[SINGAPORE] Independent directors of Great Eastern Holdings (GEH) are recommending for shareholders to accept OCBC’s conditional exit offer that will ultimately lead to the insurer’s delisting.
This is based on advice from EY, the independent financial adviser (IFA) involved in the deal, GEH said in a circular issued after the market closed on Monday (Jun 9).
It noted the IFA is of the opinion that the financial terms of the exit offer are “on balance, fair and reasonable”.
OCBC had on Friday made an offer of S$30.15 per share for the 6.28 per cent stake in GEH it does not own.
Shareholders will be voting at an extraordinary general meeting on Jul 8.
The insurer will be delisted if the resolution receives a 75 per cent approval rate. OCBC will not be allowed to vote.
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In a letter to the independent directors on the exit offer, the IFA said the exit offer price of S$30.15 per offer share is “within the derived range of values” for the shares.
It added that it has determined the range of values to be from S$30.10 to S$37.63 per share.
The IFA noted that the lower end of the range is based on the application of the average price-to-embedded value (P/EV) ratio of similar insurers of 0.8 times to the reported embedded value of the GEH group as at Dec 31, 2024. It is then adjusted for the dividend of S$0.45 per share paid on May 6.
In contrast, the higher end of the range is based on the reported embedded value of the GEH group as at Dec 31, 2024, and similarly adjusted for the May 6 dividend.
“The P/EV ratio implied by the exit offer price of 0.8 times is higher than the average P/EV ratios of the company over the 10-year period,” the IFA said, adding that it is of the view that the exit offer is “fair”.
In determining whether the offer is “reasonable”, the IFA considered a list of factors, including GEH’s trading suspension and minority interest; historical valuation measures of the group; comparison with precedent privatisation transactions; its dividend track record; and the likelihood of competing offers.
In the event that shareholders do not accept OCBC’s exit offer, they will be asked to vote on two alternate resolutions that would facilitate GEH’s resumption of trading.
Resolution B proposes adopting a new constitution by GEH, which is largely comprised of existing provisions of its constitution, but that would also introduce Class C non-voting shares that are designed to facilitate the implementation of Resolution C.
Class C shares are a non-listed, non-voting, convertible class of preference shares.
Resolution C proposes a one-for-one bonus issue for all shareholders. If both alternate resolutions are approved, shareholders will receive bonus ordinary shares, unless they elect to receive bonus Class C non-voting shares on a one-for-one basis.
GEH’s independent directors recommend shareholders opt for Resolutions B and C, if the resolution to delist is not accepted. They added that they do not recommend electing to receive Class C non-voting shares.
OCBC has said that it will vote to receive the Class C shares, to enable GEH’s public float to hit 10 per cent so that the trading suspension can be lifted.
Earlier, some GEH shareholders told The Business Times that they did not think the latest exit offer was good enough, but said they would accept it anyway.
Calling the mechanism design a “Hobson’s choice”, one shareholder said it was better to “take it and move on” than to risk the second option.
