TELEKOM Malaysia Bhd (TM) has made a RM417.3 million offer to take public-listed subsidiary VADS Bhd private as it seeks to boost earnings.
The offer is for RM7.60 per share, 12 per cent higher than VADS’ last closing price on Friday. The stock was halted from trading yesterday, and should resume trading today.
“The privatisation of VADS will accord the TM group greater flexibility to streamline its businesses to maximise potential synergies and cost-saving benefits,” TM said in a statement to Bursa Malaysia yesterday.
TM currently holds 63 per cent of VADS, which provides managed network and outsourcing services.
According to TM, the offer price is higher than its record of RM6.90 achieved last Friday. However, the stock’s average fair value from six analysts compiled by Bloomberg was RM7.70.
In fact, two research firms – RHB Research and CIMB – thought that VADS was worth RM8.51 and RM8.70 a share respectively.
TM is taking VADS private with a selective capital reduction and repayment exercise. This means that only shareholders other from TM will receive the payment.
Initially, VADS will carry out a bonus issue, with 706.2 million new shares.
This will boost its enlarged share capital to RM422.3 million comprising 844.6 million shares. VADS will then cancel RM417.3 million, or 834.6 million shares.
VADS’ paid-up capital will be cut to RM5 million comprising 10 million shares. Its paid-up capital currently stands at RM65.9 million comprising 131.8 million shares.
To facilitate the deal, TM will get a wholly-owned subsidiary to provide an interest-free advance of up to RM417.3 million to VADS to fund the exercise.
At the end of June, TM had some RM1.2 billion in cash and bank balances.
TM expects to wrap up the deal in the first half of next year. It has hired CIMB Investment Bank Bhd to arrange the deal.