When Permodalan Nasional Bhd (PNB) launched its general offer (GO) for S P Setia Bhd, many analysts indicated that they would not hesitate to downgrade the property stock should its president and CEO Tan Sri Liew Kee Sin exit by selling his stake.
Liew, who is perceived as the mastermind of the property group, owns a 10.85% stake, or 200.49 million shares, in S P Setia.
Based on PNB’s initial offer price of RM3.90 per share, Liew would have instantly pocketed RM782 million if he had accepted the GO.
However, Liew did not take up the GO.
To the relief of S P Setia’s minority shareholders and employees, he instead formed a partnership with PNB to make a revised joint offer for S P Setia and has assured them that it will be business as usual.
Shortly before the Lunar New Year break, S P Setia announced that PNB and Liew made a joint revised offer at RM3.95 per share and 96 sen per warrant, which are higher than PNB’s initial offer of RM3.90 per share and 91 sen per warrant.
Liew and PNB have also entered into a management agreement, under which Liew will remain as S P Setia’s group president and CEO for three years. Liew is also granted the exclusive authority to oversee and manage the operations of the group within the ordinary course of the business.
“Based on the terms of the management agreement, PNB shall, for so long as it remains a substantial shareholder of the company, take all steps as shall lie within its power to ensure that Liew will independently manage the group,” S P Setia said in its statement when announcing the joint offer on Jan 20.
The partnership was formed about four months after PNB launched the GO in September to gain control of S P Setia.
Looking at the chronology of events, one may wonder what was PNB’s rationale in making the surprise GO, which some earlier saw as a rather hostile move.
What did PNB want to achieve with the takeover offer?
Could it be to gain not only equity, but also management control of S P Setia, which is widely regarded as the best-run property firm in the country?
But being an asset management firm, should PNB’s mandate be to own, rather than run, a property company, although it also has successful companies under its belt?
Furthermore, PNB’s GO to raise its stake in S P Setia came at a time when the government plans to wind down its equity interest in government-linked companies (GLCs).
The move, which was part of a Strategic Reform Initiative, is to define the government’s role in business so that there would be greater liquidity in the capital market and more opportunities for private investments.
“PNB had bought into S P Setia without thinking through whether it has the capabilities to run the company without Liew.
“The deal that PNB and S P Setia hammered out goes to show that PNB did not have an alternative plan, or its plan was not good enough if Liew and his team walked out,” said an industry observer.
The joint offer comes with an agreement that Liew would not accept the revised offer, but he is granted the option to sell his stake in tranches to PNB progressively at RM3.95 per share in the next three years should he wish to do so.
“After many months’ work, I am happy that we have managed to come up with what I believe is a win-win solution for everyone, especially our customers, employees and all shareholders of S P Setia.
“More importantly, the joint offer will provide a fresh launching pad for S P Setia to continue pursuing its quest to create even greater value for all stakeholders,” said Liew.
He added that he is appreciative of PNB’s put option offer as it would enable him to focus on doing his best to grow the underlying value of the company for the mutual benefit of all shareholders.
It would be interesting to see if what Liew would do in three years. Would he exercise the put option, which could rake in close to RM800 million?
That said, both PNB and S P Setia deserve a pat on the shoulder for hammering out a win-win formula that benefits all parties.
With the benefit of hindsight, perhaps PNB could have strategised its move differently.
The takeover exercise also teaches us a lesson: besides its prime landbank, leadership, human capital and expertise are very much the key assets of a property company.
Liew, who is perceived as the mastermind of the property group, owns a 10.85% stake, or 200.49 million shares, in S P Setia.
Based on PNB’s initial offer price of RM3.90 per share, Liew would have instantly pocketed RM782 million if he had accepted the GO.
However, Liew did not take up the GO.
To the relief of S P Setia’s minority shareholders and employees, he instead formed a partnership with PNB to make a revised joint offer for S P Setia and has assured them that it will be business as usual.
Shortly before the Lunar New Year break, S P Setia announced that PNB and Liew made a joint revised offer at RM3.95 per share and 96 sen per warrant, which are higher than PNB’s initial offer of RM3.90 per share and 91 sen per warrant.
Liew and PNB have also entered into a management agreement, under which Liew will remain as S P Setia’s group president and CEO for three years. Liew is also granted the exclusive authority to oversee and manage the operations of the group within the ordinary course of the business.
“Based on the terms of the management agreement, PNB shall, for so long as it remains a substantial shareholder of the company, take all steps as shall lie within its power to ensure that Liew will independently manage the group,” S P Setia said in its statement when announcing the joint offer on Jan 20.
The partnership was formed about four months after PNB launched the GO in September to gain control of S P Setia.
Looking at the chronology of events, one may wonder what was PNB’s rationale in making the surprise GO, which some earlier saw as a rather hostile move.
What did PNB want to achieve with the takeover offer?
Could it be to gain not only equity, but also management control of S P Setia, which is widely regarded as the best-run property firm in the country?
But being an asset management firm, should PNB’s mandate be to own, rather than run, a property company, although it also has successful companies under its belt?
Furthermore, PNB’s GO to raise its stake in S P Setia came at a time when the government plans to wind down its equity interest in government-linked companies (GLCs).
The move, which was part of a Strategic Reform Initiative, is to define the government’s role in business so that there would be greater liquidity in the capital market and more opportunities for private investments.
“PNB had bought into S P Setia without thinking through whether it has the capabilities to run the company without Liew.
“The deal that PNB and S P Setia hammered out goes to show that PNB did not have an alternative plan, or its plan was not good enough if Liew and his team walked out,” said an industry observer.
The joint offer comes with an agreement that Liew would not accept the revised offer, but he is granted the option to sell his stake in tranches to PNB progressively at RM3.95 per share in the next three years should he wish to do so.
“After many months’ work, I am happy that we have managed to come up with what I believe is a win-win solution for everyone, especially our customers, employees and all shareholders of S P Setia.
“More importantly, the joint offer will provide a fresh launching pad for S P Setia to continue pursuing its quest to create even greater value for all stakeholders,” said Liew.
He added that he is appreciative of PNB’s put option offer as it would enable him to focus on doing his best to grow the underlying value of the company for the mutual benefit of all shareholders.
It would be interesting to see if what Liew would do in three years. Would he exercise the put option, which could rake in close to RM800 million?
That said, both PNB and S P Setia deserve a pat on the shoulder for hammering out a win-win formula that benefits all parties.
With the benefit of hindsight, perhaps PNB could have strategised its move differently.
The takeover exercise also teaches us a lesson: besides its prime landbank, leadership, human capital and expertise are very much the key assets of a property company.
