KUALA LUMPUR (Nov 24): The offer by the Lim family to buy the remaining 25.4% stake in Malacca-based integrated poultry farming company Huat Lai Resources Bhd for RM5 apiece, is perceived as not fair but reasonable, by independent adviser Mercury Securities Sdn Bhd.

Nevertheless, Mercury Securities recommends the shareholders of Huat Lai Resources to accept the offer.

According to the independent advice circular which was published on Bursa Malaysia today, Mercury Securities said it has derived a range of fair value in Huat Lai Resources of between RM535.7 million and RM574.59 million, which translates into an estimated fair value per share of RM6.87 and RM7.36.

“The offer price of RM5 is lower than and represents a discount of approximately 27.22% to 32.07% over the above-mentioned range of fair value per share. In view that the offer price is lower than the value of the offer shares, the offer is not fair,” it said.

Mercury Securities, however, pointed out that shares of Huat Lai Resources have never traded above the offer price since listing on July 3, 2002, save for only four market days. Besides, Huat Lai Resources’ shares are illiquid, with a simple average monthly trading volume-to-free float for the past one year of 1.17%.

For that reason, Mercury Securities opined the offer is reasonable, as it provides an exit opportunity to shareholders to realise their investment in cash, without incurring transaction costs such as brokerage, clearing fee and Malaysian stamp duty.

Meanwhile, the non-interested directors of Huat Lai Resources, namely Datuk Mohd Rosli Abdul Aziz, Chin Peck Li and Tan Peng Chan, have concurred with the evaluation and recommendation of Mercury Securities.

“Whilst the offer is deemed “not fair”, the “reasonable” view outweighs the “not fair” view. Accordingly, the board recommends that you accept the offer,” they said.

To recap, the founding family members of Huat Lai Resources Bhd — including managing director Lim Yeow Her, his brother Lim Yeow Kian and Datuk Lim Yeow Siong, who collectively own a 74.6% stake — had on Oct 24, launched a conditional voluntary takeover offer to acquire the remaining 19.78 million shares in the company.