Penguin International

[Ben]

Thank you fellow buddies for the insightful analysis as usual. My thought process is a lot simplier;

1) If the GO is successful, ie, Penguin is delisted (which is unlikely), minority SH will get $0.65c, which is the maximum they will get (unless the offer is revised). SH who sells in the market now can get this amount straight away, though there is a transaction cost.

2) If the GO is unsuccessful, ie, Penguin remains listed (which is quite likely), SH need to ask if the share price will drop below $0.65c. IMO, I think it will. In that case, based on probability, it is better to sell the shares or accept the offer

3) If (2) happens, then Penguin may declare a dividend (which is possible). However, after XD, the share price will correct accordingly, leaving SH no better off than before. And in fact, most counters correct more than the declare dividend after XD. So it is also possible that the share price will falls after a failed privatisation exercise, and falls further after XD.

So overall, SH should ask if it is better to accept the $0.65c now, vs the possible scenarios. Or sells now and buy back after (2), or after (2) & (3) above.

But of course, for a long term confident holder, then just forget about all the above scenarios and continue to hold this counter until it hit your estimated fair value.

[ghchua]

My interpretation is that both Jeffrey and James (which held the 21.56% of the shares and has given the undertaking to tender the shares for the offer) are acting in concert with the Offeror and has hence should not be excluded in the calculation.

But reading the document again, there was no mention of 'working in concert' for compulsory acquisition, so you may be right.

Hi lonewolf,

"Acting in concert" is used to determine whether one needs to do a mandatory offer under the takeover code of the Singapore Companies Act. It is also used to determine whether the offer can be unconditional or not. Basically, it adds up all the shares that the offeror and those acting in concert with him holds to determine whether it reaches 30%, 50% or whatever percentage to reach certain milestone for the offer.

For compulsory acquisition rule, it is not under the takeover code. Rather, it is under Section 215(1) of the Singapore Companies Act. And yes, as you have mentioned correctly above, this rule doesn't mention anything about "acting in concert". The exact wordings you can read from the offer document so I shall not repeat here. The key words are "other than those already held by the Offer". As mentioned in my previous post here, the Offeror holds 0% of the shares before they made this offer. Providing undertaking to tender one's shares to the Offeror doesn't mean that the Offeror holds any shares before he makes this offer.

I hope that the above doesn't confuse you. Yes, its a bit too technical and I apologize if you felt that way.

[dreamybear]

Thank you fellow buddies for the insightful analysis as usual. My thought process is a lot simplier;

1) If the GO is successful, ie, Penguin is delisted (which is unlikely), minority SH will get $0.65c, which is the maximum they will get (unless the offer is revised). SH who sells in the market now can get this amount straight away, though there is a transaction cost.

2) If the GO is unsuccessful, ie, Penguin remains listed (which is quite likely), SH need to ask if the share price will drop below $0.65c. IMO, I think it will. In that case, based on probability, it is better to sell the shares or accept the offer

3) If (2) happens, then Penguin may declare a dividend (which is possible). However, after XD, the share price will correct accordingly, leaving SH no better off than before. And in fact, most counters correct more than the declare dividend after XD. So it is also possible that the share price will falls after a failed privatisation exercise, and falls further after XD.

So overall, SH should ask if it is better to accept the $0.65c now, vs the possible scenarios. Or sells now and buy back after (2), or after (2) & (3) above.

But of course, for a long term confident holder, then just forget about all the above scenarios and continue to hold this counter until it hit your estimated fair value.

I agree thinking this way is better for minority shareholders, rather than considering the probable actions of the offeror. I think the offeror could have other options like finding new investors to inject capital into their funds other than thinking of using the company's cash to pare down borrowing. 

Along the lines of Corgitator's previous post, everyone is in it for the money, trying to get the most out of it.

I think one way to mitigate privatization scenarios would be to diversify and always have potential targets, i.e. recycle the capital from the offer to other stocks. Another like I mentioned(learnt from observation) is to invest enuff to take a board seat and ensure your investment is better "looked after". 

It's really not easy being a retail investor, Sigh ...

[lonewolf]

I hope that the above doesn't confuse you. Yes, its a bit too technical and I apologize if you felt that way.

No apologies are necessary. I appreciate the clarification. I probably have read the relevant sections a few times myself. But it is still easy to misinterpret some of the terms.

And no. It is not too technical. Just need to make the effort to understand. I'm one of those who like to make the distinction between units/shares and dividends/distributions even though most people used those terms interchangeably.

[lonewolf]

The IFA has released its recommendation (emphasis mine)

“Having considered the aforementioned factors set out in this letter and summarised in this section, we are of the opinion that the financial terms of the Offer are not fair but reasonable. Based on our opinion, we advise the Independent Directors to recommend that Shareholders accept the Offer, unless Shareholders are able to obtain a price higher than the Offer Price on the open market, taking into account all the brokerage commissions or transactions costs in connection with open market transactions.

Full Circular: Link Here

[¯|_(ツ)_/¯]

PIL@
26Feb2021 Number of Shares acquired 
99,700

Resultant total percentage of Shares owned, controlled or agreed to be acquired by the Offeror and persons acting in concert with it after the dealing
35.68%

With IFA concluded that Jeff/James offer is Not fair, whether SIAS will come out and says something (similiar to GL)?

Knowing that Jeff/James really wanted to delist PIL, what would be their reaction to SIAS and also the extremely slow increase of controlling shares?

I'm a beneficiary of various Valuebuddies tips in PIL and I would like to offer my thought process for your consideration.

Hope it make sense to you.

1. Jeff/James planned to delist PIL.
2. So far, they are in control of 35.68%
3. Unless a lot of shareholders accept the share offer, my guts feeling is PIL will stay listed.
4. Jeff/James likely will figure that out too.
5. Especially with the IFA comments that the offer is not fair (with SIAS chip in later hopefully), there might be a possibility for the increase of offer price.
6. That likely is the reason why the selling at 65cents to Jeff/James is slowing down.

For obvious reason, if one found a better investment elsewhere then selling to Jeff/James via open market transaction would be a easy and fast way out.

For me, I do not need the $$$ now, so holding on the share (without accepting the offer) would the default action for me now.

In any case, thanks everyone and especially valuebuddies who helped me all this while.

Gratitude.  

[lonewolf]

PIL@
26Feb2021 Number of Shares acquired 
99,700

Resultant total percentage of Shares owned, controlled or agreed to be acquired by the Offeror and persons acting in concert with it after the dealing
35.68%

With IFA concluded that Jeff/James offer is Not fair, whether SIAS will come out and says something (similiar to GL)?

Knowing that Jeff/James really wanted to delist PIL, what would be their reaction to SIAS and also the extremely slow increase of controlling shares?

So far PIL is only reporting their open market purchase. I don't think they have reported the total no of shares that shareholders has tendered for the offer. 

So it's likely that the resulting percentage is higher than the reported 35.68%

I'm not entirely convinced that delisting is what J&J wants? If that is their ultimate aim, perhaps a Scheme of Arrangement with a significant premium may be a better route to take.

Personally, I think they just want control (hence the conditional offer). And they want to do it as cheaply as possible (hence the low-ball offer). This is also why a revision of the offer is not going to happen. 

I agree with your assessment that PIL will likely remain listed. And my default action for all PO (and SOA) is to not accept the offer until I am forced to do so. 

[¯|_(ツ)_/¯]

agree...

Huat ah!

[dydx]

If the Offeror can't get over 50% through acceptances by the first closing date on 10Mar, and if the Offeror doesn't choose to try harder to achieve that in this attempt by revising the offer upwards, they would have wasted time, effort and money this time round.

[ghchua]

Personally, I think they just want control (hence the conditional offer). And they want to do it as cheaply as possible (hence the low-ball offer). This is also why a revision of the offer is not going to happen. 

Hi lonewolf,

The condition of 50% or more acceptance is imposed by the takeover code of the Companies Act. Like it or not, when one makes any general offer, the condition will be there.

The offeror had already stated their intention is to make the company its wholly owned subsidiary and does not intend to preserve the listing status of the company. I think this statement is quite clear. Unlike the Lum Chang case study (which I have debated with dydx earlier in this topic), the offeror wants 100% of Penguin and delist the company from SGX.

Now there is an interesting twist here. The offer is deemed "not fair but reasonable" by the IFA. What does it mean? It means that the only way now for the offeror to force delisting is via compulsory acquisition under Section 215(1) of the Companies Act. They cannot use loss of free float as a reason for delisting since under new rule from SGX Regco, all applications for delisting must be deemed "fair and reasonable" by IFA and they have received acceptance of at least 75% of independent shareholders at the close of the offer.

The IFA opinion had closed one of the route whereby they can delist the company. I agree with dydx here, the chances of a higher revised offer is high if the offeror wants to gather higher acceptance to achieve its aim.