Privatisation faces rejection as minority shareholders are told the proposal is not a beneficial one Shares in Kerry Properties took a beating yesterday after minority shareholders were advised to vote down the $3.5 billion privatisation bid by Kerry Holdings. The stock lost 6.34 per cent, or 60 cents, to close at $8.85, with about 3.62 million shares traded. Analysts cautioned that the counter would face continued pressure as the road to privatisation seemed to be uphill. Kerry Holdings, the controlling shareholder, is offering $9.50 a share to buy out the interests of minority shareholders. The offer was revised up from an initial proposal of $8.50 a share. However, the independent board committee appointed to advise minority shareholders on the offer yesterday recommended they vote against the scheme. 'We cannot accept that the offer for the scheme shares under the proposal is fair and reasonable insofar as the independent shareholders are concerned,'' the committee said. The offer price represents a 39.75 per cent discount to the adjusted net tangible asset value of $15.77 per share, according to NM Rothschild & Sons, which advised the committee. The financial adviser said the discount was substantially higher than the average discount of 20.2 per cent for recent comparable completed privatisations, including those of Realty Development Corp and Ryoden Development. BNP Paribas Peregrine's head of regional property, Adrian Ngan Wai-hung, said that with the recommendation to vote against the offer, the chance of success for the buyout had sharply diminished. Analysts generally were not optimistic that the privatisation would go through. However, Dao Heng Securities analyst Eric Yuen said there was still a 50-50 chance the buyout would succeed. 'If you ask me, I would recommend shareholders accept the offer.' Mr Yuen said each property stock had its own pattern of trading-price discounts to net asset value. Comparing the discounts of different property stocks might not necessarily be a good gauge of value. Kerry Holdings holds 61.67 per cent of Kerry Properties. Kerry Holdings and parties acting in concert, or presumed to be acting in concert with it, together hold 76.07 per cent. Independent shareholders hold a 23.93 per cent stake, or 283.41 million shares. Opposition from independent shareholders holding more than 28.34 million shares at the court meeting scheduled for July 18 will be enough to block the offer. Under existing rules, a privatisation bid will fail if shareholders holding more than 10 per cent of independent shares vote against it. Analysts said the attitude of institutional investor Capital Group, which holds 5.33 per cent of Kerry Properties, would have a decisive effect on the buyout result. Rothschilds said in its advice to the board committee that if the buyout was not approved, there was no assurance that the Kerry Properties share price would remain at existing levels. It also noted that Kerry Holdings had not made a 'no-increase statement' in connection with the offer and accordingly it was at liberty to further revise the buyout terms before the court meeting. Kerry Properties is part of the Kerry Group, the largest shareholder in the SCMP Group, publisher of the South China Morning Post.