Halcyon chief executive Robert Meyer reiterated yesterday that his buyout offer for GMG Global is final, despite misgivings among shareholders. Mr Meyer told the media: "We're not going to revise the offer because we believe the offer is fair and we are not forcing anyone to accept it."
He said he understood that some GMG shareholders may "feel buay song ("not happy" in the Hokkien dialect)" if they had picked up stock in the natural rubber producer at higher prices, but urged investors to see Halcyon's offer as a "free option" with little downside.
Halcyon is offering 0.9333 Halcyon Agri shares for each GMG share. That implies a value of 69.5 cents a share, given Halcyon's closing price of 74.5 cents last month.
Halcyon, a rubber processor, hopes to take GMG private in what could be the toughest step of a multi-part deal that will see the Singapore-listed rubber processor emerge as the world's largest rubber supply chain manager.
Halcyon needs to rally valid acceptances amounting to 90 per cent of the issued shares of GMG by Oct 21 in order to delist GMG. It now controls about 54.21 per cent of GMG's shares after getting acceptance from Sinochem International, which holds 51.12 per cent of GMG.
That was in exchange for the Chinese state-owned conglomerate becoming Halcyon's largest shareholder at a huge dilution to Halcyon shareholders.
Taking GMG private while Halcyon remains listed is preferable, said Mr Meyer, because each company spends about $2 million a year on listing costs.
Mr Meyer's comments yesterday came after the Securities Investors Association Singapore (Sias) raised questions in April over what it felt could be a potentially unfair deal. It noted, among other things, that GMG is valued at about 0.74 times its net asset value. Mr Meyer did not directly address Sias' claims.
If the GMG offer goes through, it will be Halcyon's ninth acquisition since the company was started in 2010. Halcyon has usually bought feedstock from subsistence farms, which it processes and sells to tyre, glove and condom makers, for example. The present deal will add GMG's plantations and processing plants across Asia and Africa to its stable, as well as other Sinochem assets.
This would give Halcyon the size it needs to work more closely with customers, and focus on product development and the creation of new, useful industry standards beyond the minimum specifications.
So even as investors face the sixth year of declining rubber prices, GMG's shareholders have an opportunity to join in his bid to "professionalise" the rubber industry, said Mr Meyer.
GMG posted a net loss of $6.5 million in the six months to June 30, narrowing from a net loss of $16.8 million in the same period a year earlier, as lower rubber selling prices dragged down the group's gross profit margin.
About 200 GMG shareholders are likely to attend an offer briefing to be hosted by Halcyon next Wednesday. An offeree circular, with the opinion of independent financial adviser RHB Securities Singapore, will be dispatched by tomorrow.