Goldis plans capital distribution

KUALA LUMPUR: Goldis Bhd has proposed a capital distribution involving its entire 30.59% equity interest in IGB Corp Bhd. But, contrary to expectation, it will not distribute its IGB shares directly to shareholders.

Instead, the company will transfer its 30.59% stake or 429.67 million shares in IGB to an unlisted special purpose vehicle (SPV), Steady Paramount Sdn Bhd, through which the shares will be distributed to its shareholders.

“Steady Paramount shares are unlisted and there will not be a market to trade in the shares,” Goldis said in an announcement to Bursa Malaysia yesterday.

Shareholders who prefer not to hold shares in Steady Paramount can opt for a cash payment of RM1.72 per Goldis share, which closed at RM1.99 yesterday.

According to the announcement, the capital distribution value of RM1.72 per share, either in the form of cash or in Steady Paramount shares, was calculated by dividing the fair market value of the 30.59% stake in IGB of RM1.01 billion (at RM2.344 per IGB share) over 585.47 million Goldis shares.
IGB closed at RM2.46 yesterday, with a total market capitalisation of RM3.45 billion.

While the IGB shares are now worth more than RM2.344 each, market observers anticipate that most of Goldis’ minority shareholders will opt for cash payment rather than hold unlisted shares in Steady Paramount.

“They may take the RM1.72 cash for each share, and then sell their Goldis shares to use the proceeds to buy IGB shares on the open market,” said a private investor.

“Ideally for Goldis’ minority shareholders, the distribution should be in the form of IGB shares that are traded on Bursa Malaysia rather than unlisted shares in Steady Paramount,” he said.

However, the outright distribution of IGB shares would result in Goldis’ major shareholder — the Tan family — ending up with a direct stake of only 15.74% in IGB. This could subject IGB to a hostile takeover.

Through Steady Paramount, the Tan family could potentially raise their effective stake in IGB without having to launch a costly general offer, which would have to be priced at a premium to IGB’s market price.

An observer noted that in the event most of Goldis’ minority shareholders opt for cash, rather than shares in Steady Paramount, the Tan family will end up with a higher percentage of shareholding in Steady Paramount, hence increasing their effective stake in IGB.

Through several private vehicles, the family controls about 51.45% of Goldis, which in turn owns 30.59% of IGB, which controls 50.99% of the jewel in the crown, IGB REIT, one of the biggest REITs listed on Bursa Malaysia. IGB REIT owns the Mid Valley Megamall and The Gardens mall here.

At the moment, the Tan family has an effective stake of only 15.74% in IGB (51.45% of Goldis that owns 30.59% in IGB). However, assuming that all of Goldis’ minority shareholders opt for cash instead of shares in Steady Paramount, the family will end up with 100% of Steady Paramount, hence an effective stake of 30.59% in IGB.

“This exercise could potentially bring IGB closer to the Tan family,” said a market observer.
In order to fund the potential cash payments to Goldis’ minority shareholders, Steady Paramount will have to undertake some borrowings. The quantum is still unknown at this juncture as it is not known how many Goldis shareholders will opt for cash or shares in Steady Paramount.

According to Goldis’ 2012 annual report, Permodalan Nasional Bhd used to own a 12.88% stake in Goldis. However, it ceased to be a substantial shareholder in March this year.



This article first appeared in The Edge Financial Daily, on May 9, 2013.