Bankers launch cheap raid on CMB
Two investment bankers have launched a corporate raid on cash-rich China Motor Bus by offering one HK cent a share and stripping off the company's lucrative assets.
The raiders are Peter Fung Yiu-fai and Tony Fung Wing-cheung, who jointly control main board-listed Yu Ming Investment Management.
The pair yesterday made the cash offer and pledged to distribute an estimated dividend of HK$90.59 a share.
The offer represents a ridiculous discount to CMB's last trading price of HK$70 yesterday. However, the potential dividend is at a premium of nearly 30 per cent to the last trading price.
The offer is based on a previous one made in April which the CMB board threw out.
'We have a list of raid targets . . . CMB is only one of them,' Peter Fung said.
What tempted the Fungs was CMB's distributable reserve of HK$4.15 billion, which consists of HK$2 billion cash and a property portfolio. CMB now develops properties after losing its bus franchise in 1998.
Upon the offer becoming unconditional, the Fungs will seek to take control of CMB's board, then distribute the cash reserve, dispose of property assets and pay further dividends. A total payout of HK$90.59 a share is expected if this plan materialises.
Peter Fung anticipates CMB's board and its controlling shareholder - the Ngan family - might thwart the raid.
However, the Fungs are adding a sweetener - an option to buy back shares at the offer price if the dividend payout does not materialise within one year of it becoming unconditional.
'The shares have been consistently trading at a substantial discount to the net book value . . . and minority shareholders may experience difficulties in liquidating their shareholdings,' Peter Fung said.
He said it could take about 20 years for shareholders to obtain the entire cash reserve according to CMB's existing dividend policy.
Peter Fung said he and Tony Fung would earn a fee of only HK$100 million out of the deal.