Friday July 30, 2010
Credit Suisse explains methods used in assessing EON Cap offer
PETALING JAYA: EON Capital Bhd’s (EON Cap) independent adviser Credit Suisse Securities (M) Sdn Bhd used four methodologies to arrive at its opinion that the RM5.06bil takeover offer from Hong Leong Bank Bhd (HLB) for the former was “not fair from a financial perspective.”
In a circular to shareholders on Wednesday, Credit Suisse said in evaluating the offer price of RM7.30 per share, it used the:
·Acquisition Premium Analysis to compare the offer price to the historical market price and trading activity of EON Cap;
·Trading Companies Analysis to compare the offer price with the valuation statistics of other major banks in Malaysia;
·Precedent Transaction Analysis to compare the offer price with the valuation statistics of precedent transaction involving banks in Malaysia; and
·Dividend Discount Analysis to evaluate the intrinsic value of EON Cap reflecting its growth and profitability in the future as well as its capital structure and cost of capital.
In summarising the results of its methodologies, Credit Suisse said among other findings, the offer price was below the transaction multiples paid in the precedent transactions in the Malaysian banking sector and also below the implied equity value of EON Cap – taking into account the long-term growth perspective of the company under its existing business strategies.
Under the Dividend Discount Analysis for example, it said the method indicated that the implied equity valuation range of EON Cap was between RM8.25 and RM9.25 per share, or between RM5.72bil and RM6.76bil.
Primus Pacific Partners Ltd, which is EON Cap’s largest shareholder with a 20.2% stake, has long been known to be against the proposed offer. Primus had bought its stake at RM9.55 per share, which is much higher compared with HLB’s cash offer of RM7.30 per share.
Primus last month filed a legal suit against the directors of EON Cap and three entities controlled by Rin Kei Mei and Tan Sri Tiong Hiew King who are major shareholders in the banking group (and willing sellers) for RM1.11bil in damages as it believed that the price for EON Cap should be much higher than that offered by HLB.
Despite this and despite the advice of Credit Suisse, EON Cap is still calling for an EGM to table the offer.
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