OldTown shares hit 7-month high after JDE buyout offer

OldTown shares hit 7-month high after JDE buyout offer
PHOTO: The Star/Asia News Network

PETALING JAYA - Coffee manufacturer and cafe outlets operator OldTown Bhd's share price surged to a seven-month high yesterday, following a buyout offer from Dutch coffee company Jacobs Douwe Egberts (JDE).

The counter opened for trading higher by 19 sen, or 6.6 per cent, at RM3.07 (S$1.02) and rose to an intra-day high of RM3.17. At 5pm, the stock closed one sen higher at RM3.08, with 3.73 million shares changing hands.

In a filing with Bursa Malaysia on Monday, OldTown announced that JDE had proposed to privatise the former at RM3.18 per share for RM1.47bil.

Analysts are upbeat on the deal and have recommended the remaining shareholders to accept the takeover offer.

According to Kenanga Research, the offer price is deemed fair as it is slightly higher than its unchanged target price of RM3.15 per share.

"We are positive on the news, as it demonstrates the growing brand equity of the homegrown 'Oldtown' brand in the global food and beverage scene.

"With the added connections made available by the offeror, the group's internationalisation could be further accelerated. However, this would render investment opportunity in OldTown out of the public reach," it said in a note.

The research house also stated that the pre-conditional cash offer at RM3.18 per share represented a 10.42 per cent premium over the group's last transacted share price on Dec 7.

In order to privatise OldTown, JDE requires a total stake of at least 90 per cent. The move will also need approval from the Competition Commission of Singapore and any other antitrust regulators, if any.

The takeover offer will not be made to shareholders of OldTown unless the pre-conditions have been satisfied by August 11, 2018.

AmInvestment Bank Research indicated that the pre-conditions are unlikely to be a stumbling block for JDE's takeover move, as the combined white coffee market share of Singapore amounts to 50 per cent, which is below the 60 per cent threshold for a possible breach of anti-trust laws.

JDE, which is second only to Nestle in global coffee retail, recently took OldTown's competitor Super Group private in late 2016.

RHB Research Institute also recommended investors to accept the offer, in view of the decent offer price versus the challenging business outlook, moving forward.

"The offer price for OldTown translates into a 38 per cent discount, which we think is justifiable. We believe the acquisition price offers decent value and a clean cash opportunity for OldTown shareholders to unlock the value of their investments in the company.

"Major shareholders have each provided irrevocable undertakings to JDE. Besides the pricing premium, we also think the attractive appeal and potential of OldTown under JDE - a sizeable global player with deep expertise - might have further convinced the founding shareholders to undertake the decision to divest.

"We recommend to accept the offer as the shareholders could otherwise be exposed to the risk of holding shares in an unlisted private company, in view of JDE's plans to delist OldTown's shares," it said.


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