SINGAPORE (THE BUSINESS TIMES) – Substantial shareholders of property player Hwa Hong Corporation have made a voluntary conditional cash offer of 37 cents per share to take the company private.
The offeror Sanjuro United is the bid vehicle of a consortium formed by shareholders of the company that collectively hold around 20 per cent of its shares.
It comprises Ely Investments, which is wholly-owned by former group managing director Ong Choo Eng and his family, and Ergonomix, which is wholly-owned by Dymon Asia Private Equity (South-east Asia) Fund II. Other members of the consortium include Roswell Assets and Crystalic Star Global.
The offer provides an opportunity for shareholders to realise their investment at a “compelling premium” amid low trading liquidity, and as the company faces a challenging macro and operating environment driven by Covid-19, geopolitical tensions and Brexit, Sanjuro United said on Tuesday (May 17).
The offer price represents a premium of 29.8 per cent over the counter’s net asset value per share as at Dec 31, 2021, and 27.6 per cent over its last traded price of 29 cents on May 12, being the last full trading day of the shares prior to the offer announcement. The price also exceeds all previous closing prices of the counter’s shares in the nine-year period up to May 12.
The offer also provides “a viable exit alternative for shareholders who do not wish to be subject to the risk of uncertainty in the direction and strategy of the company”, Sanjuro United said.
It noted that the company currently has no independent directors, and recent board changes have resulted in a need for an independent review of the company’s internal controls, process and practices.
On May 6, Hwa Hong received a notice of compliance from the Singapore Exchange Regulation, requiring the company to appoint an independent reviewer to review the internal controls, process and practices relating to its board nomination process, including the selection and appointment of independent directors.
Ong Eng Yaw, director of the offeror and former acting group managing director of Hwa Hong, said the current state of affairs of the company is “highly unsatisfactory”, adding that the company’s recent changes in management may lead to uncertainty in executing any strategy.
The offeror noted that the company has had leadership changes in recent years, with three managing directors since March 2021.
As for its operations, Sanjuro United noted that some of Hwa Hong’s office investment properties in the UK are ageing, and refurbishments and redevelopments amid the current inflationary environment may hit its future income. Leasing risks and potential delays may also affect future occupancies and rent outlook.
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