Published Straits Times on Nov 07, 2013
KREUZ Holdings shareholders have been urged to reject a privatisation attempt from a private equity fund.
DMG & Partners Research said yesterday that the 80 cents per share deal on the table "undervalues Kreuz, given its long-term growth potential".
DMG analysts Lee Yue Jer and Jason Saw added that the knock-down price from Headland Private Equity Fund 6 is the result of the interplay between a weak seller and a strong buyer.
DMG, which has a target price of $1.16 on the subsea services provider, said the shares will be worth between $2.07 and $2.61 by 2015 to 2016.
"Factoring in the growth from the diving support vessels sector, we believe that Kreuz's earnings can grow to US$69.4 million (S$86.3 million) in 2015 and US$92.2 million in 2016, from US$39.7 million in 2012.
"(Headland) stands to achieve a 226 per cent return in three years by taking Kreuz private now and potentially re-listing it later."
Headland, advised by Hong Kong-based Headland Capital Partners, is using a scheme of arrangement to try to sweep up Kreuz rather than the more common method of a general offer.
In a general offer, the bidder has to wait for the level of acceptances to know the outcome.
But under the scheme of arrangement, Headland will get 100 per cent of the company if the scheme is given the go-ahead by Kreuz shareholders at a meeting on a date yet to be announced.
Two hurdles must be crossed at this meeting.
A majority of shareholders present must vote "yes"; and 75 per cent of shares by value must also be cast in favour.
The second condition is as good as crossed.
Large Kreuz shareholders holding about 73.69 per cent of the firm have undertaken to vote in favour. This includes Singapore-listed Swiber Holdings, with 57.5 per cent.
Swiber will receive $256.2 million for its Kreuz stake if the scheme goes through, and will record a net gain of US$90.6 million.
"Swiber is selling its crown jewel for a one-time gain at the expense of future growth and profitability," said DMG.
Small Kreuz shareholders can still foil the offer if they want to, thanks to the condition that more than half of shareholders at the meeting must give the go-ahead.
This was the case at CK Tang's first privatisation bid in 2004.
Votes representing an overwhelming 96.8 per cent of the shares were cast in favour of privatisation, but not enough investors said "yes". CK Tang was privatised at a later attempt.
Kreuz shares were at 76.5 cents before the privatisation announcement. They rose 2.5 cents to 79 cents yesterday.
KREUZ Holdings shareholders have been urged to reject a privatisation attempt from a private equity fund.
DMG & Partners Research said yesterday that the 80 cents per share deal on the table "undervalues Kreuz, given its long-term growth potential".
DMG analysts Lee Yue Jer and Jason Saw added that the knock-down price from Headland Private Equity Fund 6 is the result of the interplay between a weak seller and a strong buyer.
DMG, which has a target price of $1.16 on the subsea services provider, said the shares will be worth between $2.07 and $2.61 by 2015 to 2016.
"Factoring in the growth from the diving support vessels sector, we believe that Kreuz's earnings can grow to US$69.4 million (S$86.3 million) in 2015 and US$92.2 million in 2016, from US$39.7 million in 2012.
"(Headland) stands to achieve a 226 per cent return in three years by taking Kreuz private now and potentially re-listing it later."
Headland, advised by Hong Kong-based Headland Capital Partners, is using a scheme of arrangement to try to sweep up Kreuz rather than the more common method of a general offer.
In a general offer, the bidder has to wait for the level of acceptances to know the outcome.
But under the scheme of arrangement, Headland will get 100 per cent of the company if the scheme is given the go-ahead by Kreuz shareholders at a meeting on a date yet to be announced.
Two hurdles must be crossed at this meeting.
A majority of shareholders present must vote "yes"; and 75 per cent of shares by value must also be cast in favour.
The second condition is as good as crossed.
Large Kreuz shareholders holding about 73.69 per cent of the firm have undertaken to vote in favour. This includes Singapore-listed Swiber Holdings, with 57.5 per cent.
Swiber will receive $256.2 million for its Kreuz stake if the scheme goes through, and will record a net gain of US$90.6 million.
"Swiber is selling its crown jewel for a one-time gain at the expense of future growth and profitability," said DMG.
Small Kreuz shareholders can still foil the offer if they want to, thanks to the condition that more than half of shareholders at the meeting must give the go-ahead.
This was the case at CK Tang's first privatisation bid in 2004.
Votes representing an overwhelming 96.8 per cent of the shares were cast in favour of privatisation, but not enough investors said "yes". CK Tang was privatised at a later attempt.
Kreuz shares were at 76.5 cents before the privatisation announcement. They rose 2.5 cents to 79 cents yesterday.
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