Laminates manufacturer Kingboard Chemical completed a top-up placement yesterday (October 13) to fund a HK$1.7 billion ($219 million) bid for one of its major clients, printed circuit board (PCB) manufacturer Elec & Eltek (E&E). The 65 million share placement was led by Citigroup (its M&A advisor) and CLSA, with pricing fixed at HK$14.70 per share.
This represented a 3.9% discount to the stock's HK$15.30 close and 10% of the company's enlarged share capital. The group's majority shareholder Hallgain saw its shareholding drop from 35.85% to just over 31%.
Specialists say the order book closed two times covered, with participation by about 60 investors, of whom the vast majority were long only funds.
The transaction represents a fairly hefty 54 days trading volume. Year-to-date the stock is up 28.03%, although it is down from a high of HK$16.3 on September 21.
The placement followed news earlier in the day that Kingboard is hoping to acquire E&E. Pre-deal, Kingboard owned 27.866% of E&E and has put forward a conditional cash offer for all outstanding shares at HK$1.90. This represents a 9.2% premium to the stock's close on October 12.
Pending the successful take-over of E&E Hong Kong, Kingboard says it will then make a mandatory offer for Singapore listed E&E, which is 52% owned by the parent.
Kingboard say it believes the acquisition will create a number of synergies and that integration of the two companies should be fairly straightforward given its experience with PCB manufacturer Techwise, which it purchased in 2002. Kingboard is the world's fourth largest laminates manufacturer and derived 57% of its revenue from this source in 2003.
In turn 80% of its products are sold to PCB manufacturers including E&E, which makes electronic components. About 86% of E&E's 2003 revenue derived from PCB's with the remainder from LCD's and magnetic products. It is the world's 20th largest manufacturer.
