JAKARTA. PT Ciputra Development Tbk (CTRA) with Singapore branch Credit Suisse have to prepare at least Rp 710.84 billion to buy back the shares if some shareholders do not agree the merger of PT Ciputra Property Tbk (CTRP) and PT Ciputra Surya Tbk (CTRS) to their parents.
But, the buyback is limited at maximum 2.5% of the total issued and paid shares issued "A maximum of 2.5% for each of the entities," said Corporate Secretary of CTRA Tulus Santoso, Friday (2/12).
CTRA will be the standby purchaser or standby buyer of CTRA’s shareholders, who do not agree with the merger, while Credit Suisse will be the standby buyer of CTRP and CTRS’ shareholders who, disagree with the merger.
As information, the corporate action is referring to the financial statements of June 2016. In the first half, the number of issued and paid up capital amounts to approximately 15.33 billion shares.
The worst scenario is some shareholders disagree with the merger. If the scenario happens, CTRA is obliged to buyback a maximum of 383.27 million shares at the price of Rp 1,350 per share.
This is a reasonable price that has previously been determined. Thus, CTRA at least need to prepare about Rp 517.41 billion for the buyback.
Meanwhile, the number of issued and paid up capital of CTRP amounts to about 6.26 billion shares. Therefore, Credit Suisse needs to set up a minimum of Rp 83.68 billion to buy back 156.41 million shares at a price of Rp 535 per share.
Meanwhile, the numbers of CTRS’ issued and paid up capitals amount to about 2 billion shares. Credit Suisse must prepare Rp 109.75 billion to buy back 50.11 million shares at the price of Rp 2,190 per share.
Since there is no change of control, the buyback will be done properly such as the normal trading at regular market, not under the tender offer scheme. "We prepare the buyback funds from internal cash," added Tulus.
The merger is expected to be completed by the end of 2016. This merger has merger ratio of 2.13 times to 0.54 times for the CTRS and CTRP, respectively. Under the scheme, every CTRS shareholder will obtain 2.13 CTRA shares for a share of CTRS, which is collected before the effective date of the merger. Meanwhile, every CTRP shareholder will obtain 0.54 CTRA shares for a share of CTRP.
The reason behind this merger is the low liquidity of CTRP and CTRS’ shares. The average daily trading value of the stocks in the past 12 months amounted to Rp 6.4 billion and Rp 3 billion, respectively.
The average daily trading value of CTRA was Rp 24.1 billion in the same period. As a result of the merger, CTRA would have a larger market capitalization. This could increase the chance to list on the index of MSCI Indonesia. "So, this merger will be the instrument for CTRS and CTRP shareholders to exchange their shares with the shares of CTRA, which are more liquid," said Tulus.
The merger will bring positive impact to the company's fundamentals. Analyst at Mandiri Sekuritas Liliana Bambang said the merger will reflect the CTRS’ actual valuation. To date, Liliana assess that CTRS’s transaction value is too low. Previously, the shares of CTRS were transacted with a discount of net asset value (NAV) of 77% and a PER of 12.3 times.
This position is much lower than CTRA’s stocks that have the discount of NAV of 49%. "So, this merger will help the shareholders of CTRS to reflect the real share value, which was largely discounted due to the liquidity,” Liliana wrote on her research.
Furthermore, the merger will cause a 12% potential increase of the NAV of CTRA shares towards the level of Rp 3,453 per share. Net gearing of CTRA will also be improved from 24% to 33%, following the increase in equity from Rp 8.5 trillion to Rp 11.7 trillion. The market capitalization of CTRA will also increase from Rp 24 trillion to Rp 29 trillion.
Credit Suisse will be the standby buyer for the shareholders CTRP and CTRA. (Muhammad Farid/Translator)
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