We are now closing in on the second closing date (26 Mar 2015) for KepCorp’s offer. As at last Friday evening, it was reported that KepCorp has cumulated 87.5% of KepLand’s shares and requires an additional 2.5% to delist the company, which is quite achievable, in our view. In addition, we note that time is still on KepCorp’s side as they have the option to further extend the closing date. After the 90% level is achieved, we believe residual minority shareholders who are holding out may be more inclined to subsequently accept, given 1) the disincentive of holding illiquid delisted shares, and 2) at that juncture, a higher likelihood of a compulsory acquisition and a S$4.60 price. Our main recommendation is for KepLand shareholders to ACCEPT THE OFFER. We also suggest that shareholders divest a portion of their positions in the market at current levels above S$4.55, which is sufficiently close enough to the S$4.60 offer price, and partially hedge against a lower S$4.38 offer price.
Closing in on second closing date
We are now closing in on the second closing date (26 Mar 2015) for KepCorp’s offer. As at last Friday evening, it was reported that KepCorp has cumulated 87.5% of KepLand’s shares. Looking ahead, we highlight two key thresholds: first – the 90% threshold – after which KepLand will likely be delisted from the exchange in accordance to listing rules as its free float falls under 10%. Given the offerer’s stated intentions, we see it unlikely that KepCorp will restore the float to keep KepLand listed. Note that, at this level, KepCorp’s offer price remains at S$4.38. Second - the 95.5% threshold – whereby KepCorp would have received acceptances from 90% of the shares not already held before the offer. Past this threshold, KepCorp will be able to compulsorily acquire all remaining KepLand shares and its offer price will be raised to S$4.60.
More likely than not that KepLand will be privatized
While we are only four days away from the deadline, we continue to judge it more likely than not that KepLand will eventually be privatized. KepCorp requires an additional 2.5% of acceptances to delist KepLand, which is quite achievable, in our view. In addition, time is still on KepCorp’s side as they have the option to further extend the closing date; under the takeover code, the latest closing date will be the 60th day after the posting of the offer document. After the 90% level is achieved, we believe residual minority shareholders who are holding out may be more inclined to subsequently accept, given 1) the disincentive of holding illiquid delisted shares, and 2) at that juncture, a higher likelihood of a compulsory acquisition and a S$4.60 price. Our main recommendation is for KepLand shareholders to ACCEPT THE OFFER. We also suggest that shareholders divest a portion of their positions in the market at current levels above S$4.55, which is sufficiently close enough to the S$4.60 offer price, and partially hedge against a lower S$4.38 offer price.
We are now closing in on the second closing date (26 Mar 2015) for KepCorp’s offer. As at last Friday evening, it was reported that KepCorp has cumulated 87.5% of KepLand’s shares. Looking ahead, we highlight two key thresholds: first – the 90% threshold – after which KepLand will likely be delisted from the exchange in accordance to listing rules as its free float falls under 10%. Given the offerer’s stated intentions, we see it unlikely that KepCorp will restore the float to keep KepLand listed. Note that, at this level, KepCorp’s offer price remains at S$4.38. Second - the 95.5% threshold – whereby KepCorp would have received acceptances from 90% of the shares not already held before the offer. Past this threshold, KepCorp will be able to compulsorily acquire all remaining KepLand shares and its offer price will be raised to S$4.60.
More likely than not that KepLand will be privatized
While we are only four days away from the deadline, we continue to judge it more likely than not that KepLand will eventually be privatized. KepCorp requires an additional 2.5% of acceptances to delist KepLand, which is quite achievable, in our view. In addition, time is still on KepCorp’s side as they have the option to further extend the closing date; under the takeover code, the latest closing date will be the 60th day after the posting of the offer document. After the 90% level is achieved, we believe residual minority shareholders who are holding out may be more inclined to subsequently accept, given 1) the disincentive of holding illiquid delisted shares, and 2) at that juncture, a higher likelihood of a compulsory acquisition and a S$4.60 price. Our main recommendation is for KepLand shareholders to ACCEPT THE OFFER. We also suggest that shareholders divest a portion of their positions in the market at current levels above S$4.55, which is sufficiently close enough to the S$4.60 offer price, and partially hedge against a lower S$4.38 offer price.
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