Monday, 15 February 2016

Sona: proposing a deal that is not fair?

From The Star: "How will shareholders vote for Sona?", some snippets:

"Now that Sona Petroleum Bhd has gotten the green light from the Securities Commission (SC) to proceed with its maiden acquisition, will its shareholders vote the deal through?

Two issues complicate the matter: one that the deal has been deemed not a fair one by the independent advisor. And secondly, the profile of many of the current investors of Sona who are believed to be yield investors banking on the cash back option that Sona offers."

The first issue is really disappointing, there is a lot of blood on the street in the Oil & Gas industry, one would have expected the SPACs to profit from that, by coming up with deals that would have been ridiculously cheap just a year ago. The fall in the price of these kind of assets easily outweighs the decline of the RM versus the USD.

But Sona comes with a deal that is deemed to be not fair, Hibiscus is running in all kinds of legal problems while not showing a single year of operational profits and Cliq's proposed acquisition seems to be in dire straits (I expect it to be pulled).

Regarding Sona's proposed acquisition, readers should also take note of the comment made by Kinibiz:

" .... the management team’s primary focus is to secure a deal so long as it allows them to graduate, while shareholders will be torn between the promise of eventual gains post-QA (possibly quite far in the future) versus a tidy risk-free gain at the end of three years."

In other words, the interest of the management team and the shareholders is not aligned.

Hopefully Sona is able to renegotiate the price of its proposed acquisition down a lot. They probably have to, if they want to have a decent chance that the shareholders will vote in favor of it.

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