By Xavier Kong
With the disposal of its stake in Lay Hong last week, QL has more or less withdrawn from Lay Hong. With how the general offer for full ownership of Lay Hong failed, walking out with a cool RM18.9 million overall gain seems a rather smooth exit for QL, in Tiger’s opinion.
There was a time where Tiger thought that there would never be an end to the egg puns, forced or otherwise, coming from Tiger’s mouth (or keyboard). Then the QL Resources Bhd versus Lay Hong Bhd tiff went silent, and Tiger rejoiced. No more egg puns for this Tiger!
However, it seems QL was determined to have the last laugh, as it were.
On Sept 11, QL announced that the group had disposed of its entire 38.63% stake in Lay Hong in a direct business transaction worth RM60.6 million, with the valuation at RM3.05 per Lay Hong share.
In Tiger’s opinion, this represents a rather smooth exit from the entire disagreement for QL, who had failed to achieve the 50% of shares required by its general offer for Lay Hong, which in turn was triggered by QL’s representative Chia Mak Hooi not being reelected to Lay Hong’s board of directors during its previous general meeting.
QL was concerned about the loss of its say in the direction of Lay Hong, despite being a substantial shareholder, and thus made a general offer two days after Chia was not voted back on.
Well, when the offer failed, Tiger figured that it must have been quite a bit of egg on some faces at QL, but now, it seems it did get the last laugh, walking out of the entire thing with that RM60.6 million.
Of course, this entire amount is gain realised over time, which in turn means that its gain from this in 2015 is RM377,000. Still something, and a bit more padding for QL’s war chest.
QL and Lay Hong even remain as business partners as QL will still be supplying raw feed to Lay Hong. Bravo to this sportsmanship, Tiger says, bravo.
But Tiger is curious about something. Does the bad blood between the two companies, peers in the same industry, really not going to matter moving forward? At this juncture, Tiger would like to point out that both companies are each controlled by a family.
Of course, analysts are positive on the disposal of the stake in Lay Hong by QL, with one noting that “the two shareholders have misaligned directions on Lay Hong’s growth”, and another noting that they “were not very supportive of the acquisition to begin with”.
This sounds to Tiger like the general offer was a decision made while emotions were running high, and while the acquisition would have indeed been synergistic, and looked very good on paper, the offer was also made at rather steep valuations, and who knows what else could have happened.
It was also noted by one particular analyst that if the acquisition had been successful, and QL had gotten a bigger share of the market, it would also be more severely affected should there be any health scare situation. The larger hold on the market would also make it more susceptible to oversupply.
Perhaps it really was for the best that QL disposed of its stake in Lay Hong. This way, all that remains between the two is purely business. QL now has an expanded war chest, and does not have to deal with the uncomfortable feeling of being unable to have a say in the direction of a company in which it owns a substantial stake.
Perhaps this really does outweigh any gain QL would have received from that 38.63% stake in Lay Hong. Maybe it was better that QL did not have all its eggs in one basket.
Personally, Tiger thinks that QL should have held onto some of it, maybe a smaller stake rather than 38.63%, but hey, what does Tiger know?
GRRRRR!!!
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