SINGAPORE (Feb 21): BRC Asia is making a voluntary conditional cash offer of 42 cents a share for all the issued shares in Lee Metal Group.

The offer price represents a 2.4% premium over Lee Metal’s last traded price of 41 cents on Tuesday.

It is also a 32.9% premium above the volume weighted average price (VWAP) for the 12-month period prior to Lee Metal’s last undisturbed trading day on Nov 10, 2017, when an announcement was made regarding a notification by certain shareholders of an unsolicited approach in relation to their shares.

According to the pre-conditional offer announcement, the transaction will first need to receive approval from the Competition Commission of Singapore that it does not infringe the prohibition under Section 54 of the Competition Act.

The voluntary cash offer will also be conditional on BRC Asia holding shares carrying more than 50% of the voting rights attributable to issued shares by the closing date.

BRC Asia has already received irrevocable undertakings from certain Lee Metal shareholders, including executive chairman and CEO Lee Lin Poey, to accept the offer if and when it is made. These undertakings total some 228 million shares of Lee Metal, accounting for 48.06% of the entire issued shares.

According to a filing to SGX on Wednesday, BRC Asia believes it will be well-positioned to capitalise on Lee Metal’s trading platform to expand its own service / product offerings as well as create potential synergies by combining with a complementary business.

The group says it also allows minority shareholders to realise their investment in the shares at a premium, as well as provides an opportunity for shareholders who may find it difficult to exit their investment due to low trading liquidity.

When the deal is completed, BRC Asia says it may undertake a strategic and operational review of Lee Metal and its subsidiaries in order to realise synergies, scale, cost efficiencies and growth potential.

It will also consider delisting Lee Metal from the SGX, in order to facilitate management and operational control and leverage over the company and its subsequent developments.

It adds that it presently has no intention to introduce any major changes to the business of the company, or to discontinue the employment of any of the existing employees of the company.

Should BRC Asia receive valid acceptances of more than 90% of the total number of Lee Metal’s issued shares, it would be entitled to exercise the right to compulsorily acquire all the shares of shareholders who did not accept the offer, at a price equal to the offer price.

In the FY17 ended December, Lee Metal saw its earnings fall 43.6% to $7.5 million, from $13.3 million a year ago.

The lower earnings were mainly due to changes in inventories of finished goods and work-in-progress.

See: Lee Metal posts 40.5% drop in 4Q earnings to $2 mil on higher costs of manufacturing

See also: BRC Asia to resume trading of shares from Dec 1 after restoring free float

Shares of BRC Asia and Lee Metal last closed at $1.38 and at 40 cents, respectively.