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Thursday, November 29, 2007

E&O Property minorities advised to accept parent firm's share offer

Minority shareholders of E&O Property Development Bhd (EOPD) should accept a share offer by parent company Eastern & Oriental Bhd (E&O) as the cash offer is too low, analysts said.

Construction and property group E&O, which holds 63 per cent of EOPD, has offered to take EOPD private under a share swap.

It offered to exchange new E&O shares for the shares that make up 37 per cent of EOPD. This is on a basis of 1.1 new E&O share for every EOPD share.

In addition, minorities of EOPD can elect to get part cash. There is also a cash offer of RM2.50 a share, analysts said, citing company management.

The offer price of RM2.50 is below most analysts' expectations. Based on data compiled by Bloomberg, Credit Suisse and UOB Kay Hian value EOPD at RM4.50 and RM7.80 respectively.

At RM2.50, it also represents a mere two per cent premium to its price when suspended on Tuesday.

"We believe that the cash option is not attractive. Nevertheless, the cash option provides downside protection (in the current volatile market environment). We would advise investors to accept the share swap option instead," Credit Suisse said in its report.

The deal is due to be completed in the second quarter of next year, followed by the delisting of EOPD.

"We believe the proposal is positive for E&O as the share exchange is attractively priced, should reduce the holding company discount (and) improve liquidity," added DBS Vickers in its research notes.

EOPD shares rose as much as 10 per cent, or 25 sen, to RM2.70 before closing at RM2.56 yesterday. The stock has gained 28 per cent so far this year. E&O shares closed one sen higher at RM2.41 yesterday.

By New Straits Times (by Goh Thean Eu)

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