Cash offer for Delong 'not fair but reasonable'

Offer of $7 a share unfavourable, but it's above closing price on last unaffected trading day: Adviser

PricewaterhouseCoopers Corporate Finance has deemed the $7-a-share revived cash offer for steelmaker Delong Holdings as "not fair but reasonable".

Delong's independent directors back the findings from the independent financial adviser and have recommended that shareholders accept the offer.

Delong chief executive Ding Liguo relaunched his voluntary cash offer late last month to take the company private at $7 per share.

This followed an aborted privatisation attempt last year that breached Singapore's takeover code.

PricewaterhouseCoopers Corporate Finance said yesterday the financial terms of the revived buyout were not fair, partly because the offer price is a 40.1 per cent discount to the net asset value (NAV) per share as at June 30.

It also noted Delong's valuation measures are below the mean and median of comparable companies.

Additionally, the offer price is "unfavourable" as it is lower than what a firm related to Mr Ding had paid for a 15.04 per cent stake in June last year.

However, the financial adviser still found the offer reasonable.

This is because the offer is at a premium of 1.9 per cent to the closing price of $6.87 as at the last unaffected trading day of Sept 26 last year.

It also represents premiums of 8 per cent, 17.9 per cent, 37.2 per cent and 76.9 per cent above the volume weighted average price of the shares for the respective one-, three-, six-and 12-month periods before Sept 26 last year.

The adviser also noted that the offer price is final and will not be revised and that it is the only one available to shareholders.

Mr Ding does not intend to keep Delong listed, so shareholders will likely find it difficult to sell their stock in the absence of a public market, the adviser said.

The offer was declared unconditional two weeks ago, after Mr Ding's buyout vehicle amassed 90.73 per cent in shares and valid acceptances.

That means it can exercise its rights of compulsory acquisition to buy out all the shares from holders who have not accepted the offer at $7 apiece.

Delong shares closed flat at $6.99 yesterday.

The offer closes at 5.30pm on Sept 10.

A version of this article appeared in the print edition of The Straits Times on August 28, 2019, with the headline 'Cash offer for Delong 'not fair but reasonable''. Print Edition | Subscribe