Thursday, March 28, 2013

Fair But Not Reasonable

It used to be independent advisors can only recommend shareholders to accept or reject a deal. Accept if its fair and reasonable, reject if its not. But somehow, in recent times there is a new category of qualification for them: fair but not reasonable. To me thats a bloody cop out. A shirking of duties from all sides. 

Its like all MBA graduate employees insisting that we must do a market survey before launching a product. In reality, its not so much to gain more data on potential market - in the end its more to cover their ass ... if the product failed, they can say, "But, we did the survey before launching ....".

The "fair but not reasonable" is a bogus fortune teller kind of opinion ... "Mr. so and so, you will be rich soon, if not you might be poor ... RM500 thank you". 

Can we go back to reject or accept ... pay a few hundred thousand just to get a "Yes, but maybe not ..." view sounds like such a waste of resources. If a deal gets that opinion, and say the deal goes through, the company gets privatised ... and 6 months later the same asset get relisted somewhere else at a 40% premium to takeover price .... end result is NOBODY gets into trouble, not the SC, not the independent advisors, .... oh but minority shareholders get shafted.

Just look at the last four or five opinions from independent advisors, most have taken the safe, insured route of "fair but not reasonable" ... what you are going to get from now ON is a lot of the same fucked up "yes but no" opinions. Apa value add? What can minority shareholders do? Basically you are telling MI, well, you can sell at this shafted price valuation but don't sue me.

I am in no way implying the offer for MISC is not reasonable or that the opinion is wrong by the independent advisor. I am arguing that the opinion would be worth so much more SALT if they can only tell us to ACCEPT or REJECT. In the MISC case, what do you think they will opine if they have only 2 options and not 3???!!! 

I mean seriously, the offer for MISC is 1.1x book ... lets assume for a moment that book value is RM2bn .... hmmm why don't I fucking give Petronas RM2.2bn and they go and build another MISC from scratch??!! Can you see how ridiculous it is now ... you can cite downturns in sector but you try and build another MISC now and see how much it will cost you, not to mention the human talent, branding, goodwill attached with foreign clients, the network ...

"Absence of competing bid" ... OMG... its like advising your girlfriend to accept the marriage proposal because there seems to be no other guys wanting to propose to you.... cbmf...



 






Can we switch back to just reject or accept ... the current system is seemingly not fair and not that reasonable to minority shareholders.

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Meanwhile back at the EPF/MISC stable ...


The Employees Provident Fund (EPF) is probing the reason for the sales of 
1.494m MISC shares, weeks after its CEO Tan Sri Azlan Zainol said Petronas 
should raise its buy-out price for the national shipping company. "The selling of the MISC shares were done by one of our external portfolio managers and was not from our internally-managed portfolio," EPF public relations general 
manager Nik Affendi Jaafar said in a statement. As such, he said the EPF is 
following up with the fund manager concerned to ascertain the reason for the 
shares were sold, adding a total of 3.99mn shares were sold between March 
12-15. (BT)

MISC's stock price, which had fallen below the RM5.30 buyout price rebounded 
yesterday to end the day at RM5.34. The concern though is that without a higher price, the deal could fall through considering the views expressed by the EPF which owns a 9.6% stake in MISC. EPF's chief executive Tan Sri Azlan Zainol has spoken out asking for a higher price than the RM5.30 per share offered which is at 1.1x MISC's book value. MISC's other big minority shareholder is Skim Amanah Saham Bumiputra with a 6.35% stake. Since the offer is conditional upon getting this 90% acceptance, the offer will lapse if Petronas does not get that level of acceptance.

The Minority Shareholder Watchdog Group has come out to say that the RM5.30 offer price by Petronas is "not compelling enough". Its chief executive, Rita Benoy Bushon said that "Petronas might do well to consider putting a larger carrot on the stick if its intention is to fully take MISC private." 

Petronas’ offer price to privatise MISC is "not fair but reasonable", said the 
independent adviser to the RM8.8bn deal. The offer allows shareholders to 
realise their investment at a premium of between 19.6% and 27.1% over MISC's five-day to three-month volume weighted average market price. Petronas owns 62.7% of MISC's total and paid-up share capital. (BT)

With the independent adviser on Petroliam Nasional Bhd's planned buyout 
of MISC Bhd recommending that shareholders accept the offer, all eyes are on 
the Employees Provident Fund (EPF). The provident fund has already said it 
viewed the offer as being too low. And it has all the right to do so. Its decision to speak out sends the right message to millions of its members. Last Friday, AmInvestment Bank Bhd, the independent adviser to the minority shareholders of MISC, said while the offer was not fair, it was reasonable. 

AmInvestment said the offer was unfair as it was priced at a significant 
discount to MISC's sum-of-parts valuation (SOPV) but considered it reasonable due to a weak shipping outlook that may persist and the absence of a competing bid. So, it recommends that minorities accept Petronas' offer.

In EPF's case, this is very pertinent, because it holds the key in the MISC 
buyout being the second largest shareholder and the largest 
non-interested shareholder with a 9.63% block worth about RM2.44bn. 
In a recent interview with Bloomberg, EPF chief executive Datuk Azlan 
Zainol said the pension fund wants a higher price and that Petronas 
should increase its RM5.30 per share offer. (StarBiz)


3 comments:

hoseadavids said...

It's like saying:

Mary is a woman but she has a dick.

solomon said...

David is a man but no ball to recommend....

It looks like a show to have external auditors and this bunch of advisers...just wondering who recommend them to shareholders???

Fung C.F. said...

I was once worked in a local investment bank (corporate finance). The way people draft the independent adviser letter is to work something out to justify the offer price, not working out to see whether the offer price is justifiable. Every IB wants deals and most privatisation target companies (normally offeror-friendly) would only hire "friendly" independent advisor. At the same time, the IBs need to cover their ass and that's why they will tell you Mary has a dick (but marry her anyway).

Minority shareholders like us should rely on the info of independent adviser but not the "bottom line" of the letter. If possible, get some professional advice elsewhere.