Sunrise Technology has responded to a series of frequently asked questions (FAQs) with regard to the scheme of arrangement of Sunningdale Tech on the morning of Feb 4.
The FAQs covered topics such as an increase in the scheme consideration, other offers for Sunningdale, rationale for certain decisions, the choice to privatise at this time, and why was the scheme being proposed in the first place.
On the proposal of the scheme, Sunrise clarified that it was done to “secure Sunningdale [Tech’s] long-term future”.
“[Sunrise] believes a new cycle of investments, involving expansion in ‘high-cost’ regions including US and Europe, will be needed to meet the challenges of an evolving supply chain brought about by escalating trade tensions and exacerbated by the Covid-19 pandemic. This is in addition to the historical investments made to sustain business performance assuming a ‘status quo’ scenario,” it says.
SEE: Sunningdale Tech needs to pivot fast; additional capex required: Koh Boon Hwee
In the same statement, Sunrise noted that the independent financial adviser (IFA) has said that the financial terms of the scheme are “fair and reasonable”.
Sunrise, through the FAQ, added that it considers Sunningdale’s price-to-earnings (P/E) ratio and EV/EBITDA multiple to be more “appropriate metrics” for valuing Sunningdale, instead of simply taking Sunningdale’s latest net asset value (NAV) for the scheme consideration.
“Taking into account the EV/EBITDA statistics of precedent merger and acquisition (M&A) transactions, the EV/EBITDA statistics for listed comparable companies and the net cash position of the company as at Sept 30, 2020, the IFA estimated the valuation range for Sunningdale Shares to be between $1.55 and $1.68, and noted that the scheme consideration is fair and reasonable as it is within the estimated range.”
On Jan 19, Sunrise and Sunningdale increased their privatisation offer to $1.65 in cash per scheme share or 1,650 shares in Sunrise.
The revised scheme consideration, says Sunrise, is “final”, and that there are no other offers on the table for Sunningdale.
On offering a scrip option, Sunrise says that was given to give shareholders a choice and that the quantum of the rollover stake was determined after keeping in mind a range of factors including “structuring of both equity and debt financing for the transaction and the requirement for the current shareholders of [Sunrise] to achieve control of the private entity to effect the sorts of changes they view as necessary”.
Shareholders have also questioned the timing of the privatisation offer, especially considering the “significant” amount invested into Sunningdale’s manufacturing footprint over the past years.
“[Sunrise] anticipates that a new cycle of investment in ‘high-cost’ regions is required in order to meet the evolving challenges of the industry. In particular, persistent trade tensions are impacting on the way in which businesses are organising their supply chains and this trend is being further exacerbated by the pandemic,” says the company.
“We believe that Sunningdale needs to pivot quickly to secure its future. For instance, Sunningdale has already made its first such acquisition in what some would term a high-cost country by buying Moldworx in the United States in November last year,” it adds.
Should the scheme be rejected by shareholders, Sunningdale Tech will remain a listed company.
Sunrise also clarified that Sunningdale’s non-executive non-independent director, Loke Wai San, was not involved in the deliberations of the scheme.
Shares in Sunningdale closed flat at $1.63 on Feb 3.