Investors are betting an asking price of 10 cents is not final Shares in China Strategic Holdings surged 33.33 per cent yesterday to a seven-month high after major shareholders Hanny Holdings and Paul Y-ITC Construction Holdings announced an offer to buy out other shareholders at a 95.19 per cent discount to the company's net asset value. China Strategic closed at 12 cents yesterday, with a hefty $21.65 million in shares changing hands. The closing price is 20 per cent higher than the 10 cents per share Hanny and Paul Y have offered other China Strategic shareholders for their stakes. Philip Securities research director Louis Wong Wai-kit said the premium might be due to investor speculation that Hanny and Paul Y are working up new business development plans for China Strategic after they take combined majority control. The other possible reason for the run-up is that investors are betting Hanny and Paul Y may be forced to raise their offer price later. Minority shareholders might not be willing to sell their holdings at a sharp discount to China Strategic's net asset value of $2.08. The acquisition would only be completed if enough investors agree to the proposal, boosting Hanny and Paul Y's combined stake to more than 50 per cent after the offer. There is reason to believe the 10-cent asking price is not final. Majority shareholders in Henderson Investment and Kerry Properties were forced to raise their offer prices in their privatisation bids after resistance from minority investors. Hanny and Paul Y's offer price represented an 11.11 per cent premium to China Strategic's closing price before the share purchase announcement. 'It's a bit of a catch-22 situation,' Mr Wong said. 'For minority shareholders, if they do not take the offer the share price may fall back to where it was. But if they take it there is also the chance that the share price may go up if there is new business development by the major shareholders.' China Strategic's former chairman, Singapore businessman Oei Hong Leong, has a 7.98 per cent stake in the company. He sold the bulk of his shares in 2000.