KUALA LUMPUR (March 23): Minority shareholders of Iskandar Waterfront City Bhd (IWCity) should accept the offer by Ekovest Bhd to buy their shares, said independent adviser BDO Capital Consultants Sdn Bhd.

"Based on our evaluation, we are of the opinion that the cash option is not fair but reasonable while the share exchange option is fair and reasonable," BDO said in a circular to the shareholders. "Accordingly, we advise and recommend that the holders to accept the offer."

On Oct 31, Ekovest said it would buy the remaining 61.65% stake in IWCity not held by its parent company Iskandar Waterfront Holdings Bhd (IWH) through either a cash consideration of RM1.50 per share, or a one-for-one share swap deal. The deal values IWCity at RM1.25 billion.

BDO said the cash option is not fair as the RM1.50 cash consideration is lower than the fair value of IWCity shares of RM3.06, which represents a discount of RM1.56 or 51%.

As for the one-for-one share exchange option, BDO said the offer is reasonable as the exchange ratio ranges from 1.26 to 1.33, which is higher than 1, so the value of the Ekovest shares received by the shareholders is a premium of 26% to 33% over the value of the IWCity shares to be surrendered.

Also, IWCity shares have not traded above the offer price of RM1.50 for the past three years, except during IWH's proposed merger exercise period.

Additionally, the RM1.50 represents a premium of about seven sen or 4.9% over the closing price of IWCity shares as at the last practicable date (LPD) and a premium of 11 sen or 7.9% to the five-day volume weighted average market price of up to the LPD, said BDO.

Ekovest executive chairman, who is a common shareholder in Ekovest, IWH and IWCity, and persons acting in concert, own 63% of IWH and the remainder is held by Kumpulan Prasarana Rakyat Johor Sdn Bhd.

Lim's stake in Ekovest amounts to 32.38%.

Apart from the share swap offer as part of a reorganisation exercise, Lim also proposed an initial public offering of shares in IWH on a stock exchange wherever situated.

However, IWCity is expected to be delisted once the acquisition by Ekovest is completed.

Ekovest's share price closed down one sen or 1.03% at 96 sen for a market capitalisation of RM2.05 billion yesterday, while IWCity rose three sen or 2.24% to close at RM1.37, valuing the company at RM1.15 billion. — theedgemarkets.com

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