Second attempt to delist E&O Property by the parent

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Nov 27 2007
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One of my property stocks, Eastern and Oriental, has requested suspension on the shares trade of both the parent and its subsidiaries. Eastern & Oriental Berhad (KLSE: E&O, stock-code 3417) has signaled a major corporate transaction involving itself (parent) and its property arm, E & O Property Development Berhad (KLSE: E&OPROP, stock-code 3468).

It was reported that an announcement will be released later in the day on a a major corporate exercise, igniting speculation that Eastern & Oriental could be launching a buy-out bid for the property unit, which has a market value of around US$482 million. The last stock prices traded for Eastern & Oriental was RM2.40 while E & O Property was at RM2.45 a share.

Reuters reported that a spokeswoman for the parent company said it’s a “big corporate” announcement, without giving more details. Could the parent company, Eastern & Oriental trying to wrest and take the profitable property arm private again after failed to do so previously? For those who’re not aware of the power of minority shareholders, let’s do a flashback.

On 5th May 2005 Eastern & Oriental served a notice of conditional voluntary offer to while E & O Property’s board of directors when the KLCI was hovering at 900 points. The reason for the privatization – E & O Property’s shares traded was not reflective of its true value. But minority shareholders believed the management didn’t work hard enough to bring in values to the property arm. Furthermore the offer price of 65 sen a share was well below attractive level. Of course the picture of holding unlisted shares scared the shit out of many shareholders and lots of them accepted the offer.

In a twist to give the majority shareholders a taste of their own medicine, a group of 134 shareholders with 19.90 million shares voted against 20 other shareholders with 741.86 million shares for the Company’s delisting at E & O Property’s EGM on 12th Oct 2005. It was a victory for the minority shareholders, until today.
E&O Property delist planFinanceTwitter waited for the news (before publishing this article) and here’s the announcement. In a second attempt to delist E & O Property, Eastern & Oriental offered on Tuesday (27th Nov 2007) to buy out the remaining 37 percent it does not already own in E & O Property for up to RM610 million. Existing shareholders of E & O Property can either:

  • swap 1,000 shares for 1,100 new Eastern & Oriental shares OR
  • exchange 1,000 E&O Property shares for 715 new Eastern and Oriental shares plus RM875 cash.

For the first option, shareholders will ended up owning Eastern & Oriental shares worth RM2,640 based on closing price of $2.40 a share. The second option will give shareholders total values amounting to RM2,591. However assuming the stock prices of E&O Property goes up upon relisting from suspension, the offer might not be that attractive. Eastern & Oriental owned 63.8 percent of E&O Property Development as of July 2007 and it appears this round the parent company has a higher chance of delisting the property arm.

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my apologies if you feel there is a disconnect as the takeover of E& O and Rohas is different. My point for writing is to forewarn minorities to be very careful and evaluate closely. There are just too many sharks out there going for the big bite at the expense of the ignorant.
best of luck, MIs.

noted with thanx your concern yok hoong … not only the sharks are getting more nowadays but they’re “protected” one way or another …

cheers …

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