Excerpt of Letter to CHH Independent Directors by Stirling Coleman.

The full text is available at:

 

http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_E9823464D39913E8482572B800264260/$file/CIRCULARdd09apr2007.pdf?openelement

 

<quote>

Having carefully considered the information available to us, and based upon the monetary,

 

industry, market, economic and other relevant conditions subsisting on the Latest Practicable

 

Date and based on the factors set out in Section 9 above, and subject to the qualifications and

 

assumptions made herein, we advise the Independent Directors to make the following

 

recommendations to the Shareholders in relation to the Offer as follows:

 

1) Shareholders should ACCEPT the Offer if:

 

* Shareholders take a short term view of their investments in the Shares and/or

 

wish to liquidate their holdings of the Shares in the near term and/or take a

 

negative view of the future performance of the Share price and longer term

 

prospects of the Group, and if they are unable to sell their Shares in the open

 

market at a higher price than the Offer Price (after deducting all related

 

expenses). In this connection, Shareholders should note that the Offer Price is

 

higher than the mean of the trading PER and the highest EV/EBITDA multiples of

 

the Comparable Companies, but within the range of the trading P/Book NAV ratios

 

of the Comparable Companies; and/or

 

*Shareholders with larger holdings wish to take advantage of the Offer which

 

provides an avenue to dispose part or entire of their shares in the Company at the

 

Offer Price.

 

2)  Shareholders should REJECT the Offer if:

 

*Shareholders are prepared to take a longer term view of their investments in the

 

Company and/or who are confident of the longer term prospects of the Group?s

 

assets under the management of the Offeror. Shareholders who retain their

 

Shares, however, should understand that the future performance of the Share

 

price of the Company would depend, amongst other things, upon the performance

 

and prospects of the Group as well as the prevailing market conditions and

 

general sentiments of the equity market in Singapore. Shareholders should also

 

note that there is no assurance that the market price of the Shares can be

 

sustainable at current levels. The Share price may also not be maintained at such

 

levels after the close of the Offer.

</quote>

What's Peh up to with Chuan Hup?



By CONRAD RAJ



WHAT is Chuan Hup Holdings' founder and single largest shareholder, Jimmy Peh Kwee Chim, up to with his recent bid for the rest of the shares of the investment holding company?



The offer was triggered by his purchase (more correctly through Walnut Pte Ltd, which was specially set up to make the offer) of shares in Chuan Hup to raise his total direct and deemed stake in the company to 30.38 per cent - just beyond the takeover trigger point of 30 per cent. Walnut has since made further purchases, raising the total stake to 30.97 per cent.



However, Mr Peh has clearly indicated that he does not want to take the company private, stating in the offer notice that he 'intends to maintain the listing of the company and for the company to continue with its existing activities and has no intention to (a) introduce any major changes to the business of the company, (b) redeploy the company's fixed assets, (c) affect the operations of any of its subsidiaries, or (d) discontinue the employment of any employees of the company and its subsidiaries, other than in the ordinary course of business'.



Having sold in 2005 its marine logistics business to the Scomi Group, the Malaysian oil and energy giant controlled by businessman Shah Hakim and Kamaluddin Abdullah, the only son of Malaysian Prime Minister Abdullah Ahmad Badawi, Chuan Hup is now a pure investment holding company, albeit still largely in the marine business.



The marine logistics business, comprising 29 per cent of CH Offshore and 49 per cent of PT Rig Tenders Indonesia, was sold in a cash-cum-equity deal worth $570.6 million.



Chuan Hup is now left with 23.8 per cent of CH Offshore, which owns and operates a fleet of vessels to support and service the offshore oil-and-gas industry in Asia-Pacific and the Middle East. In addition, it is involved in property development in Australia and the Philippines through various domestic companies, and in electronics manufacturing through listed PCI Ltd. Other investments include manufacturing and engineering of hydraulic products, international marketing and communications, biotechnology, and some treasury activities.



Since Mr Peh does not really want to change the nature and structure of Chuan Hup's businesses - after all, he is already largely in control of the company with his son, Terence, as its chief executive - it's obvious that he feels that the company is significantly, perhaps grossly, undervalued.



So why should the other shareholders take up the offer?



The offer price of 34 cents a share provides little enticement for most minority shareholders to accept the offer by Walnut - they would be nuts to do so (pardon the pun). Compared with Mr Peh's last transacted price of 33.5 cents before the mandatory offer, there is hardly any premium.



In fact, those who have been paid or who will receive the interim dividend of 0.5 cent declared by the company on Feb 13 will have to settle for a reduced consideration of 33.5 cents a share. This is hardly the kind of inducement needed to make shareholders part with whatever stake they have in the stock. The offer price is also well below the company's net tangible assets per share of just over 40.38 cents as at the end of last year.



So, if he is not really serious about taking Chuan Hup private, what really is Mr Peh up to? Perhaps he is just signalling to investors and the market that they need to wake up and realise that they are sitting on an undervalued asset.