SHAREHOLDERS of Chemical Company of Malaysia Bhd (CCM) have been advised to accept the conditional takeover offer of the company by Batu Kawan Bhd (BKB) at a cash offer price of RM3.10/share.
Hong Leong Investment Bank (HLIB) Research deemed the offer as “generous: given it far exceeded the research house’s previous target price of RM1.47.
“We advise investors to accept the offer,” wrote analyst Low Jin Wu in a company update.
Yesterday, CCM received a conditional takeover offer from BKB – which is also the holding company of Kuala Lumpur Kepong Bhd – to acquire its 56.32% equity interest from Permodalan Nasional Bhd (PNB) at a proposed cash offer price of RM3.10 per ordinary share amounting to RM292.8 mil.
Upon completion of the proposed acquisition, BKB’s shareholding in CCM will increase from nil to 56.32%.
If and when the proposed acquisition of PNB’s stake becomes unconditional and the proposed offer is accepted by other shareholders upon mandatory general offer, CCM would be privatised.
Elaborating further, Low noted that CCM’s financial performance was already subdued before the movement control order due to weak chlor-alkali product demand and prices.
“Despite seeing an uptick in demand for its polymer division, its average selling price has remained lacklustre due to competition as a result of low barriers to entry,” added the analyst.
As for BKB, HLIB Research views the acquisition of CCM as synergistic to the former’s business which is largely focused on the manufacturing and distribution of chemical products.
“BKB is also more diversified than CCM and most of the chemicals manufactured by BKB’s subsidiaries are manufactured and distributed by CCM as well,” justified Low.
“We believe that the potential acquisition would offer economies of scale for BKB as it would have about circa 85% of the caustic soda market share upon acquisition of CCM.”
At 11.35am, CCM was up 16 sen or 5.73% at RM2.95 with 13.46 million shares traded, thus valuing the company at RM495 mil. – Nov 18, 2020
