KUALA LUMPUR, Feb 13 (Bernama) — Integrax Bhd shareholders holding out for a higher offer price from Tenaga Nasional Bhd (TNB) are in for a disappointment as the energy company adopts a ‘take it or leave it’ stance on its original RM2.75 offer.
According to a source close to the deal, 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 per cent 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”.
“Yes, it is good to have control, but not at any price,” said the source, referring to the Integrax-owned Lekir Bulk Terminal at Lumut in Perak which feeds TNB’s Janamanjung power plant.
“Surely, if TNB wanted to revise its offer price, it would have done so when the offer document was sent to Integrax shareholders on Jan 30, but TNB simply chose to formalise the offer at this price.
“And if push comes to shove, they can easily walk away from the deal and it is none the worse for it, as TNB simply stays put in its current position as a major shareholder of Integrax, though admittedly without full control of the port. But inside TNB, the feeling is they can live with this.
“On the other hand, for shareholders of Integrax, things may not turn out to be so rosy. I tend to agree with what analysts have warned that if TNB walks away from this deal, it is likely the current high share price will retrace its level before the offer price of RM2.75 was made public, which suggests it would revert to the RM2.20-RM2.30 pre-offer level,” the source said.
TNB, which currently has a 22.12 per cent stake in Integrax, had on Jan 9 submitted a notice to Bursa Malaysia for this proposed purchase.
The nation’s power supplier is eyeing the remaining 78 per cent that it does not own at an offer price of RM2.75 a share.
With Integrax in play, its shares soared to a high of RM3.03 on Jan 29, a day before the offer document was released and closed at RM2.84 on Jan 30 when the offer documents were despatched to shareholders.
The share is now trading in the range of RM2.80.
The media had reported that analysts agreed TNB’s RM2.75 offer price was attractive and provided shareholders the opportunity to exit their investment with healthy returns.
Kenanga Research, in its Jan 12, 2015 report, highlighted that the offer price was favourable to Integrax’s shareholders as its peers had more diversified client portfolio and larger port-handling capacity.
With a premium to its intrinsic value, Kenanga had advised shareholders to accept the offer.
According to the source, with two more power plants coming onstream whose coal supplies would pass through the Integrax-operated port, TNB would be contributing higher revenues.
“TNB has been the major contributor to Integrax’s revenue. Now with Manjung 4 becoming operational in March 2015 and Manjung 5 expected in October 2017, total annual coal consumption will increase, with TNB continuing to be the port operator’s major revenue contributor,” he said.
RHB Research, via its Jan 12 report, said it would make perfect sense administratively to turn Integrax in its wholly-owned unit, describing the move by the port’s sole customer as tactical in nature.
“The takeover will provide TNB with full control over the port’s operations and future direction, particularly when it comes to negotiation of jetty usage rates which has in the past been a sticky point and a long-drawn process,” RHB Research said.
TNB’s offer hit an obstacle when Integrax’s other major shareholder, Amin Halim Rasip, had on Jan 16 issued a statement declining TNB’s offer of RM2.75 as it was “not reflecting the value of Integrax”.
A business daily reported him as saying that Integrax’s “true value and the minimum price per share for Integrax should be at RM5 and could go up to as high as RM10 within the next five years”.
TNB believed that the offer was fair and reasonable after taking into consideration the current market conditions and Integrax’s earnings potential.
“There is already a hefty premium baked into this RM2.75 offer and all indications point to TNB sticking to its price. Simply put, it is a case of take it or leave it,” it said.
TNB in its offer documents said it planned to de-list Integrax from Bursa Malaysia if it received sufficient acceptance, aiming to gain full control of the operator of Lumut Port in Perak.
TNB’s RM2.75 offer price represents a substantial 21.7 per cent premium over Integrax’s 5-day volume weighted average price up to Jan 8, 2015, and while its shares have not traded above the offer price over the past 10 years prior to TNB’s announcement of the offer on Jan 9, 2015.