FRESH from a 70.8 per cent price gain on the market last year, electronics services provider AEM Holdings on Monday launched a S$99.7 million buy-out bid for mainboard-listed contract manufacturer CEI Ltd.

 

Citing business synergy, mainboard-listed AEM is offering S$1.15 in cash, or a mix of cash and new AEM shares, for each share in CEI. This price tag is final and the offeror does not intend to revise its consideration.

 

The offer price marks a premium of 26.1 per cent to the volume-weighted average price of CEI shares in the 12 months to Jan 8. CEI closed at S$1.00 on Monday, up by S$0.01 or 1.01 per cent, while AEM added S$0.02 or 0.55 per cent, to S$3.67.

 

Besides cash, CEI shareholders can opt to accept the offer for a mix of 85 per cent cash and 15 per cent new shares, or 70 per cent cash and 30 per cent new shares, at an issue price of S$3.55 for each new share in AEM.

 

This would come up to either S$0.9775 in cash and 0.0486 of a new AEM share, or S$0.8050 in cash and 0.0972 of a new AEM share.

 

CEI shareholders have to pick only one of the three ways to tender their shares, and cannot combine different modes. If they do not indicate their preferred payment option, they will be deemed to have chosen the cash offer for all the relevant shares.

 

The cash consideration offers CEI investors a " clean cash exit opportunity" , while taking a mix of cash and shares dangles an opportunity to share in " future prospects of an enlarged AEM group" , the offeror said.

 

AEM plans to privatise CEI, but added in its offer document that it wants to continue developing the business and does not intend to introduce any major changes, redeploy fixed assets or terminate staff beyond the ordinary course of business.

 

The AEM board, which plans to fund the cash component of its offer through internal cash resources, asserted that CEI offers " a strategic fit and will provide synergistic benefits to the business and operations" .

 

These could include opportunities for better supply-chain integration, wider cross-selling and improved manufacturing processes.

 

Still, the bid is conditional on AEM and its concert parties obtaining valid acceptances for at least a 50 per cent interest by the close of the offer.

 

AEM disclosed that it did not hold any CEI shares as of Monday' s announcement, but CEI shareholders with a combined 23.68 per cent have made irrevocable undertakings to tender their shares in acceptance of the offer. These shareholders include CEI chairman Tien Sing Cheong and managing director Tan Ka Huat.

 

For the deal to go through, the Singapore Exchange must also give in-principle approval for the listing and quotation of the new AEM shares by the long-stop date of Feb 15, or any other date put forward by the offeror in consultation with the Securities Industry Council of Singapore.

 

Separately, the CEI board noted that it will appoint an independent financial adviser to advise the independent directors, once the offer goes out.

 

In the meantime, it advised shareholders to exercise caution when dealing in their shares and to refrain from actions prejudicial to their interests.

 

The book value of CEI was roughly S$38.7 million as at June 30, 2020, while its net tangible asset value was some S$37.6 million, according to unaudited consolidated financial statements cited in AEM' s bourse filing.