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Analysis and Recommendation
Last week, Holcim Philippines Inc. (HLCM) was suspended from trading following a drop in minimum public ownership (MPO) to 5.05% from 14.27%. It was reported that Sumitomo Osaka Cement Co. sold its 595 million common shares of HLCM at P3.92/share to Holderfin B.V., the 18.11% owner of HLCM prior to the transaction. The transaction effectively increases Holderfin B.V.’s stake in HLCM to 27.3% and reduces the public ownership level of HLCM to 5.05% — below the PSE’s 10% minimum public ownership (MPO) threshold.
An MPO below the PSE’s threshold will cause a trading suspension for no more than 6 months. Holderfin, has indicated its willingness to conduct a tender offer for the remaining minority shareholders of 5.05% should HLCM fail to raise the stock’s float back above 10%. Given Holderfin’s position and the difficult market conditions, HLCM is “carefully evaluating the feasibility and potential benefits of pursuing a Voluntary Delisting.”
Our View: HLCM has set a precedent for companies who want to delist. HLCM’s public ownership report back as of March 31, 2023 showed that HLCM’s public was at 14.27% but the report does not show the chunky shareholders such as Sumitomo, which, when convinced to sell to the owners, can easily breach the PSE’s 10% public float threshold (20% MPO for companies that have been listed from 2018 or later). This will suspend trading for the subject stock for 6 months and a tender offer for the remaining shares can subsequently take place.
So what? HLCM’s slick move can serve as an inspiration for other listed companies who have either conducted a tender offer recently (CHP) or companies who’ve been speculated to be taken private (i.e. FGEN). CHP’s public float of 10.07% and FGEN’s 11.67% are within striking distance of the threshold and will not take much to cause a suspension, subsequently a tender offer and inevitably a delisting/privatization.
The key is to get a substantial shareholder to sell. Holderfin’s purchase price of P3.92/share is equivalent to around ~US$38mn EV/ton, a substantial discount to what SMC would have paid for back in 2019 of US$190mn/ton but at a discount compared to Indonesian peers’ of US$70-80mn EV/ton. Currently, CHP is trading at a valuation of US$85mn EV/ton and will probably make the next tender offer in CHP attractive to minority shareholders.
The same may not be the case for FGEN and especially MPI, whose current share prices are trading well below consensus estimates. Consensus has a fair value of P27 for FGEN and P6.21 for MPI. Well, HLCM showed how to do it quietly (in large part aided by the low investor ownership in the stock) the rest will just need to make a sweet deal (or sweeter for MPI) to get on with their intent to delist.
See also: MPI sweetens delisting deal with P5.20 offer price
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