What is the news?

The second largest shareholder of SC Global Development (SCGD), Wheelock Properties, continues to accumulate shares of SCGD in the open market at prices slightly higher than $1.80 as offered by Simon Cheong, despite the reiteration by the latter that he has no intention to increase his offer price. Based on the updates provided by SCGD on 11 Jan 13, the public float as at 11 Jan is ~16%, or ~6% away from the minimum free float of 10% required by the Exchange’s Listing Manual.

How do we view this?

The aggregate shares held by Simon Cheong and the concerted parties is over 50%, which makes any counter offers unlikely or invalid, if the majority shareholder refuse to sell. With the deadline of Qualifying Certificate extension charges approaching, we view that the current offer of $1.80 by Simon as a reasonable offer for the minority shareholders to exit. The independent financial adviser appointed by SCGD also gave the view that “the financial terms of the Offer are fair and reasonable and are not prejudicial to the interests of minority Shareholders”. Shall the privatization fall through, share price of SCGD will likely to pull back to pre-offer level, which is a situation undesirable to all shareholders.

Investment Actions?

We recommend shareholders to either accept the current offer at $1.80 per share or sell shares in the open market if a higher price could be achieved after deducting the relevant transaction costs. The offer made by Simon Cheong will close at 5.30 p.m. on 16 January 2013.

Source: PhillipCapital Research - 14 Jan 2013