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On 11th Aug 2015, Geshen announced an unconditional take-over offer by Pelita Niagamas on all other Geshen shares & RCPS it does not own at an offer price of 81sen.
This news came as a shocker to many minor Geshen shareholders I guess, as its share price closed at 94.5sen a day before the announcement.
Geshen's share price even reached RM1.07 a week earlier.
So the outcome is not hard to predict. Geshen's share price fell all the way down to around 81sen level.
In April 2015, Geshen completed the acquisition of 75% of Polyplas, together with issuance of 30mil RCPS.
This corporate exercise saw 53 year-old Mr Chan Choong Kong emerged as a major shareholder who holds 11mil Geshen shares (14.3%) via Pelita Niagamas, and was then given a seat in the board as an executive director.
Apparently, Mr Chan has recently acquired another 29.5mil shares at 81sen each from Geshen's two other largest shareholders Geshen Resources Sdn Bhd & Netyan Group Corporation who owned 29.0% and 12.4% of Geshen shares respectively.
Geshen Resource is a company owned by main executive directors & founder of Geshen group. Their shareholding drops to only 2.9% after the sale.
Netyan Group who first emerged as major shareholder in Geshen since 2006 has sold all its shares.
As Pelita Niagamas's shareholding reaches 52.67% after the acquisition, it is obliged to extend a mandatory take-over offer to acquire all the remaining shares and RCPS of Geshen at the same price as its purchase price, which is 81sen.
Mr Chan is keen to retain the listing status of Geshen.
In fact I'm still not too familiar with this type of event. I'm not 100% sure whether my interpretation is correct.
I hope someone who is expert in this kind of situation can explain more.
This looks similar to OSK's offer to OSKProp earlier, isn't it?
OSK bought OSKProp's shares at a price lower than its market share price and had to make a mandatory take-over offer of the remaining shares from other shareholders at that lowish purchase price, as its shareholding had exceeded certain percentage.
As a result, OSKProp share price dropped to that low level and stays low until today, mainly because of retreat in property sector in general.
Although my average price for Geshen is 57.5sen and will have 40% gain at 81sen, I'm actually not too pleased with this news as this is not what I would have expected when invested in Geshen initially.
However, I can't be too disappointed either as I still gain from this investment.
Furthermore, this acquisition just shows the confidence its new largest shareholder has on the company's future.
Anyway, what I understand that this kind of mandatory take-over is just "standard operating procedure" and usually means nothing significant.
Some shareholders might sell their shares to Mr Chan and some will not.
In the end, Geshen is still a listed company doing its business as usual, and its true value will be reflected in its share price in the future.
If its business expands and profit increases later, then its share price will go up. The opposite is true as well.
It seems like this take-over offer will last for 60 days. Will this mean that its share price will probably stay at 81sen for 2 months?
What I'm more concern is whether there will be any drastic change in Geshen's management team, even though a change is not necessarily a bad thing.
Current executive directors almost sold all their Geshen shares to Mr Chan. Will they still stay in the company to work for him?
What will Mr Chan, who looks like a fund/assets manager, do with Geshen later? I don't think he is an expert in plastic injection moulding industry.
Will he change the management or direction of the company, or inject or merge anything into it?
Will he use Geshen as his vehicle to set up his own business empire?
I think only he himself and those who are close to him will know.
Geshen is going to announce its FY15Q2 quarterly report which will include Polyplas result for the first time soon.
If the result is good, I wish to see whether Geshen's share price can break this barrier of 81sen before the closing date of the take-over offer.