Sunday, 29 January 2012

YTL: why so stingy? (2)

YTL Cement announced it has received a takeover notice from YTL Corp. The takeover would not be in cash, but through an exchange of YTL Corp shares, in a ratio of 1 for 3.17.

A previous blog about this issue can be found here:

MSWG wrote about the same issue in in their newsletter January 12, 2012:

In the mean time, OSK has issued their independent advice:

With the risk of repeating myself, it is not very good, I miss any critical remarks whatsoever about the issues at hand. 

Those issues are:
  • YTL Corp's shares are more liquid, however, OSK fails to notice that 97% of the shareholders hold 100,000 or less shares which can easily be sold in the market (monthly turnover is on average more than 3 million shares);
  • YTL Corp is a diversified conglomerate with its earnings dominated by the utilities segment, but investors of YTL Cement knew that when they bought their shares, and they still preferred them above the YTL Corp's shares;
  • However, there is no cash alternative, making the offer less attractive;
  • YTL Cement shareholders will end up with odd lots;
  • The average market price of YTL Corp and YTL Cement over the last six months shows that there is no premium whatsoever in the offer, while from a valuation point YTL Cement clearly looks to offer somewhat better value from an earnings, dividend and assets point of view;
  • If YTL Cement shareholders collectively don't accept the offer, then there is a decent chance that YTL Corp will increase the offer price.

So the question remains: why would shareholders of YTL Cement accept the offer?

Blogger "Bursa Stock Talk" attended me on his blog:

"Despite the offer made is close to the 7th anniversary of the ICULS (10 November 2012) whereby the conversion price of the ICULS to mother shares will be adjusted from RM2.04 to RM1.82, shouldn't the offeror and the independent adviser take the step down conversion price into consideration as the adjustment is just few months away? Both the offer document dated 9 January 2012 and the independent advice circular appeared to be silent on this. The Board of YTLCMT confirmed that to the best of their knowledge and belief, there are no materials facts, the omission of which would make any statement in this IAC misleading. But is not the adjustment in conversion price with difference of 10.8% significant?"

I think the writer definitely has a very good point, the 7th anniversary is about nine months away and it appears rather strange if this is not mentioned in the offer document or in the independent advice.

I hope that YTL Cement shareholders do not accept the offer, thereby forcing YTL Corp to increase its offer price for the YTL Cement shares. The closing date is February 10, 2012.


  1. at what rejection thereshold in percentage terms do the shareholders stand a chance to push for a better deal? the usual 50% or 70%?

  2. if YTL Corp owns more than 90% of all YTL Cement shares (iether directly or indirectly), then YTL Cement will be automatically delisted. Between 75% and 90% they can ask for delisting to Bursa, which might or might not happen. In both cases, shareholders always get another chance to submit their shares, that is at least my experience.