TSH ... Sep12

It may need to sweeten its offer for the takeover of Pontian United Plantations Bhd, having only received 8.2% acceptance so far (Till Sept 10 Sept 2012) and extended the offer the deadline three times until 07 Sept 2012. Only 8.2% stake in PUBB or 710567 shares were taken up for the rm90.00 per share offer from TSH and the Lee family. The rm90 is to be settled in cash and TSH shares.

Including those who have accepted so far, the offerors currently (10 Sept 2012) control 27.92% of PUBB. This includes 19.72% held by TSH and the Lee family before making the offer in June 2012.  On June 2012 26, 2012, TSH and the Lee family proposed to buy the remaining 80.28% stake in PUBB for rm624 million or rm90 per share.

The offer is conditional upon TSH and the Lee family securing at least 50% plus one share in PUBB. TSH will pay and get all the acceptance shares while the Lee family will continue to hold its 11.76% stake. Apart from the offerors, there are 197 shareholders of PUBB who are open to the offer.

As TSH continues to get the cold shoulder from the remaining PUBB shareholders, there is speculation that it may increase the offer price. Under the offer, the consideration will be satisfied by rm45.06 million cash per TSH share and rm44.94 via the issuance of 21 new TSH shares at an issue price of rm2.14. At rm45.06, TSH needs to fork out rm312.7 million cash to purchase the remaining 6.94 million shares it does not own. The cash portion will be funded entirely by bank borrowings and TSH has obtained sufficient credit facilities.

Assuming TSH increases its offer by another rm10 cash per share, it will need to fork out rm382 million in cash. However, the offer will increase TSH’s gearing. AS at June 2012, TSH has rm38.2 million in cash and rm813 million in borrowings of which rm444.3 million are long term in nature.

Some market observers do not foresee TSH Resources and the Lee family getting the 50% acceptance level and will not raise the offer price and may seek another way to acquire the shares. Or they might just call off the whole offer. This is not entirely bad news as PUBB’s trees are old and the acquisition will out some pressure on TSH Res’ books.