Hong Leong to take cement-maker Tasek private

KUALA LUMPUR (May 28): Singapore-listed Hong Leong Asia Ltd, which controls about 80.08% in cement maker Tasek Corp Bhd via two wholly-owned subsidiaries, wants to take Tasek Corp private in a deal worth an estimated RM128.61 million, based on the offer price of RM5.50 for every ordinary as well as preference share. HLA is part of Hong Leong Group, controlled by tycoon Tan Sri Quek Leng Chan.

This is the second corporate exercise involving a cement company in the last month, after YTL Corp Bhd's unit, YTL Cement Bhd, acquired a 51% stake in Lafarge Malaysia for RM1.63 billion or RM3.75 per share.

In a stock exchange filing today, Tasek said it has received an unconditional voluntary takeover offer from HL Cement (Malaysia) Sdn Bhd (HLCSB) and Ridge Star Limited (RSL) — the two subsidiaries which HLA uses to control Tasek — to acquire the remaining shares they do not own in the cement maker.

Together, HLCSB and RSL presently hold 97.89 million ordinary shares in Tasek, representing 80.8% of the total issued and paid-up 121.14 million ordinary shares (excluding treasury shares). They also have 211,050 or 63% of Tasek's total issued and paid up 335,000 preference shares. The takeover will involve the remaining 19.2% ordinary shares and 37% preference shares.

Tasek’s board is helmed by Quek's cousin, Kwek Leng Peck, as its non-executive chairman. Kwek is also the executive chairman of HLA. Kwek joined Tasek's board in June 1984 and has been Tasek’s chairman since April 2009.

Tasek said the offer price of RM5.50 per share represents a premium of 8.06% over the company's five-day volume-weighted average price, up to and including May 27, of RM5.09. It is also 8.91% more than the stock's closing price of RM5.05 yesterday, which gave it a market value of RM611.77 million.

In addition, it is at a premium of 26.19% over the company's net assets per share of RM4.34, as at end-March this year.

According to Tasek, which is also involved in cement-related products and ready-mixed concrete, primarily in peninsular Malaysia, the joint offerors do not intend to maintain its listing status on completion of the takeover.

Last month, Tasek reported that its net loss widened to RM10.42 million in the first quarter ended March 31, 2019, from a net loss of RM4.43 million a year ago, as its cement segment continues to be plagued by price competition and higher production costs. The weaker quarterly results came in despite revenue improving marginally to RM137.26 million from RM136.33 million.

Tasek's share price slipped 2 sen or 0.39% yesterday from Monday's close. In the past year, the stock has slumped nearly 33% from when it was trading at around RM7.50 a share.