Northstar offers to take over Innovalues for $331.4m

Another local company is seeking to delist from the Singapore Exchange amid a dull market.

Private equity firm Northstar Advisors has launched a takeover offer for precision machine parts maker Innovalues at $1.01 a share, in a deal valuing the firm at $331.4 million.

The offer price represents a premium of 30.5 per cent over the 12-month volume weighted average price of Innovalues shares to April 6 - the last trading day before the company told shareholders that it had employed an adviser to conduct a strategic review of the company "with a view to enhancing and unlocking shareholder value".

Shares of Innovalues have surged since rumours of a buyout first surfaced in late March, reaching an all-time high of $1.105 on July 7.

Earlier this month, CIMB Research put an "add" rating on Innovalues, on the back of forecasted sales growth and gross margin improvement, with the acquisition talks as a near- term catalyst.

"A historical transaction price- to-earnings ratio range of 12 to 16 times would imply a possible valuation range of 91 cents to $1.21 per share," the CIMB report said.

The Northstar acquisition will be carried out by way of a scheme of arrangement.

This means that the offeror will hold a scheme meeting at a later date, where it needs more than 50 per cent of shareholders present in person or by proxy to vote "yes" to the scheme.

These shareholders will also have to hold at least 75 per cent of the value of total shares held by all at the meeting.

The offeror, Northstar vehicle Precision Solution, said it has received irrevocable undertakings from Innovalues chairman and chief executive Goh Leng Tse, directors Pung Tong Seng and Ong Tiak Beng, as well as veteran investor Koh Boon Hwee representing about 39 per cent of all Innovalues shares, to vote in favour of the scheme.

Instead of accepting $1.01 cash per share, Innovalues shareholders also have the choice of opting for one share in a holding company that is the parent of the offeror and 61 cents in cash for each Innovalues share.

But the holding company is not a listed company, which makes its shares illiquid.

The option is also subject to a limit of 65 million Innovalues shares.

So Innovalues shareholders who choose this option will, together with Mr Koh and Mr Ong, own only 11.4 to 13.8 per cent of the holding company.

Mr Goh said in a statement that he "strongly believes" in the merits of the transaction, which gives shareholders an opportunity to realise their investments.

The independent directors of Innovalues have appointed Provenance Capital as the independent financial adviser to advise them on making a recommendation on whether to accept the scheme.

The counter rose 0.5 cent or 0.51 per cent to close at 98.5 cents yesterday.

Singapore-headquartered Northstar also bought the ERA real estate brokerage franchise from Hersing in 2013.

A version of this article appeared in the print edition of The Straits Times on October 27, 2016, with the headline 'Northstar offers to take over Innovalues for $331.4m'. Print Edition | Subscribe