PK minority shareholders advised to reject offer

PK Resources Bhd’s three major shareholders and its top three management officials’ bid to take over the cash-rich company suffered a setback after the independent adviser recommended the minority shareholders reject the offer.

Kenanga Investment Bank Bhd, in its independent advice circular issued last Friday, told the minority shareholders to reject the offer of 60 sen per share after taking into account the financial and price considerations.

It said the offer price was below the market prices of the shares since April last year and was also at a discount of 23.08% and 25.39% to the five-day volume weighted average price (VWAP) up to March 17 of 78 sen and 81 sen respectively.

In a separate statement to minority shareholders, five PK Resources directors, who said they were non-interested directors in the deal, said they had also deliberated on the offer and concurred with the recommendation of Kenanga for the holders “to reject the offer”.

The non-interested directors are Chor Eng Choon, Prof Tengku Datuk Shamsul Bahrin, Datuk Alladin Mohd Hashim, Datuk Prof Zainudion Muhammad and Ooi Soon Kiam.

Kenanga said the offer price was also at a price-to-book ratio (PBR) of 0.16 times, which is substantially below the below the average PBR of comparable companies of 1.61 times.

“Holders should also take note that the offer price represents a discount of 18 sen or about 23.08% to the five-day VWAP up to March 17 of 78 sen per share, as opposed to premiums given in recent privatisation transactions,” it said.

It had also considered takeover exercises of companies, which were completed since June 2006 and it noted the average premiums were 16.31%. The premiums ranged from 0.4% for Magnum Corp Bhd to a high of 49.4% for Nexnews Bhd.

PK Resources, which is involved in property development, also operates the Nilai International University College. At Dec 31, 2007, it had RM27.55mil cash.

Kenanga said the implementation of the Government’s proactive measures such as the exemption of the real property gain taxes and other positive measures were expected to augur well for the property development sector in general.

“Based on the outlook and prospects of the property industry, the PK Resources group for the next 12 months is expected to maintain its current business and financial trend,” it said.

On March 18, the major shareholders and management officials had proposed to acquire the remaining 54.02%, or 61.6 million shares, at 60 sen each or RM36.96mil.

Akarmas Sdn Bhd, which owns 10.84% of PK Resources, had teamed up with Ragan Jaya Sdn Bhd (22.83% equity) and Pristine Acres Sdn Bhd (7.24%), for the takeover exercise. They had stated the listing status of PK Resources would be maintained.

The top management officials of PK Resources also involved in the takeover were executive chairman Tan Sri Dr Gan Kong Seng, managing director Gan Eng Hong and executive director Datuk Gan Kong Hiok.

Kong Seng has a direct stake of 3.53 million shares or 3.10% while he indirectly controls 40.63 million shares or 35.63% and Kong Hiok, 2.24 million shares.

By The Star (by Joseph Chin)