Monday April 8, 2013

Is the revised MISC offer good for EPF?

Corporate Notes by GURMEET KAUR

Without EPF’s agreement to sell its block of MISC shares, the deal may not go through. Without EPF’s agreement to sell its block of MISC shares, the deal may not go through.

SHOULD the Employees Provident Fund (EPF) accept the revised offer price of RM5.50 for the privatisation of MISC Bhd?

That is the dilemma the pension fund faces after MISC's major shareholder, Petroliam Nasional Bhd (Petronas) upped the offer by 20 sen on Friday, the last day of the share acceptance for its earlier offer of RM5.30 per share. With this, Petronas will now have to fork out RM9.2bil, or about RM400mil more to take private its shipping arm.

The new offer appears low compared with the RM1 more that the EPF was rumoured to be seeking from Petronas. StarBiz had earlier reported, quoting sources that the pension fund had sent signals to the latter that it was looking at a price of RM6.30.

Going by that figure, it would seem that a more probable resolution would have been both parties meeting at the middle point of 50 sen more, namely for Petronas to raise the offer price to RM5.80.

Without EPF's agreement to sell its block of MISC shares, the deal may not go through. Minority shareholders have until April 19 to accept or reject the new offer.

Petronas needs to secure up to 90% of MISC shares that it does not own to make the offer unconditional and pave the way for the delisting of MISC.

Petronas first made a bid to buy all the shares of MISC on Jan 30 and had extended the deadline last month when its offer failed.

Also noteworthy is that the new RM5.50 offer is still lower than the sums-of-parts valuation (SOP) of between RM5.69 and RM6.10 per share as per the indicative valuations of AmInvestment Bank Bhd, the independent advisor.

AmInvestment had said that the previous offer by Petronas was unfair as it was priced at a significant discount to MISC's SOP but considered it reasonable due to a weak shipping outlook that may persist and the absence of a competing bid.

Analysts had, meanwhile, pegged MISC's fair value at between RM6 and RM6.50 a share based on its future prospects.

The previously loss-making shipping company had made a turnaround after cutting its container business and refocused on shipping liquefied natural gas and floating oil storage business.

It is clear that minorities felt that Petronas' original offer of RM5.30 was unattractive as the oil major had only received an acceptance level of 7.58% as at last Friday to bring its total stake in MISC to 70.25%.

MISC's other minority shareholder holding a large block is Permodalan Nasional Bhd, which has a 6.35% stake through its various unit trusts. The Penang Development Corp and Pacific Mutual Fund Bhd, which hold a 1.3% and 0.09% interest, respectively are also minority shareholders.

MISC's share price had also rallied above RM5.30 from March 18 a signal that the market either felt that the shares were undervalued or that punters were banking on an upward revision on the buyout price.

Valuations can be quite a subjective thing and Petronas may have its reasons for only raising the price to RM5.50.

Petronas' president and chief executive officer Tan Sri Shamsul Azhar Abbas had told the media in February that if the buyout fails, MISC share price may come under pressure because of the business challenges the shipping giant is facing.

So once again, the people at the EPF will have to crunch their numbers and sweat over this decision. After all, their vote will be the one that determines if this buyout succeeds or fails. l Deputy news editor Gurmeet Kaur feels that the MISC-buyout saga, where two government-owned entities have gone head-to-head, is a sign of a maturing capital market.

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