A bid by the management of Select Group to take the restaurant chain and caterer private is being blocked by a substantial shareholder seeking a better offer, sources said.
Madam Goh Gaik Choo, the mother of Loyz Energy managing director Adrian Lee, has not accepted the offer price of 52.5 cents a share for her 23.82 per cent stake in Select, with just 10 days to go before the offer closes on May 20.
Mr Lee, together with Select's three other independent directors, went against Select's founding brothers Vincent and Jack Tan last month by advising shareholders not to accept the deal, which they said undervalued the company and the property its owns.
One of those independent directors, former MP Ho Geok Choo, stepped down a week later.
In March, a consortium led by Dymon Asia Private Equity and including the Tan brothers offered 52.5 cents in cash for each Select share, valuing the company at about $74.8 million. Select Group subsidiaries include the Peach Garden and Lerk Thai restaurants.
The offer gives shareholders a premium over Select's last transacted price of 42.5 cents before trading was halted on March 21.
But the independent directors noted that the offer price is also 10.4 times Select's earnings per share, implying a price-earnings (PE) ratio lower than the mean (34.9) and median (32.2) PE ratios of four comparable companies - Jumbo Group, Neo Group, BreadTalk and Soup Restaurant Group.
They also disagreed with the $45 million open market valuation of Select'sheadquarters in Senoko, which they said did not reflect the property's "full business potential".
Mr Kwah Thiam Hock, who chairs Select's audit committee, told The Straits Times: "It is always the prerogative of major shareholders to do what they want with their shares. But as independent directors, it is our duty to be objective in our assessment."
While it is unusual for company boards to disagree with management on such issues, shareholders' options are limited. Those who do not accept the offer will be stuck with illiquid shares when the offer closes. The offerers hold about 69 per cent of Select's total issued shares, short of the 90 per cent needed to take it private.But managing director Vincent Tan yesterday said he plans to delist Select, even if the compulsory acquisition threshold is not achieved: "So those with no intention to surrender will go private with us."
He added: "I think we are giving shareholders a chance to liquidate and give them back their money."
Mr Tan said he has not spoken to Madam Goh: "I'll leave it to her, whether we'll go private together. If we offer her extra, we have to offer everybody extra." He added that he cannot offer her a special deal over the next six months.
The takeover code states that offerers cannot make a second offer with better terms to any shareholders until six months after their first offer is closed.
Madam Goh bought her 20 million shares in Select from her son, Ezra Holdings chief executive Lionel Lee, in March and February.
She paid $7.1 million, at 35.5 cents a share. If she accepts the offer, she will make a profit of $3.4 million.