KUALA LUMPUR – Genting Malaysia Bhd’s (GenM) indirect unit Resorts World Ltd (RWL) has finally managed to dispose its entire 16.87% stake in cruise operator Genting Hong Kong Ltd (GenHK).
However, the transaction was made at the lowest price permitted under the disposal mandate given by its shareholders at an EGM in June.
In a filing with Bursa Malaysia, GenM said RWL inked an agreement on Friday to sell the 1.43 billion GenHK shares to Golden Hope Ltd for US$415mil (RM1.71bil) in cash, or 29 cents per GenHK share.
The Resorts World Genting operator said the price represented an 8.2% premium to the five-day volume weighted average market price (VWAMP) of GenHK shares up to and including Sept 29 of US$0.268. Under the mandate given by GenM’s shareholders, a discount of up to 20% to the five-day VWAMP was allowed.
Nonetheless, 29 cents is the lowest price authorised under the renewed one-year disposal mandate given to the company by its shareholders at the meeting on June 1. Under the original mandate which expired on July 1 this year, the minimum disposal price allowed had been higher, at 33 US cents.
Even at 33 cents, there would have been no profit to be made. The original cost of investment in the disposal shares had been US$604.1mil (RM2.49bil), or an average of 42 US cents per share.
It is believed that concerns whether the minimum disposal price was too low led some shareholders to oppose giving the mandate to sell the GenHK shares. At the June 1 EGM, shareholders holding 12.53% of the voting shares voted against renewing the mandate, while at the 2015 EGM, the figure was higher at 24.16%.
Golden Hope Ltd is the trustee of Golden Hope Unit Trust which is ultimately owned by a discretionary trust in which GenM chairman and chief executive Tan Sri Lim Kok Thay, his son Lim Keong Hui and other family members are beneficiaries.
Golden Hope Ltd, where Kok Thay is a director, already held 47.22% equity interest in GenHK prior to Friday’s purchase.
On the rationale for the disposal, GenM said it had engaged placement agents to procure interest from potential investors in the shares that were up for sale.
“As at Sept 30, 2016, based on the review of the share price level of GenHK, market conditions and feedback from selected investors contacted by the placement agents, the company believes that there is insufficient demand to conduct a placement of the entire number of sale shares through a widely distributed process at the minimum price of US$0.29 allowed under the 2016 disposal mandate,” it said.
“Further, the share price of GenHK has been trading below US$0.29 (being the minimum price allowed under the 2016 disposal mandate) since July 22, 2016. Hence, the disposal allows the GenM group to monetise the entire non-core stake in GenHK at a disposal price of US$0.29 per share, which represents a premium of 8.2% to the 5-day VWAMP of GenHK shares up to and including Sept 29, 2016 of US$0.268.”
The share disposal is expected to be completed on Oct 21.