Straits Trading: GEH throws in the towel!!!

GEH has made the following announcement at the close of trading:


The committee of Independent Directors have evaluated the two offers relating to the Group's shareholdings in the Straits Trading. Holding a strategic nature in the Straits Trading, any premature announcement by GEH could have influenced the outcome of the competing offers.

"The Special Committee has decided, after careful and extensive deliberations and taking into consideration, inter alia, the advice of the financial adviser, to accept Cairn's offer of $6.70 per share in the best interest of the Group's policyholders and shareholders."

MYOB feels that this is a decent outcome for Tecity and The Cairns. I believe that Ms Chew was prepared to paid up to $6.70 per share for Straits Trading. The Lees, including OCBC and GEH, played their cards well to ensure that they extract maximum value out of Tecity.

Relating to a similar 'buy-out' of OUE, MYOB believes that shareholders who hold STC can hang on for the ride. Firstly, liquidity has been reduced greatly. Any weak sellers would have sold out already, or accept Tecity's offer. If you believe that Tecity could unlock further value in STC, hang on to your shares. Of course, once the offer closes, there is a high potential that the shares may drop below the offer price of $6.70.

Straits Trading: Round 2. Fight!

CIMB-GK has been appointed as the independent financial adviser to the directors of
The Straits Trading Company Limited (STCL).

Here are some of the interesting highlights from their letter to the Independent
Directors of STCL.

STCL has four distinct core buseinsses comprising:
(a) Tin mining and smelting;
(b) Hotel operations;
(c) Property operations; and
(d) Securities trading and investment holding.

Using the SOP valuation analysis, CIMB-GK values STCL between $6.09 to $7.27 per
share.

The summary of the valuation as follows:

Tin mining and smelting $118m - $212.2m
Hotel operations $66m - $274.8m
Property operations $1064.1m
Investment in UE $66.3m - $115.5m
Investment in WBL $81.5m - $116.4m
Remaining investment portfolio $316.6m
Other net tangible assets $270.7 m

Total - $1983.2m - $2370.3m

At $7.27 per share, it is perhaps a highly optimisstic target. Interestingly, the Lee
family has raised the stakes in the fight for STCL. At $6.55, it would be interesting
to see how The Cairns would react. MYOB knows little about The Cairns or the
directors, mainly Ms Chew Gek Khim. However, it is worth noting that Tecity recently
gave an irrevocable undertaking to sell its stake in Robinson to Al-Futtaim. The
significance of this move could be related to OCBC and GE 'selling out' Robinson to
the Lippo Group.

In any case, MYOB thinks that there is a chance for a final bid by The Cairns.

Looking at a recent similar event, shares in OUE were privatised at $10.20 each by
the Lippo group (them again!) and Ananda Krishnan in May 06. Disregarding the
dividents, OUE's last traded price is $15.40. So even in the event that both the
offerers fail, STCL should have generated enough interest. Lastly, Ms Teh of BT have
done a comparison of privatisation offers and concluded that cash deals triumph share
deals.

What MYOB likes:
- Cash offer
- Quality of STCL
- Strong investors
- Attachment to STCL

Make it your business? Just hang in there.. the show just started!