Integrax - The Chess Game Continues

Integrax - The Chess

Game Continues

The on-going tussle for taking private Integrax Berhad by Tenaga Nasional Berhad is proving to be interesting daily dossiers of a chess game for those concerned parties to think and make the next decisive move after one another.

What started out as a simple offer for taking Integrax private has turned out to be a very difficult obstacle for Tenaga. For instances, Encik Amin Halim Rasip, the co-founder of Integrax Berhad and the other major minorities group notable Perak Corp Bhd, their next moves are closely followed with great impact on this takeover offer.

The offer price of RM2.75 by Tenaga in the initial stage was already sneered by Amin who not only openly opposed at the low price, but proved he is a man of his words who walks the talk by buying Integrax shares from the open market for many days at prices above RM2.75.

Amin's aggressive stance must have garnered great minorities support for Integrax shares price stayed above RM2.75 for most of the days after the announcement by Tenaga.

Interestingly, while Amin has stated openly of his objection, Perak Corp has chosen to remain quiet about making a decision until a recommendation by its appointed Independent Adviser Affin Hwang recently.

Affin-Hwang has valued Integrax at RM3.25 per share. Based on that, Perak Corp on Feb 23 announced that it will recommend to its shareholders to accept the revised takeover offer.

Is RM3.25 compelling enough?

While Perak Corp may try to ask its shareholders to accept the revised takeover price, the same cannot be said of the other interesting parties, example TSM Global Berhad (12,000,000 shares) and Public Smallcap Fund (11,854,200 shares). These two had largely remained silent about this even at this point.

Not every one will agree that the revised takeover price of RM3.25 is an attractive one. For one, the independent adviser M&A Securities engaged by Integrax valued the stock at RM3.60 per share!

However, some analysts said the revised offer is relatively expensive! The analysts felt that the previous offer of RM2.75 was already on the high side.

See, when it comes to valuation, everyone has his own way of valuing.

I, for one also won't be selling at this revised price and I would be urging my followers and friends to continue to support and stand behind Amin.

Full Control of Integrax - Important for Tenaga

The quick pace to revise the takeover price of RM2.75 by 50 sen to RM3.25 (after Perak Corp's announcement that it would only support a RM3.25 price) showed that Tenaga is anxiously and seriously enough to want to take full control of Integrax.

The Lumut ports are turning up to be a real strategic important one for Tenaga to ensure the security of the coal supply for its several Manjung plants. Investors are now waking up to know the important value of Integrax to Tenaga.

Once Integrax is fully under Tenaga's control, Tenaga will not have to deal with Integrax for any agreement on the usage of its ports. Should Tenaga becomes successful in taking Integrax private, I forsee the utility giant will most probably do away with other business other than coal supply because by 2017 when the Manjung plants are expected to generate about 18% of the nation's supply from the current 10%. This means more coal shipment from Indonesia from 2017 onwards.

  

What will Amin do now?

Although Tenaga has extended the revised takeover price of RM3.25 until March 31, attention will now be focussed back on Amin. Will Amin continues to buy more Integrax shares from the open market to beef up his shareholding percentage?

On Feb 26, Amin again bought a massive amount of Integrax shares (975,400 shares at prices between RM3.22 - RM3.24). This showed that Amin is buying to increase his stakes as the revised offer price is still too low for him and at the same time, Amin believed Integrax is worth much more than the current market price at the moment.

We will have to wait until March 31 to see how much acceptance Tenaga will be getting from the offered parties and minorities?

A good indication is how Integrax share price performs prior to March 31. If is stays above RM3.25, then it is likely goodbye for Tenaga in this attempt. I understand that the offeror can offer another revised price again only six months later. I hope I am right about this.

Did Tenaga say "take it or leave it?"

Several reports from the English dailies including the famous online Kinibiz reported that Tenaga has adopted a stance of "take it or leave it" regarding the takeover offer price of RM2.75 for Integrax shares before the Chinese New Year.

It stated that "according to a source close to the deal", Tenaga is not willing to fork out anymore other than the RM2.75 price. TNB would not revise upwards its offer to buy the Integrax shares it does not already own because RM2.75 was already a high figure, considering Integrax's share price over the past 10 years prior to the offer had never breached RM2.50.

"The feeling is that TNB may have been over-generous in offering RM2.75 in the first place," said the source. He said since TNB already owned 22.12% of Integrax which it bought in 2011, "it makes no sense for it to overpay and shell out exorbitant amount for a port in which it is the main client."

As I am also an interested party to this Integrax tussle, I checked thoroughly with various websites and could not get any official statement from Tenaga at all. That was why in my previous blog, I mentioned that I would not comment any on this "take it or leave it" stance by Tenaga because I did not read any official announcement by Tenaga.

This brings me to this question of misleading reports by irresponsible journalists just because they heard it "from a close aide!" Such irresponsible reports can sometimes cause anxiety to shareholders especially when certain misleading reports could be widely reported wrongly!

Will Tenaga or minorities win in the end?

Time will itself pan out the on-going tussle for Integrax by Tenaga. The question is which side will emerge out as winners in the end?

If Tenaga is able to garner more than 50% of the remaining shares it does not own, that would make the offer unconditional. What does this mean?

If Tenaga fails to garner more than 50% of the remaining shares it does not own, the offer would lapse. If then this happen, what will happen to Integrax shares price? Will it collapse or will it stay firm considering that investors are now warming up to know the strategic important of Integrax to Tenaga.

History has showed that as long as the company continues to earn improved earnings year after year, its share price will continue to enjoy support and firm itself up naturally.

Take two classic cases of Harrisons Holdings Berhad and Misc Berhad recently.

In the year 2008, the major shareholders of Harrisons, Bumi Raya International Holding Co. Ltd. offered RM1.20 for Harrisons shares. The price was revised to RM1.40 and collapsed after minorities refused to sell. Today Harrisons shares are traded above RM3 and has rewarded investors with total gross dividends of RM1,330.00 since 2009.

In 2013, parent company Petroliam Nasional Bhd (Petronas) attempted to privatise its 62.27% subsidiary, Misc Bhd. Initially offered at RM5.30, it was later revised to RM5.50, but minorities stood firm and the offer also collapsed. Today, Misc is trading above RM8 plus!

On both occasions, the timing was done during the "not so good times". In Harrisons' case, 2008 was the year the U.S. subprime mortgage crisis coincided with the U.S. recession of December 2007 – June 2009.

In the case of Misc, earnings were down and Misc was saddled with loss making divisions.

But both companies continued to make profits years after years since then. The rewards were reflected in the shares price of massive appreciation.

Both group of minorities stood firm and today, they were vindicated!