After months of speculation, the low-profile Syed Mokhtar AlBukhary finally announced the plan to split its plantation and sugar refining business from the group to focus on its hotel and property businesses. The re-organization involves Tradewinds Corportion Berhad (KLSE: TWSCORP, stock-code 4804) that owns 53.02 per cent of Tradewinds (M) Berhad (KLSE: TWS, stock-code 4421), which in turn holds 69.76 per cent of Tradewinds Plantation Berhad (KLSE: TWSPLNT, stock-code 6327).

Under the proposal, TWSCORP will sell all its shares in TWS to its shareholders and raise about RM597.34 million of which 60 per cent of the proceeds will be used to repay debt (estimated RM355 million) and the rest as working capital and to fund the land purchase of 363 hectares (valued at RM145 million) of land in Bandar Nusajaya. TWSCORP will offer 1 (one) TWS share for sale for every 4 (four) TWSCORP shares held at the offer price of RM3.80 per TWS share.

Syed Mokhtar’s Perspective Lane (M) Sdn Bhd, which holds 32 per cent of TWSCORP initially, has raised its stake to 62 percent after it converted its loan stocks, triggering mandatory general offer for the remaining shares of TWSCORP, TWS and TWS Plantation. The offer prices are as follows:

• Tradewinds Corportion: RM1.36 a share (pre-suspension price: RM1.36)
• Tradewinds Malaysia: RM3.80 a share (pre-suspension price: RM3.52)
• Tradewinds Plantation RM2.73 a share (pre-suspension price: RM2.74)

However, analysts are not sure if investors are equally excited with the offer price as with Syed Mokhtar’s enthusiasm in wanting to settle the debts and cash to purchase the land. The offer prices are obviously not attractive at all. According to Bloomberg who has been following up with the company, the fair values for the above three companies varies.

As for Tradewinds Corportion, Merrill Lynch and SJ Securities have a price tag of RM2.55 and RM2.30 respectively. Meanwhile Tradewinds Plantation has a fair-value of RM4.70, RM4.50, RM2.95 and RM2.40 a share estimated by Merrill Lynch, Aseambankers, AmResearch and Kenanga Investment Bank respectively. Hence, existing shareholders might ask Syed Mokhtar to fly kites instead. But then Syed Mokhtar might not have the intention to do a full clean-up of the above three companies in the first place. He just wanted the RM597.34 million cash.

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October 10th, 2007 by financetwitter

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