
  PNB, which had owned a 32.98 per cent stake in Bonia at that time, just slightly under the 33 per cent level that would have triggered a MGO, has since been selling off some shares in the market.
  
  PNB currently owns a direct 12 per cent stake in Bonia, but together with some of its funds, own a collective 21.04 per cent stake.
  
  Chiang, who is also the group executive chairman, and his family currently hold 32.98 per cent of the company.
  
  Bonia said when the Chiang family's purchase of over 50 per cent in the firm was completed, they would be obliged to extend a MGO for the rest of the shares at the same price.
  
  They intend, for now, to maintain Bonia's listing status on the Main Market of the stock exchange.
  
  "Their intention will be firmed up upon completion of the potential acquisition," Bonia said.
  
  The move by Chiang comes amid expectations of more mergers and acquisitions (M&As) in Malaysia's consumer market.
  
  OSK Research, in a report earlier this week on the sector, said consumer companies have to "conquer or be conquered".
  
  "In recent years, consumer companies in the emerging markets have been consolidating to strengthen their presence and improve operating efficiencies," it noted.
  
  It said this was because cash-rich companies from the developed world have been on the lookout for opportunities to venture into new markets, especially in emerging markets.
  
  "We believe there will be more consolidation or M&A moves in the consumer sector, which may in turn spur a re-rating of the sector," it said.
  
  It had a "buy" call on Bonia with a target of RM3.15 a share.
  
  In the year ended June 2011, the company posted a net profit of RM42.6 million.
  
  Chiang told reporters in December last year that he hoped to see double-digit growth in the current financial year.

The Bonia shares were traded at 2.59.

The Bossie said he wants to buy more... but at a discount... between 1.80 and 2.00.

A move that would tragger a MGO.

With MGO offered at steep discounts, how not to panic?

• The stock fell by as much as 9.3 per cent during the day to RM2.35, before gaining some ground to close at RM2.49, or 3.9 per cent lower than the previous day.

And of course the situation was 'helped' by OSK comments.

• Bonia shares too cheap to let go, says OSK Posted on 27 August 2012 - 09:04pm
  
  PETALING JAYA (Aug 27, 2012): Minority shareholders of Bonia Corp Bhd are unlikely to accept a potential offer from its group executive chairman and CEO Chiang Sang Sem to increase his stake in the retailer, as the RM1.80 to RM2 per share offer price is deemed too low, OSK Research Sdn Bhd said.
  
  "Chiang will have to offer a higher price in the potential mandatory general offer (MGO) in order to entice the company's minority shareholders to give up their shares," the research firm said in a note to clients today.
  
  "(But) assuming the proposal went ahead and triggered an MGO, we still do not think that it would achieve the delisting threshold of 75%," it added.
  
  Last Friday, Bonia told Bursa Malaysia that Chiang is in discussions with several parties to acquire certain stakes in Bonia in a bid to increase his stake in the company. The potential acquisition, when completed, would result in Chiang and his family collectively holding more than 50% stake.
  
  Currently, Chiang and his family hold 32.98% of Bonia, while Permodalan Nasional Bhd, the second largest shareholder, has a direct 12.1% stake, followed by Skim Amanah Saham Bumiputera with 8.9%.
  
  "We believe the proposal is targeted to strengthen the Chiang family's grip on the group. On its completion, the proposed acquisition would result in Chiang (who is also the company's founder) and his family collectively holding more than 50% of Bonia, which will trigger an MGO to acquire the remaining shares they do not hold in the company," said OSK.
  
  However, OSK noted that the indicative price for the proposed acquisition of RM1.80 to RM2 per share, which translates into a financial year 2012 price-to-earnings ratio (PER) of 6.3 times to seven times, represents a deep discount of 22% to the last traded price of RM2.59.
  
  "Moreover, the offer price is way below the valuations of recent acquisitions for retail companies of around 9-10 times PER. Thus, we believe the potential acquired stake might be coming from Chiang's friendly parties," it added.
  
  OSK is maintaining a "buy" rating on Bonia at RM2.59, with a RM3.15 fair value.

Have to offer a higher MGO price?

So sure?

Then on yesterday afternoon:

• Bonia sees 35mil shares done off-market at a discount Written by Cindy Yeap of thedgemalaysia.com 
  Tuesday, 28 August 2012 15:51
  
  KUALA LUMPUR (Aug 28): Bonia Corp Bhd saw 35.93 million shares or 17.38% of its share base done off-market at RM2.04 apiece or a 20% discount to prevailing market prices in the afternoon session.
  
  The buyers and sellers for the six blocks of shares done between 2.41pm and 2.54pm were not immediately certain.
  
  On August 24, Bonia said its group executive chairman cum CEO Chiang Sang Sem was “in discussion with several parties to acquire certain stakes in Bonia” in the range of between RM1.80 to RM2 apiece.
  
  The deal, if sealed, would trigger a mandatory general offer by Chiang as he and his family would hold more than 50% of Bonia’s share base.
  
  Bonia was up 6 sen to RM2.55 at 3.23pm

17.38% done off market? At 2.04?

That's a huge chunk!

And then on this morning papers:

• Bonia founder launches takeover offer of RM204.9m
  
  By Adeline Paul Raj Published: 2012/08/29
  
  KUALA LUMPUR: Bonia Corp Bhd's founder Chiang Sang Sem launched a takeover offer of RM204.9 million, or RM2.04 a share, for the leatherwear firm after he and his family increased their stake past 33 per cent yesterday.
  
  However, analysts doubt that shareholders will agree to the takeover, given that the cash offer is at a significant 20.9 per cent discount to its last traded share price of RM2.58.
  
  At least two research houses that track the stock, OSK Research and Affin Securities, have a fair value of RM3.15 and RM3.05 respectively on it.
  
  The mandatory offer came after Chiang - who is also chief executive officer and executive chairman of the group - and his son Chiang Fong Yee bought some 35 million shares (or a 17.38 per cent stake) in the company via Freeway Team Sdn Bhd at RM2.04 a share yesterday.
  
  This increased the stake held by them and parties acting concert to about 50.2 per cent from just under 33 per cent before.
  
  Going past the 33 per cent level meant they had to make a mandatory general offer (MGO) for the rest of the shares they don't own.
  
  Bonia, in a stock exchange filing just before the market closed yesterday, said its board has deliberated on the MGO and does not intend to seek an alternative offer.
  
  It will appoint an independent adviser to weigh the offer. The offerors have said they intend to maintain the listing status of Bonia.
  
  The offer price of RM2.04 is at a 17.7 per cent discount to Bonia's five-day volume weighted average price (VWAP) up to August 27 and at a 10.5 per cent discount to its one-month VWAP.
  
  It is understood that Chiang's move in going for a controlling stake in Bonia is to stave off the possibility of a takeover by any other party, including its second biggest shareholder Permodalan Nasional Bhd.
  
  Bonia shares, which were halted from trading in the last few minutes yesterday, will resume trading today.

So the MGO is set 2.04.

Of course.... minority shareholders do not have to agree. They do not have to sell....