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SCMP Reporter

Value,  like beauty, is in the eye of the beholder.

When printed circuit board manufacturer Elec & Eltek International Holdings (E&E) sought a second listing in Singapore a decade ago, it found that investors there  paid handsomely  compared with those in Hong Kong.

Hong Kong had time for only property and banks  while Singapore had a voracious appetite for stodgy industrials.

As the Singapore-listed Elec & Eltek International Co (EEIC) soared, its Hong Kong parent saw a simple opportunity to make money -  divest.  It had sold its stake all the way down to 42.3 per cent by December 1998, racking up exceptional gains as it went.

But now E&E is  learning that two can play the price arbitrage game, as rival Kingboard Chemical Holdings launches an opportunistic takeover through the back door in Hong Kong.

As E&E has built its position in its Singapore affiliate back to 52 per cent, the Hong Kong holding company offers a potential cut-price route to controlling the group.

A cash offer of HK$1.90 by Kingboard for E&E shares, representing a 9.2 per cent premium to Tuesday's closing price, values E&E at $2.3 billion. The Singaporean entity, by contrast, has a market capitalisation of $3.2 billion.

Kingboard's audacious move appears to have been hatched well in advance. While E&E was selling off its  Singaporean shares,  Kingboard  quietly built a  28 per cent  holding in E&E.

While this did not bring with it a seat on the board - indicating Kingboard's attentions were unwelcome - it does make the path to 50 per cent that much shorter.

It  also appears to have helped the share price, which has risen 50 per cent in the past 12 months while EEIC  has been treading water.

The announced bid also includes an offer for the Singaporean arm, although the odds are it will  not  come to pass.

For one, it would require more than 90 per cent of E&E shareholders to accept the offer.  And as the offer price for the Singaporean affiliate is at a mere 4 per cent premium to Tuesday's close of US$2.85, it suggests Kingboard is merely going through the motions.

But  Kingboard has some formidable financial firepower. In addition to a proposed share placement worth HK$956 million, it has lined up a $7.27 billion loan facility from its financial adviser, Citigroup.

Whether this is enough to tempt major shareholder and founder David So Cheung-sing to opt for retirement remains to be seen.

Yet in the absence of other bidders, this time the higher selling price may be fetched in Hong Kong.



E&E discovers worthy rival knocking at the back door