Date: December 18, 2024
The Securities Investors Association (Singapore) (SIAS) refers to the unconditional mandatory general offer for Avarga Limited by TKO Pte. Ltd (offeror) and would like to advise shareholders to reject the offer in line with the independent financial adviser’s (IFA) view that the price is “not fair and not reasonable’’.
SIAS’s view is notwithstanding the fact that the company’s independent directors do not agree with the IFA and instead have advised shareholders to accept the offer because it is “not fair but reasonable’’.
Some background
The mandatory general offer was triggered after the offeror acquired approximately 183.25 million shares from the second largest shareholder, Mr Lim Eng Hock, at $0.25 per share. This resulted in the offeror and its concert parties increasing their stake from 33.14% by a further 20.17%.
As a consequence, and in accordance with the rules surrounding takeovers, the offeror is obliged to make a general offer.
Terms of the offer
SIAS further notes that the offer price of $0.25 in cash is FINAL. The offeror does not intend to increase the offer price, unless a competitive situation arises. The offer is unconditional in all aspects and the offeror is making the offer in compliance with the rules.
In addition, the offeror intends to undertake and support any action to lift the trading suspension if it is unable to delist the company or exercise its rights of compulsory acquisition. If the offeror is able to exercise its rights of compulsory acquisition, it will do so as it does not intend to preserve the listing status of the company on the SGX-ST.
The IFA’s opinion
According to the IFA, the offer price of $0.25 represents a discount of approximately $0.1426 or approximately 36.32% to the unaudited net asset value per share of S$0.3926 as at 30 June 2024, or a price-to-NAV (“P/NAV”) ratio of approximately 0.6 times.
On a net tangible assets (NTA) basis, the NTA per share as at 30 June 2024 was approximately S$0.3442, or a price-to-NTA (“P/NTA”) ratio of approximately 0.7 times.
On a revalued NAV basis, the unaudited RNAV attributable to shareholders of approximately S$389.9 million as at 30 June 2024, was approximately S$0.4293, or a price-to-RNAV (“P/RNAV”) ratio of approximately 0.6 times. The IFA has also estimated that the range of values for each Avarga share is between S$0.256 and S$0.276.
The IFA has therefore advised the independent directors to recommend shareholders to REJECT the offer.
Recommendation of the independent directors
The independent directors, having reviewed and considered the terms of the offer, DO NOT CONCUR with the IFA’s opinion and advice. The independent directors consider that the offer is not fair but reasonable as (i) more weightage should be given to the opportunity for shareholders to monetise their investment without having to incur brokerage and other trading costs given the relatively illiquid nature of the company’s shares and (ii) the discount of up to 9.4% is reasonable.
As such, the independent directors recommend that shareholders accept the offer which they deem not fair but reasonable.
SIAS’s advice
SIAS urges the company to articulate a clear and actionable strategy for unlocking shareholder value, including a comprehensive review of its remaining key asset—a 71.99% stake in Taiga. This strategic review should outline how the company intends to maximise the value of this asset for the benefit of all shareholders, with a particular focus on ensuring equitable treatment for minority shareholders. A transparent and well-structured approach to value crystallisation would help align the company’s actions with shareholder expectations and reinforce confidence in its strategic direction.
SIAS would encourage shareholders to carefully read the IFA’s opinion and its advice. While SIAS recognises that the independent directors have stated their reasons for disagreeing with the IFA, SIAS remains unconvinced and, as a matter of principle, would not encourage shareholders to accept an offer that is not fair.
David Gerald
Founder, President and CEO
SIAS
Subscribe to Newsletter
Subscribe to SIAS Mailing List and get updates to all upcoming events and news
By clicking submit, you agree to our privacy statement, collection, use and/or disclosure of your personal data to the extent necessary to provide you with this service.
