Haeco shares soar by record after Swire Pacific’s plan to take Hong Kong Aircraft Engineering private

Haeco jumps 55 per cent in Hong Kong trading after parent Swire Pacific offers to buy out a 25 per cent it does not already own at a 44 per cent premium to its share price

PUBLISHED : Monday, 11 June, 2018, 10:57am
UPDATED : Monday, 11 June, 2018, 11:00pm

Hong Kong Aircraft Engineering (Haeco) surged by the most on record on Monday after parent Swire Pacific proposed to take private the unit in a buyout valued at US$382 million because of illiquid stock trading.

Shares in the company that maintains and overhauls commercial aircraft closed 55 per cent to HK$68.10, with volumes soaring to more than 70 times the 30-day average.

Swire Pacific, which already owns 75 per cent interest in the company, plans to make a general offer to buy the remaining stake for HK$72 per share, the conglomerate said in a filing to the exchange. The offer price represents a 64 per cent premium to Haeco’s Friday closing price.

“Due to the low liquidity and the relative underperformance in the trading of Haeco shares, Swire Pacific views the listing of Haeco shares as no longer offering a viable source of funding for Haeco’s business,” the exchange filing said. “In fact, Haeco has not raised any equity funds from the public equity markets for over 30 years and Swire Pacific sees no practicable opportunity for this to happen in the foreseeable future.”

An average of 71,128 shares in Haeco changed hands every day over the past decade, compared with 22.7 million shares for Tencent Holdings, one of the most actively traded stocks on the Hong Kong exchange, according to data compiled by Bloomberg.

The proposed privatisation came after 44-year-old Merlin Swire, who already sits on the board of Swire Pacific, will take over as chairman of the conglomerate from July 1. John Slosar, 61, will step down as chairman after serving the group for 38 years.

The company will probably finance its purchase of Haceo’s stocks through existing cash resources, the exchange statement said.

Swire Pacific’s general offer followed a botched buyout of Haeco in 2010, when its offer of HK$105 a share failed to garner enough support from shareholders. Swire Pacific dropped 1 per cent to HK$82.45.