SINGAPORE – Minority shareholders of Global Palm Resources (GPR) should reject the privatisation offer of 25 cents per share as it is “too low and unfair” and seek a higher offer, the Securities Investors Association (Singapore), or Sias, said on Monday.
In late March, GPR chief executive Suparno Adijanto, along with six family members, launched an offer to take the mainboard-listed palm oil producer private.
Sias founder and CEO David Gerald said the retail investor watchdog disagrees with the independent financial adviser (IFA) who deemed the offer “fair and reasonable”.
He noted that there are many ways to value companies and no single method will be met with universal acceptance.
“Offerors will always pitch their price as low as possible, whilst shareholders will always wish for a price that is as high as possible,” said Mr Gerald.
“The final settlement price must therefore lie somewhere in between – sufficiently fixed at a level so that there is adequate margin for offerors to extract value from their purchase, but also sufficiently high so that shareholders do not end up feeling short-changed.”
Mr Gerald took issue with how comparable companies were arrived at for the GPR offer.
He said that when doing so, the IFA had set an arbitrary market cap limit of $500 million, thus arriving at only two “comparable companies’’ listed on the Singapore Exchange (SGX) and excluding the bourse’s market leaders.
The IFA then included eight such companies that listed on the stock exchange of Indonesia, which is also an emerging market.
“Sias acknowledges this is a judgment call but urges shareholders to ask themselves whether it really is appropriate not to consider firms listed on the home market in favour of several in an overseas market when arriving at valuation metrics,” Mr Gerald said.
Sias also noted that when compared with recent going-private transactions on the SGX, the IFA listed 13 such transactions.
While the GPR offer looks attractive when compared with the volume-weighted average price due to its depressed trading price, it is substantially below the mean in terms of the price-earnings ratio and price to revalued net asset value (RNAV).
Mr Gerald said GPR’s initial public offering (IPO) price was a 118 per cent premium over the NAV at the time of listing, compared with the current offer, which is at a 22 per cent discount to the current RNAV of around 32 cents.
If the same premium were to be employed today, the offer price should be in the region of 70 cents, he said.
He added: “The question has to be asked: If the company could raise money from the public at a price that was a large premium to asset value, then why should it be allowed to buy everyone out now at a discount?”
The Sias chief also noted that as at December 2022, GPR’s revenue has more than doubled since its IPO, while earnings before interest, taxes, depreciation and amortisation are roughly 50 per cent higher and the company is in net cash position.
“In other words, given the growth enjoyed by GPR since listing and its good financial standing now, it is wholly unreasonable to offer to buy out shareholders at a discount to NAV, especially when a premium was applied at IPO,” said Mr Gerald.
Judged on its own, the present offer is clearly wholly unsatisfactory, he concluded.
In the stock market, GPR shares closed unchanged at 25 cents on Monday after 56,610 shares changed hands.
