Is CWT Ltd Ripe For A Privatisation?

Credit: Axisadman

As early as last year, the main shareholder of Singapore-listed logistics outfit CWT Ltd (SGX: C14), C & P Holdings Pte Ltd, had indicated its intention to sell its stake in the company.

But, it was only two days ago on Monday that CWT announced that C & P Holdings and Chinese conglomerate HNA Group are currently in talks. According to the announcement, HNA Group has entered into exclusive negotiations with C & P Holdings.

HNA Group started out in 1993 as an aviation company from Hainan China. The company expanded rapidly and can now be considered as a bona fide conglomerate with more than RMB600 billion (S$126 billion) worth of assets. HNA Group currently has businesses in aviation, logistics, tourism, and finance. The company has interests in a total of 11 listed companies and generated RMB190 billion (S$40 billion) in revenue in 2015.

The Chinese conglomerate has been on a buying spree in 2016, spending more than US$8.3 billion in foreign acquisitions thus far. CWT, with total assets and a market capitalisation of S$3.94 billion and S$1.29 billion, respectively, might actually be considered as a small investment for HNA Group.

For minority shareholders of CWT, if HNA Group does manage to buy the shares of CWT that C & P Holdings control, it will trigger a mandatory general offer. Chapter 17 of Singapore’s commercial law states that:

“An obligation to make a mandatory offer is triggered when:

  1. a person acquires shares in the Offeree company which (taken together with shares held or acquired by persons acting in concert with him) carry 30% or more of the voting rights of a company;”

The expectation of a possible general offer to appear if the deal goes through might be the reason why the shares of CWT have been rallying recently; over the past month alone, CWT’s stock price has climbed by 10% even as the Straits Times Index (SGX: ^STI) has declined by 5%.

Foolish Summary

But, shareholders have to note that in the Monday announcement, CWT also mentioned  “there is no certainty or assurance that such discussions [involving HNA Group and C & P Holdings] will lead to any transaction involving the Company”.

Investors should be cautious when investing in shares of CWT at this moment and keep an eye on the relationship between the company’s share price and intrinsic value.

For more stock analyses and investing tips, sign up here for your FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock SingaporeIt will teach you how you can grow your wealth in the years ahead.

Like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

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 any companies mentioned above.