Thursday January 24, 2013

Affin picked as adviser and all eyes will be on independent adviser report on HLC takeover

Hong Leong Capital’s price has surged past the offer price to RM1.86 yesterday Hong Leong Capital’s price has surged past the offer price to RM1.86 yesterday

PETALING JAYA: Affin Investment Bank Bhd has been appointed as the independent adviser (IA) in the takeover of Hong Leong Capital Bhd (HLC), the latter said in a filing to Bursa Malaysia.

Considering that the takeover offer by Hong Leong Financial Group (HLFG) of HLC is seen by some commentators as low, a lot of attention will be paid to what Affin says in its IA report, industry players told StarBiz.

To recap, on Jan 15, HLFG had launched a conditional voluntary takeover offer for all the shares that it did not already own in HLC at RM1.71 cash per share or about RM67mil in total. HLFG held about 80% of the issued and paid-up share capital of HLC at the point of the offer.

The RM1.71 had represented a 20.4% to HLC's last trading price of RM1.42 prior to the announcement.

However, HLC's price has surged past the RM1.71 offer price since then, hitting a high of RM1.90 and closing at RM1.86 yesterday. The offer price of RM1.71 values HLC at one times its book value. Recent sales transactions involving investment banks HLC mainly houses the group's investment banking business have been priced at a range of 1.3 to 1.9 times book value.

In addition, it has been reported that HLC had paid a premium to establish itself as an investment bank in 2007, when it bought SBB Securities and Southern Investment Bank from CIMB Group. Hence Affin will have to explain to shareholders if the current offer by HLFG to privatise HLC at one times book value is fair.

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