With close to 85% of Hock Seng Lee Bhd (HSL) held by its major shareholders, the company has always been a target of privatisation.
Finally, last Thursday, the major shareholder of the Sarawak-based marine engineering and construction company, Hock Seng Lee Enterprise Sdn Bhd (HSLE), launched a takeover of the company. The takeover exercise comes just two months after Amanah Saham Bumiputera (ASB) ceased to be a substantial shareholder of HSL.
HSLE already holds 84.19%; parties acting in concert (PAC) hold another 3.59%. Considering that almost 88% of the stock is cornered, the offerors should be able to mop up more shares from the public to hit the 90% acceptance level.
Once that level is achieved, HSL can be suspended, subject to Bursa Malaysia’s approval.
Compulsory acquisition for a delisting is not so easy to execute, however, because the rules state that the major shareholders need to obtain the acceptance of the owners of 90% of the remaining shares that the former do not hold at the point of making the takeover offer to trigger a compulsory acquisition.
This would mean an acceptance level of more than 96% before the major shareholders can compulsorily acquire all the outstanding shares they do not own.
It may not be easy to do so, considering that HSL’s shareholding is already tight. The top 30 shareholders hold more than 90% of the company. All that is needed is for a group of shareholders holding 4% to thwart the privatisation.
The company’s net asset value is RM1.56, which is a premium of 15% over the offer price. HSL is also in a net cash position and has carved a niche in the engineering and construction sector.
Even though ASB is no longer a substantial shareholder, it is not a given that no other obstacles stand in the way of the privatisation of HSL.