Zico Capital recommends that shareholders accept the offer

 

THE takeover offer for oil-and-gas contractor Dyna-Mac at S$0.67 a share has been deemed &ldquo fair and reasonable&rdquo by the independent financial adviser (IFA) of the deal.

 

The adviser, Zico Capital, has thus recommended that shareholders accept the offer, said a bourse filing on Wednesday (Oct 23).

 

In September, South Korean company Hanwha launched a voluntary conditional cash offer through a special-purpose company to take management control of Dyna-Mac at S$0.60 a share.

 

This was later revised to a final offer price of S$0.67 a share.

 

The offeror said it plans to review Dyna-Mac&rsquo s business and ensure its continuity, and to lead it to further growth and development. It does not intend for Dyna-Mac to be delisted from the Singapore Exchange (SGX).

 

In determining that the offer was &ldquo fair&rdquo , the IFA noted that the final offer price of S$0.67 a share is within its estimated value of between S$0.66 and S$0.80, among other factors.

 

The final offer price has a premium over the one-month, three-month and six-month volume-weighted price averages of the shares, prior to and including the last trading day before the offer was announced.

 

It also has a premium over the last traded price on the last trading day, with the shares hitting their highest price of S$0.675 after the offer was announced.

 

The price over the adjusted net asset value (ANAV), diluted ANAV, net tangible asset value (NTA) and diluted NTA ratios &ndash as implied by the final offer price &ndash are also above the range of the price over NAV and NTA ratios of comparable companies.

 

But the IFA also noted that the price-to-earnings ratio of the company, as implied by the final offer price, is within the range of, but below, the mean and median of that of comparable companies.

 

The enterprise value over the earnings before interest, taxes, depreciation and amortisation (Ebitda) of the company is also below the mean and median of that of comparable companies, although it was within range.

 

In determining that the deal was &ldquo reasonable&rdquo , the IFA noted that the final offer price represents a premium of 67.5 per cent to what the offerors paid for their stakes in the company in May 2024.

 

Shares of Dyna-Mac were not actively traded during the reference period, but became more actively traded after the offer was announced.

 

The IFA also noted that the offer presents an opportunity for shareholders to realise their investment at a premium to the prevailing share price, without incurring brokerage and other trading costs that would typically erode returns.

 

Meanwhile, the company&rsquo s &ldquo generally favourable&rdquo outlook and net-cash position of S$307.70 million as at Jun 30, 2024, undermines the reasonableness of the offer.

 

Dyna-Mac&rsquo s outlook is supported by its current order book, which was on an upward track during the period under review, and reflects sustained market demand, the IFA noted.

 

While the offeror said it has no intention to increase or revise this improved offer, it said on Oct 14 that it &ldquo reserves the right to do so in a competitive situation&rdquo .

 

Some analysts and the estate of Dyna-Mac&rsquo s late founder had earlier said the initial offer of S$0.60 per share was not compelling.