3HA Capital to privatise watch-listed CosmoSteel after buyout offer accepted

[SINGAPORE] Shares of watch-listed CosmoSteel will be suspended and eventually delisted, after the offer by investment holding company 3HA Capital to privatise the group at S$0.25 a share closes on Friday (Aug 1) at 5.30 pm.

The piping-systems provider no longer satisfies the Singapore Exchange’s (SGX) free-float requirement, which stipulates that at least 10 per cent of a listed company’s shares must be publicly held, said 3HA Capital.

The special-purpose vehicle is 30 per cent owned by CosmoSteel’s controlling shareholder, Japanese global steel trader Hanwa Co.

This comes as 3HA Capital’s offer to buy out CosmoSteel has received valid acceptances representing more than 90 per cent of all the group’s shares, leaving under 10 per cent of the shares in public hands.

As at 6 pm on Thursday, the offeror and its concert parties owned, controlled or had agreed to acquire around 237.1 million shares, representing 90.7 per cent of CosmoSteel’s total issued shares.

With the loss of the free float, SGX will suspend trading in CosmoSteel’s shares at the close of the offer. 3HA Capital intends to compulsorily acquire all the offer shares it does not yet own with a view to delist the company.

Chance for shareholders unwilling to bear risks

On May 15, 3HA Capital made a voluntary conditional cash offer for all CosmoSteel shares at a price of S$0.20 apiece.

The investment holding company is a four-member consortium whose shareholders include HHH Group, Thor Capital, Ann Yak Siong and Hanwa Singapore – a Singapore-incorporated company in the business of trading metals, foods and energy, that is wholly owned by Hanwa Co.

Hanwa Co owned some 82.6 million shares of CosmoSteel, or around 31.6 per cent of its entire paid-up issued capital, as at May 15.

The offeror noted that the piping-systems provider, which has been on the SGX watch list since June 2018, faced potential suspension from trading if it failed to meet the watch-list exit criteria by the extended Jun 4 deadline. The group was placed on the watch list for recording pre-tax losses for three consecutive financial years.

The offer was an opportunity for shareholders “who are not prepared to bear the risks associated with the company” to realise their investments at a premium to historically traded prices, 3HA Capital said.

It added that the offer price was a premium of 48.1 per cent over the counter’s last-traded price of S$0.135 on May 14.

It was also a premium of 57.5 per cent, 61.3 per cent, 70.9 per cent and 75.4 per cent over the volume-weighted average price per share for the one, three, six and 12-month periods, respectively, up to and including May 14, 3HA Capital said.

Ong Tong Hai, CosmoSteel’s outgoing chief executive officer and executive director, spoke out against the offer on May 30. Speaking to The Straits Times, he said the offer did not “represent fair value for shareholders” as it undervalued the company’s recovery trajectory, assets and potential.

It was also made under “potentially misleading premises” for failing to account for the proposed scrapping of the SGX watch list and the bourse regulator’s assurance that no listed company would be forced to delist or suspend trading pending the review, he added.

Ong, a long-term shareholder of CosmoSteel, also noted that the parties behind 3HA Capital are direct competitors of the company.

His resignation from his CEO and executive director roles was announced on Jul 11, with his last day to be on Dec 31.

On Jun 23, the offeror revised its offer price upwards to S$0.25 a share after an independent financial adviser deemed its initial offer unfair.

The revised offer turned unconditional in all respects on Jul 7, after it received valid acceptances representing around 50.2 per cent of all CosmoSteel shares.

The counter closed down 2 per cent or S$0.005 at S$0.245 on Friday.