• Final offer price (S$2.10/share)
• Final closing date (2 Oct 2018)
• Two-tiered recommendation

Final Offer Price and Final Closing Date

Regarding the voluntary unconditional general offer (GO) from Wheelock & Co (20 HK), the Offeror has announced both a final offer price (S$2.10/share) as well as a final closing date (5:30PM on 2 Oct 2018). Below we discuss various options open to shareholders.

Option 1: Accept the Offer

Shareholders may choose to accept the offer. S$2.10 in cash represents a premium of 20.7% over the last transacted price prior to the announcement. Meanwhile, the open market price has corrected 3% from S$2.17 as of 21 Sept to S$2.10 as of 24 Sept’s close after the latest announcement.

Option 2: Wait for a Vard Repeat

Given the relatively low offer price, shareholders may also decide to reject the offer in anticipation that the Offeror will return with another GO at a higher offer price six months or more after the close of the first GO. In this instance, shareholders may look to Vard Holdings as an example of an ongoing privatization case which has seen two GOs by the same offeror (see appendix). Ultimately, the probability of 20 HK coming back with another GO and a higher offer price depends on 1) how many shareholders decide not to accept the offer this time around (which can be monitored through dealings disclosures), and 2) how eager the Offeror is to delist WPS.

Option 3: Acceptances Increase Offeror’s Stake to 90% or Above

Should the Offeror’s stake reach 90% before the offer closes, there are two things to note: 1) the Offeror will have a right to compulsorily acquire remaining shares at S$2.10/share and 2) even if the Offeror does not exercise this right, remaining shareholders (who did not accept the offer prior) will have the right to require the Offeror to acquire their shares at the last offer price.

Our Recommendation: Depends on When You Bought

Given the substantial gap between our fair value estimate and the offer price, we previously encouraged investors to Reject the Offer. This sentiment was echoed by other brokerage houses with some suggesting “fair” offer prices that were higher than our own fair value.

We continue to see the offer price as low relative to our fair value. At the same time, we also recognize that the GO presents a unique opportunity for shareholders to realize a profit in a very short period of time.

As such, we have a two-tiered recommendation. For shareholders who are in-the-money, we recommend accepting the offer (Option 1) to switch to other more attractive opportunities like CAPL and UOL.

For shareholders who collected WPS after the current GO announcement (at more than S$2.10), we recommend waiting out for a second and better general offer (Option 2), though there are also risks associated with this.

Source: OCBC Research - 25 Sept 2018