• KKR offers S$2.50/share in all-ornothing deal
• Intends to delist Goodpack
• Accept offer

KKR intends to delist Goodpack at S$2.50 cash/share

Goodpack announced the proposed acquisition by IBC Capital, an affiliate of KKR, via a scheme of arrangement (share scheme) at S$2.50 cash/share. The deal values Goodpack at about S$1.4b. The share scheme will require: 1) the approval by a majority of Goodpack shareholders who are holding at least 75% in value of Goodpack shares held by those present and voting, and 2) the sanction of the share scheme by the High Court of Singapore. Unlike General Offer where each shareholder individually decide to sell his share or not, once the share scheme is approved all existing shares will be acquired regardless of individual decisions. Essentially, this will be an all-or-nothing deal for KKR. KKR has stated its intention to delist Goodpack if the deal goes through.

Support representing 32% of shares obtained

IBC Capital has received irrevocable undertakings from founder Mr Lam, representing 32% of total Goodpack shares, to vote in favour of the share scheme. Since the approval only requires support from present and voting shareholders (i.e. those absent/not voting do not count towards the denominator that the 75% is based upon), Mr Lam’s support greatly sways the outcome of the deal towards one that will go through.

Accept the offer

The offer of S$2.50/share represents a premium of 23.2% to the closing price on 18 Mar 2014, or 34.3% to the 6-month volume weighted average price to 18 Mar 2014 (18 Mar 2014 is the day prior to an announcement by Goodpack in respect of a possible transaction). Though the offer is only at a 6.8% premium to the last closing price before this announcement (S$2.34 on 23 May 2014), we note that the run-up since March has largely priced in a privatisation. Furthermore, newswires have reported that other suitors, Blackstone Group and Carlyle Group, have dropped out. Given the above and that our fair value estimate of S$2.61 is just 4.4% higher than KKR’s offer price, we recommend shareholders to accept the offer.

Source: OCBC Research - 29 May 2014