KUALA LUMPUR: Regional auto dealer Jardine Cycle & Carriage Ltd plans to privatise its Malaysian arm Cycle & Carriage Bintang Bhd, offering the latter’s shareholders nearly doubled its last closing price on Friday.
The share price of Cycle & Carriage, a Mercedes-Benz dealer, has been depressed in the past few years and is at a 10-year low.
Jardine is offering RM2.20 per share for the remaining Cycle & Carriage shares it does not already own, under a selective capital reduction and repayment (SCR).
This represents a 70.5 per cent premium against Cycle & Carriage’s last traded price on Friday.
The offer price is also at a premium of 94.66 sen or 75.52 per cent above its five-day volume weighted average price of RM1.2534.
The offer would cost RM90.6 million to Singapore-based Jardine, which holds a 59.1 per cent of Cycle & Carriage, whose shares were down three per cent or four sen to RM1.29 on Friday.
Cycle & Carriage suspended trading of its shares on Monday, with Jardine having submitted a formal proposal for the deal to the former’s board of directors.
“Upon the completion of the proposed SCR, Jardine will fully own Cycle & Carriage. Jardine does not intend to maintain the listing status of Cycle & Carriage on the Main Market of Bursa Malaysia,” the group said.
“It presents an opportunity for the minority shareholders to exit and realise their holdings in CCB in cash, and provide CCB with greater flexibility in managing and developing its existing business without the regulatory costs and restrictions associated with being listed on Bursa,” Jardine added.
Jardine said the proposed came on the back of several reasons namely a challenging operating and trading environment, a long-term commitment by Jardine and additional capital investments expected for Cycle & Carriage, an opportunity for entitled shareholders to realise their holdings, and seeing a minimal benefit from the listing status.
“Despite a competitive product line-up and the tax holiday in 2018, Cycle & Carriage could not generate satisfactory sales and returns in the recent years. The tax holiday in 2018 brought forward many car buying decisions resulting in the decline in sales in 2019.
“The above has adversely impacted Cycle & Carriage’s financial performance and resulted in it incurring a net loss after taxation from continued operations of RM28.2 million for the financial period ended September 30, 2019,” the group added.
For the nine-month up to September, the sales for Mercedes-Benz models experienced a sharp correction with a decline in sales volume by 26 per cent to 7,764 units compared to 10,461 units in 2018.
During the period, Cycle & Carriage incurred a net loss of RM16.95 million against a net profit of RM17.82 million in the same period last year.
Analysts said maintaining its listing status was of minimal benefit, as Cycle & Carriage had not undertaken any fund raising activity from the capital market over the past 15 years.
“With no need for cash to reinvest in the business, the scope of which has been flat to lower in the past decade, the best option was to return it to shareholders,” an analyst said.