3 Things To Learn From One Of The Latest Privatisations In Singapore’s Stock Market

On 18 April 2016, Lantrovision S Ltd (SGX: BJK) announced that it had received a takeover offer at a price of S$3.25 per share.

Instead of going with a voluntary general offer like what happened with Keppel Land and what is taking place at the moment with OSIM International Ltd (SGX: O23) – two higher profile privatisations in Singapore’s stock market in recent years – the potential acquirer of Lantrovision had picked a “Scheme of Arrangement” method for the privatisation.

A court meeting had to be held for the Scheme of Arrangement and the results of the meeting were announced yesterday. The motion was passed and Lantrovision looks set to be privatised soon. This deal is one of the more interesting privatisation attempts the Singapore stock market has seen over the past few years. Here are three things investors can learn from it.

What makes the deal different

In a traditional general offer, the parties that are acting in concert to acquire a company would have their shares side-pocketed and the company in question can only be delisted after the concert-parties gain control of more than 90% of the remaining shares outstanding.

But, in a Scheme of Arrangement, a court meeting is to be held to decide if the company would be delisted and privatised. As long as 75% of the voters present, including those of the parties acting in concert with the acquirer, vote in favour of the deal, the deal can be approved and the whole company can be privatised.


Another interesting aspect of the deal has to do with Lantrovision’s valuation. At the offer price, the company is valued at S$175 million on the whole. But, Lantrovision currently has S$90 million in cash on hand with no debt. In other words, the acquirer is effectively paying only S$85 million or so for the whole of Lantrovision.

Given that Lantrovision raked in S$12.6 million in net income over the last 12 months, the company is only valued at 6.8 times its earnings at the buyout price after adjusting for the cash on its balance sheet.

Although an earnings multiple of less than seven might seem low, Lantrovision’s chairman commented that the deal makes sense as it allows synergies to be realized between the acquirer and the company. It also adds to the continuity and succession planning of the company for the future. Lantrovision’s lead independent director, Lim Woon Wah, also commented that the deal is fair.

Everyone walks away happy

With the valuation angle I shared above, it’d appear that Lantrovision’s minority shareholders are in a disadvantageous situation.

But, it appears that everyone is able to walk away happy. As part of the deal, the company’s three co-founders and all its employees will remain employed after the buyout. As for the minority shareholders, the buyout price is higher than any price at which the company’s shares have been trading at since late 2012.

Foolish Summary

Lantrovision’s privatisation taught me that in business, all parties that are involved in a deal can still be happy even if the deal’s not completely fair. In practice, it is important to strike a balance for all parties involved in order for a deal to go through.

In the case of Lantrovision, if its shareholders were to hold out on the offer and force a higher price on the acquirer, the acquirer might find no reason to purchase the company as it is no longer a bargain to do so.

And if the acquirer still wants to purchase the company at a price where all shareholders can be very happy with, then it might need to execute major cost cutting exercises after the acquisition. This might then affect Lantrovision’s current employees.

Instead of fighting to have the whole cake for myself, Lantrovision’s privatisation has showed me that it might sometimes be better to have a smaller portion and share the cake with everyone else.

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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 writer Stanley Lim does not own shares in any companies mentioned above.