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Wednesday, June 20, 2007

Some Companies are Fairer to Minority Shareholders

It is the season of taking public listed companies private for whatever reasons and minority shareholders usually get a raw deal.

Even large groups like PNB can treat smaller shareholders with little sentiment like the recent moves to merge all the plantation companies via a third party exercise as if that somehow reduces their moral obligations or sense of fair play.

An even worse privatisation move is to take Island & Peninsula Bhd private with a miserable RM2.35 offer even though the asset backing is around RM2.80 per share.

No doubt the independent advisor will make the blase comment to the effect that "the offer is 15% more than the last traded price for the past 6 months". I suppose advisors will be willing to write anything that covers their reputation.

Of course we should not make more rules to prevent the delisting of companies but isn't a fairer treatment of minority shareholders possible?

It would be a good practice if the independent advisors take the stand that the offer price is reasonable based on the following criteria:

The offer price will be the higher of:
1.At least 10% more than the highest traded price of the last 3 months
2.At least 15% more than the net asset value of the share based on valuations done within the last 2 years.

The latest company to take the private road is AIGB but at least they are offering 2.2times the asset value. I don't think many minority shareholders will argue with the offer.

Graphics: Thanks to http://www.civilwarliterature.com/ListOfIllustrations/122464p0829(2)w775.jpg

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