The decision by Pioneer Industries International (Holdings) to sell a basket of assets to a related party at one third of its market value has been criticised by fund managers. The company yesterday proposed to divest a string of real-estate investments in the United States, 1.85 per cent of Bangkok Bank, 1.29 per cent of finance group Bangkok First Investment & Trust and 23.55 per cent of freight-forwarder Wah Kwong Shipping Holdings. Almost all of the $552 million in proceeds from the planned transaction are to be distributed to shareholders in the form of a special dividend at $1 a share. The related party - Promise City, a British Virgin Islands company - is owned by family trusts related to the Gaw family and Koo Yik-chun family. Promise City and associates hold 59.58 per cent of Pioneer. With the dividend, Promise's cost will be offset substantially. The purchase price compares with a combined market value of $1.73 billion, or an intrinsic value of $804 million, according to Pioneer's estimates. Kingsway SW Fund Manager director Patrick Chia Tai-man said some minority shareholders could suffer as a result of the transaction. However, he said Pioneer's major shareholders might have little choice but to sell the assets, as the company's shares were trading at a substantial discount to its net-asset value. Analysts also questioned the timing of the sale. If the assets had been sold three years ago, as urged by former minority shareholder Regent Pacific Group, proceeds would have amounted to billions of dollars. They said the Bangkok Bank stake alone was worth twice Pioneer's entire market capitalisation of about $1.9 billion before the regional financial crisis began in 1997. Pioneer's market capitalisation was only $658.6 million yesterday. Pioneer director Rosanna Wang Gaw yesterday defended the proposed sale and its timing. 'It was really chaotic at the time,' she said of the period before the Asian crisis began. 'We really weren't sure of the situation,' she said. Pioneer justified the sale price, saying it was based on the prevailing market value of the assets, contingent tax liabilities of $160 million and existing indebtedness of $767 million of the US properties. However, stock exchange sources said minority shareholders could choose whether to approve the transaction by voting at a special general meeting. The major shareholders are forbidden to vote in the meeting under listing rules. News of the transaction yesterday pushed Pioneer shares 59.75 per cent higher to close at $1.31. The sale will leave Pioneer with limited assets, such as investment properties in Hong Kong and Southeast Asia worth $391.5 million. ACQUISITIONS
