Hong Kong companies are expected to keep busy in the small and medium-sized merger and acquisition space for the rest of the year and in 2010 with potential activity including privatisations, stake sale and overseas acquisitions, bankers say.
'Hong Kong companies will opt for privatisation because of lower corporate valuations while there will be fewer leveraged transactions across the region in the coming two years because of credit tightening,' said Edward Lam, head of Hong Kong investment banking at Citi.
Recent transactions include the 40 HK cents a share offer by Crocodile Garments chairman Lam Kin-ming in February to shareholders to delist the company. That represented a 92.3 per cent premium to the company's last traded price. He raised the offer to 42 cents in April. The shares are trading at 41 cents each and a shareholder vote on the deal is set for May 26.
Hong Kong Catering Management on May 7 announced the company would be bought out. Its shares doubled in pre-market trading that day and have dropped 8.25 per cent since. The restaurant and bakery operator has a market capitalisation of HK$307.44 million.
Acquisitions focusing on what a company does best are more likely.
'We expect firms will seek to capitalise on existing market conditions by simplifying their corporate structures and strengthening their core businesses ahead of a return to previous growth rates throughout the region.
'The recently announced offer by Shui On Construction and Materials (Socam) for China Central Properties is an example of the type of corporate actions that we expect to see more of in coming months,' said Gordon Paterson, Deutsche Bank head of mergers and acquisitions, Asia.
