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Tat Hong Holdings Call It Quits With Kian Ho Bearings: What Does It Mean For Both Companies?

Tat Hong Holdings (SGX: T03), one of the largest heavy equipment supplier and service providers in the region, has divested its 31.27% stake in Kian Ho Bearings (SGX: K22). The latter is a distributor and retailer for bearings, seals, and power transmission belts in Asia Pacific.

Tat Hong had first invested in Kian Ho back in 2006 with the hope that synergies could develop between the two; Tat Hong has a spare parts business which should have proved complementary with Kian Ho’s operations. Unfortunately, the synergies did not emerge and Tat Hong had decided to divest its stake last week on the basis of wanting to have a more efficient allocation of its assets. Raffles United ended up buying Kian Ho shares from Tat Hong at S$0.235 each, or S$17.2 million in total

Who is Raffles United?

Raffles United is a holding company owned by the two children of Kian Ho’s managing director, Mr. Teo Teng Beng. With this recent purchase, the Teo family now owns controls more than 52% of Kian Ho, triggering a mandatory unconditional offer to take the company private; in light of that, Raffles United has also offered to buy up the rest of Kian Ho at S$0.235 per share.

However, it seems that a privatisation of Kian Ho will not be realized as the company’s next largest group of shareholders, the family of Mr. Kwek Che Yong, the current deputy chairman of Kian Ho, has decided not to accept the offer.

What does it mean for both parties?

The emergence of a new major shareholder in Kian Ho might signal a new chapter for the company as it is now firmly in the control of Teo, its managing director.

As for Tat Hong, the impacts of the divestment would not be too big as the company’s investment Iin Kian Ho is a relatively small amount compared to its total asset base of S$1.57 billion.

Foolish Summary

All told, investors would likely see the same from good old Tat Hong while watching interesting developments unfold with Kian Ho.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.