Sunday, 5 February 2012

The "battle" between SP Setia & PNB, another turn

On September 28, 2011 PNB made an offer of RM 3.90 for the shares of SP Setia:

"The Board has met to consider the Offer and are of the view, based on external valuations of the Company by investment analysts published before receipt of the Offer, that the Shares Offer and Warrants Offer fundamentally undervalues the Company."

Subsequently, PNB and the Board of Directors of SP Setia started negotations:

"Permodalan Nasional Bhd (PNB) may be paying out lucrative bonuses and stock options to property developer SP Setia Bhd’s top management staff in order to persuade them to stay on with the company following an offer by PNB to increase its stake in the property developer."

However, minority investors, holding 55% of the shares of SP Setia, did not get a chance to be involved in these negotiations at all, they were completely sidelined.

A deal was struck and a new offer was proposed on January 20, 2012:$File/Press%20Release.pdf

It turns out that PNB has increased its offer price by a measly 5 cent or 1 percent (in the mean while, the share market has increased much more since the last offer made), and that Tan Sri Liew (the CEO who received a put option from PNB to dispose his shares) switched sides and is now suddenly a joined offeror.

An offer price of RM 3.90 fundamentally undervalues the company, but an offer price of RM 3.95 is suddenly "fair and reasonable"? The share price of SP Setia traded several months in 2011 above RM 4, shareholders who didn't sell at that price are now supposed to accept this offer?

It will be interesting to read the offer document, both the opinion of the Board of Directors, and the independent advice.

This is what MSWG wrote about the revised offer:

MSWG's COMMENT: The original offer by PNB was unanimously rejected by the Board (except for interested directors) led by LKS, as the offer was deemed “fundamentally undervalued”. The property developer said it would seek rival bidders. Does the Board consider the revised, lightly adjusted offer prices fair given that: 1) it deemed the previous offer “fundamentally undervalued”, and 2) the Bursa Malaysia Properties Index closed at 839.06 points on the date the original offer was received and has since appreciated 21% to close at 1012.48 points on the day the revised offer was received?

Besides the above issues, there is also the matter of increasing nationalisation and crowding out of the private sector:

The way this whole exercise has been conducted looks very disappointing given the parties involved: a large Government Linked Investment Company and one of the "blue chips".


  1. How does the joint offer work? For those shares acquired via the revised offer at RM3.95, how many % go to PNB and Tan Sri LKS each?

    At first, I thought Tan Sri LKS was fighting for the minority shareholders... From being offeree, Tan Sri "frogged" to become offeror.

    Was what Tan Sri LKS did "if you can't beat them join them"?

  2. 100% goes to PNB, it just means LKS will not sell (but then again, he has a put option, can sell anytime he wants in the next 3 years).

    Yes, they called it a "win-win" situation, they meant win for PNB and win for LKS, but (as so often in Malaysia) it is definitely no win for the minority investors, they surely thought that the offer would be clearly better.

  3. It is another case of corporate nationalisation (ala MAS, Guthrie or Boustead where the listed jewels are taken over by 'national'-read Bumi-interests). Woe betide for LKS who fights against PNB because the authorities can make life difficult/impossible for a property co:land conversion approvals,finance-as banks are 'controlled',other administrative hurdles). LKS knows, if PNB succeeds, his tenure as CEO will be shortlived; so better for him not to be too greedy and sell out now and let PNB run the company aground rather than continue holding on when they can slowly kill you for your obstinacy.
    Summary: With this offer,SP Setia suffers a slow declinei.e. if LKS keeps control, co. suffers obstacles to future growth; if PNB wins control, LKS eventually will have to go and co. becomes rudderless.

  4. Interesting summary.. but more looks like a stereotypes conclusion.. jeez