Second attempt to privatise SEGi?

by **Cals** Tue 04 Mar 2014, 10:32

Business & Markets 2014

Written by Levina Lim & Kathy Fong of theedgemalaysia.com

Tuesday, 04 March 2014 09:35

KUALA LUMPUR: Tan Sri Clement Hii Chii Kok, founder and controlling shareholder of SEG International Bhd (SEGi), bought 40 million shares in the private education group last week, raising his direct equity interest to 30.95% from 24.79% previously.
Hii, who is group managing director of SEGi, last Friday also bought 12.4 million warrants that were trading in thin discount, bringing his holdings to a total of 70.58 million units or 88.32%.
With the latest share purchase, Hii’s direct and indirect stakes in SEGi are raised to 72.68% from 66.63% in mid-January.
The latest purchases of shares and warrants have raised talk that Hii may be making a second attempt to take SEGi private — something that he and private-equity firm Navis Capital failed to do so two years ago.
Should Hii convert all his SEGi warrants into equities at an exercise price of 50 sen per share, his direct shareholding will balloon to 37.23% on a fully diluted basis.
“There may be a general offer coming up in the near future ... the controlling shareholders are still studying such a plan,” an executive familiar with the education group told The Edge Financial Daily yesterday.
“With the current share price, which is below what Navis Capital paid earlier, it makes sense for the major shareholders to do it now [taking it private],” the executive said.
Navis Capital’s investment vehicle, Pinnacle Heritage Solutions Sdn Bhd, held a 41.81% stake in SEGi as at April last year, according to SEGi’s 2012 annual report.
To recap, Pinnacle Heritage and Hii entered into a shareholders’ agreement in 2012 to regulate their rights and obligations as SEGi shareholders. The duo made a mandatory general offer (MGO) at RM1.714 for each share and RM1.214 for each warrant in April 2012. The deal valued SEGi at RM1.14 billion then, compared with its current market capitalisation of RM989.3 million.

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If Hii is to exercise his warrants, the shareholdings of the two parties acting in concert would increase to 75.38% on the diluted basis, a level that does not meet the minimum public shareholding spread of 25% required by the stock exchange.
SEGi has been buying back shares from the open market. As at yesterday, the education group accumulated treasury shares of 26.04 million or a 3.9% stake.
Navis Capital and Hii would only need to buy about 21% equity interest to take SEGi private.
Interestingly, SEGi’s share price has been on a decline since the failed privatisation exercise. The stock plunged from RM2.15 in late 2012 to RM1.54 yesterday — below the MGO offer of RM1.714.
SEGi currently has a net cash position of RM22.49 million after taking into account borrowings of RM46.13 million.

This article first appeared in The Edge Financial Daily, on March 04, 2014.