Independent shareholders in red-chip Denway Investment, whose main asset is car-maker Guangzhou Peugeot, are being advised not to accept an offer for their shares by a company controlled by the Guangzhou government's commercial arm.
The advice, from Natwest Markets, which is advising shareholders with 27 per cent of Denway, comes one month after Yue Xiu Enterprises announced it was making an offer and putting a stake in Guangzhou Peugeot up for sale as part of a restructuring of Denway.
It also follows news yesterday that Yue Xiu plans to buy a 26.22 per cent indirect stake in Guangzhou Peugeot if no buyer is found for the troubled car-maker by the middle of July.
Natwest said its advice was based on the expectation that the outlook for Denway would improve in time after the restructuring.
It said the offer price of 46.5 cents a share was fair and reasonable, given Denway's recent unsatisfactory performance and thin trading volume of shares from January to November last year.
It also said the offer price represented a 10.19 per cent premium to adjusted consolidated net tangible assets and that there was concern as to whether plans by Yue Xiu to turn Denway around would be implemented in full.
It added that the offer was not generous, because it represented a 19.8 per cent discount to the closing price of 58 cents on Monday but a slight 5.3 per cent premium to the average price between January 2 and December 4 last year.
