UM Land share holders advised to accept takeover offer

PETALING JAYA: Independent adviser Affin Investment Bank Bhd has advised minority shareholders of United Malayan Land Bhd (UM Land) to accept the takeover offer of RM2.50 per share by Seleksi Juang Sdn Bhd (SJSB) and parties acting in concert (PAC), who hold a combined 77.52%.

It said yesterday the RM2.50 offer price per share was fair and reasonable, as it was a 13 sen premium to the closing market price of RM2.37 on July 11, which was the last trading day prior to the takeover notice.

Affin Investment Bank also said UM Land's shares had not traded at or above the offer price for the past five years. “Holders should note that there is no assurance that the market price of the UM Land shares will remain trading at this level in the future,” it said in a circular to shareholders.

The stock traded at an average monthly volume of 881,758 shares, or 1.30% of the free float for the past year leading up to the offer date. Affin Investment cautioned the minority shareholders holding the remaining 22.48% of UM Land that the illiquidity of the shares may impact their ability to realise their investment in the open market.

It said as SJSB and the PAC held 77.52% of UM Land's total issued shares, irregardless of the level of acceptance of the offer, the company did not comply with the public shareholding spread requirement. SJSB and the PAC plan to delist the company from Bursa Malaysia Main Market.

Due to the fact that as at the date of notice, both SJSB and the PAC collectively held more than a 50% stake, the offer is not conditional upon any minimum number of valid acceptances of the offer shares being received.

If the company is delisted, its shares will no longer be able to be traded. “Holders should note that they may not be able to realise their investments at the same consideration under the offer and may encounter difficulties in disposing them,” Affin Investment said.

The offerors intend to privatise the company in order to have greater flexibility to plan and execute long-term business opportunities. It has a number of projects in the pipeline, which comprises of township and niche developments.

UM Land expects its township developments to contribute to earnings in the long term, as it requires an extended period of time. This may affect the company's ability to pay dividends in the future.

The company has been paying dividends for the past five years. It adopted a dividend policy of a 25% payout ratio, effective financial year ending Dec 31, 2012 (FY12).

As dividend policy is subject to availability of future investments and cashflow position of the company, there is no assurance to shareholders that the payout ratio will hold at the same level.

UM Land had announced on July 12 that had it received a takeover offer from SJSB and the PAC to buy the remaining 22.48%, or 67.81 million shares, not already owned by them for a cash consideration of RM2.50 per share.

Analysts had said that it was a good deal for the parties offering to buy out the company as the offer price represented a discount of about 18% from UM Land's net asset value per share of RM3.04.

In the first quarter ending March 31, UM Land posted a lower net profit of RM136,000 compared with RM13.97mil in the same period last year. Revenue had also fallen to RM51.6mil from RM82.2mil previously. UM Land shares closed at RM2.49 yesterday.

By The Star