Privatisation:From Listed To Private

There is the increasing trend of listed companies going towards privatisation exercises.
Hence,it is important that we are aware of the reason for majority shareholders or founder shareholders of public listed companies to go private.

Listed below are some of the reasons:

• their company‘s share prices have been grossly under-valued by the public/share market;
• to avoid public scrutiny especially with the onerous corporate governance and disclosure requirements;
• the initial objective of listing no longer provide any tangible benefits;
• to avoid assets strippers/predators who seeks the opportunities in public listed companies where their share prices are below their net tangible assets (particularly in property development and stock broking businesses);
• high cost of maintaining those onerous corporate governance and disclosure requirements;

Incidentally,it is never easy to embark on a privatisation exercise . The acquirer must ensure that the offer price is sufficiently attractive to minority shareholders to entice them to accept the offer. Otherwise,the acquirer runs the risks of seeing its proposal thrown out at a shareholder’s general meeting or the acquirer fails to obtain the minimum number of acceptances by minority shareholders for the privatisation to be successful.

Illustration of financial impact on Privatisation Exercise:
In this case the holding company is AB Holding Group which has two subsidiaries:Subsidiary A,a listed public company which is 55% owned and Subsidiary B,a private company which is wholly owned.

Assuming that AB Holding Group ‘s Board of Directors consider that the market/public has undervalued its group’s fundamental and its rightful price should be around the range of $14.50 (0.5 x average industry PER of 29) instead of $7.50 (0.5 x PER of 15 times).
Its Board of Directors decided to embark on its privatisation scheme by acquiring all the balance of the shares of Subsidiary A from the public.

By privatizing subsidiary A,its holding company AB Holding Group’s Earning per share (EPS) has now gone higher which it hopes that share price will go up higher perhaps to $12.00 level (0.8 x15)

• PUBLIC LISTED COMPANIES,NSTP &SARAWAK ENERGY BHD GOING PRIVATE
• Malaysian Privatisation:UDA Holdings Bhd Proposes Scheme To Take It Private
• Going Private – An Increasing Trend
• Malaysian Privatization News:MMC To Take Malakoff Private In Record Deal
• Companies Whether To Go For IPO/Listing
• MASB:FRS Now Optional for Private Companies
• 3 rd Chinese Company To Be Listed on Bursa Saham Malaysia