Singapore-listed electronic components maker Memtech International on Wednesday announced that it has received a voluntary conditional offer from the Chuang family, which owns the firm, of S$1.35 in cash for each share. The offer values the firm at S$189 million ($138 million).
The offer was made through M-Universe Investments Pte Ltd, a special purpose vehicle backed by the Chuang family; Keytech Investment, an investment entity owned 49.39 per cent by the Chuangs; and Universal Global Tech (UGT), which is owned by Shanghai Stock Exchange-listed Universal Scientific Industrial (USI).
M-Universe Investments Pte Ltd currently controls 57.77 per cent of Memtech. The plan is for Keytech to ultimately hold a 57.77 per cent equity stake in the offeror, with UGT owning the remaining 42.23 per cent.
The offer price represents a premium of approximately 31.5 per cent over the volume weighted average price (VWAP) per share for the one month leading up to May 10, the last full market day immediately prior to the announcement date. It also represents a premium of approximately 23.9 per cent over the closing price per share of S$1.09 on May 10. Memtech had called for a trading halt on May 13.
The offer will become unconditional if the offeror receives, by the close of the offer, valid acceptances for it to control no less than 90 per cent of Memtech.
Memtech has not carried out any exercise to raise equity capital since its initial public offering (IPO) in 2004, and the trading volume of its shares has been generally low, according to the offeror’s financial adviser, OCBC Bank.
David Blennerhassett, pan-Asia catalysts/events analyst at Ballingal Investment Advisors Ltd, and a Smartkarma Insight Provider termed the offer price fair with respect to peers and recent precedent transactions in Singapore (Spindex Industries, Innovalues Ltd., and Interplex Holdings), and the premium to last close and one-month VWAP as reasonable.
In his latest research note published on Wednesday, he pointed out that the offer was pitched in the wake of increasing costs across the board, declining earnings and a global slowdown in car sales. Cost pressures, alongside operational challenges, are expected to persist in FY 2019, he said.
Following the announcement of the cash offer and lifting of the trading halt on Wednesday, the Memtech stock was trading nearly 23 per cent up at S$1.34 at 04:08 pm Singapore time.