Appeal Letter to Lian Beng for Fair and Reasonable Offer Price

Date: April 25, 2023

Chairman & Managing Director
Board of Directors
Lian Beng Group Ltd


Dear Chairman, Mr Ong Pang Aik

I am writing to you on behalf of minority shareholders of your company to appeal for a better offer price than the S$0.62 that is currently being offered to take Lian Beng private.

The Business Times has correctly described the offer as “lowball’’ and has called upon minorities to reject it (“Minority shareholders should hold out against Lian Beng’s lowball offer’’ Business Times 19 April) and after having studied the deal, SIAS agrees.

Before going further, SIAS acknowledges a basic truth in privatisation offers, or for that matter any arms’ length sale – whilst shareholders will want to receive the full value for their shares, offerors will always pitch their offers as low as possible in order to extract maximum benefit from their purchase.

The final settlement price will always lie somewhere in between these two extremes. Both parties will therefore have to compromise and come to a mutually agreeable price, one that the authorities have mandated must be “fair and reasonable’’.

Companies that have wooed investors at IPO and have made promises of good returns, should not short-change those who have put their trust in them.  SIAS will not stand by and allow companies, which can afford to pay, to get away with lowball offers that are not fair and reasonable.

To an impartial observer like SIAS, S$0.62 does not appear to be “fair and reasonable”.  The main reason for saying this is that for a property and construction group, asset value is the appropriate valuation benchmark and, in this regard, SIAS notes that the offer is priced at a large 60% discount to the net asset value of S$1.54 as at end-November last year.

For comparison, SIAS notes that construction firm Chip Eng Seng was privatised in February this year at a price that represented only an estimated 25% discount to net asset value.

Given that Lian Beng is financially strong with retained earnings of S$721.2 million and cash of S$246.9 million as at end-November, an upward revision is clearly warranted. SIAS calls upon the offerors to do so and table a fair and reasonable offer price.

David Gerald
President and CEO