Tannery shares up as trading resumes
Shares of red-chip Guangdong Tannery soared more than 27 per cent yesterday as the stock resumed trading after its suspension on June 28.
The counter closed at 27 cents, one cent shy of the general offer price from the company's unlisted mainland parent, which hopes to privatise the subsidiary.
GDH, an investment arm of the Guangdong municipal government, plans to delist Guangdong Tannery and is offering to buy the 28.44 per cent interest it does not already own and outstanding share options for about $46 million.
GDH has ruled out revising the offer, which values the company at $146.76 million, calling it a fundamental condition of its proposal.
The offer price is at a 32.1 per cent premium to the June 28 closing price of 21.2 cents and a 52.2 per cent premium to the average closing price of 18.4 cents over the 30 days to June 28. It also works out to a 14.1 per cent discount to the firm's audited consolidated net asset value calculated at 32.6 cents a share at end-December.
Justifying its move to privatise the tannery, GDH said the subsidiary had been consistently trading at a discount to its net asset value and its trading volume had remained low.
Trading liquidity was so low that the subsidiary had accessed the equity market for funding only once since it went public in 1996, the company said.
'GDH directors and Guangdong Tannery directors regard the costs of maintaining the listing status of Guangdong Tannery on the stock exchange to be not justifiable,' the firms said in a joint statement.
They said the offer provided a way out for investors who wanted to realise their investments at a premium to the market price.
Guangdong Tannery posted a $4.66 million net profit last year, versus a $101.29 million net loss in 2003.
A GDH spokesperson declined to comment yesterday when asked if the privatisation heralded a corporate restructuring among other listed GDH subsidiaries.