k1 Ventures recently received a voluntary conditional cash offer for all of its shares from GKB Holdings at $0.135 per share. GKB Holdings' shareholders are the major shareholders of k1 Ventures.
At $0.135 a share, the offer is being viewed as too low by investors -- and falls far short of the 30 cent valuation by DMG & Partners. See below...
If GKB Holdings receives valid acceptances of not less than 90% of the shares (other than those shares already held by the Offeror, its related corporations or their respective nominees as at the date of the Offer), the Offeror will have the right to compulsorily buy over all the remaining shares.
The offeror intends to exercise its rights of compulsory acquisition.
k1 Ventures has appointed an independent financial adviser who will advise minority shareholders and independent directors on the deal.
DMG upgrades valuation of k1 to 30 cents a share.
Analyst: Goh Han Peng
We are upgrading our valuation of k1 from $0.24/share to $0.30/share, as we factor in the US$100m investment in the preferred shares of Guggenheim Capital. We had omitted this investment earlier in our valuation.
In mid-2011, k1 had invested US$100m in US-based Guggenheim Capital, a privately-held financial services group with more than US$100b in assets under management (AUM).
k1 invested in the preferred shares of Guggenheim with a dividend rate of 7% and has detachable warrants to convert into equity in Guggenheim.
Structuring deals with favourable risk-reward profile, in this case by investing in the preferred shares of Guggenheim, with option to share in the equity upside, has been a hallmark of the Green management team.
We remain optimistic that value would be gradually unlocked as the company embarked on managing its existing investments for eventual exit and the distribution of excess cash back to shareholders.
We raise our TP for the stock to $0.21/share on the same 30% discount to SOTP valuation.
Excerpts from i3investor.com
k1 Ventures - A low-ball offer
Author: kiasutrader
The majority of k1's portfolio comprised of investments in privately-held companies.
Disclosure of financial data for these privately-held investments is either limited or not publicly available.
This makes it difficult for investors to ascribe valuations to its investments and establish a fair value for the stock.
The long gestation period for these private investments to bear fruit also deter some prospective investors.
To its credit, k1's investments have done creditably well under the current management team led by Steven Green. Following a series of successful investments, the company has, since 2005, distributed more than $470m, or 23 cents/share, back to shareholders.
The remaining portfolio includes:
1) a 80.1% stake in Helm Holding Corporation, a railcar and locomotive leasing company based in the United States;
2) a 12.2% stake in Knowledge Universe Holdings (KUH), the largest pre-school education service provider in the United States;
3) a US$100m investment in the preferred shares of Guggenheim Capital, a financial services firm with US$100b under management;
4) 2.3m shares in McMoRan, an E&P company based in the U.S.;
5) an undisclosed stake in China Grand Auto, the largest auto dealership group in China.
Comments
K1 Venture might privatisation two subsidiaries :
1) More recently, k1’s 1.43% stake in MMR was the subject of a
takeover bid by Freeport–McMoRa Ran Copper & Gold (FCX). The latter made
an offer to acquire MMR for US$14.75/share in cash and 1.15 units of a royalty
royalty trust.
2) China Grand Auto has filed for initial public offering (IPO) to list on
the Shanghai Stock Exchange. K1 has invested a total of approximately
US $12.4 million. If IPO successful , the value should be 3 to 8 times
the value of K1 invested.
Goh Han Penge from DMG on BUY
recommendation.
Scoop of the Day: Following an unsuccessful privatisation offer by GKB
Holding – an investment vehicle set up by major k1 shareholders Keppel
Corp, Steven Green and BV Group – k1 management has committed to
managing its existing investments for eventual exits and returning the
proceeds of divestments to shareholders. Given the depressed share price
(trading at a 14% discount to NAV), management is also putting off plans to
raise fresh capital to make new investments. K1’s existing investments
include railcar leasing (Helm), pre-school education (Knowledge Universe),
auto distribution (China Grand Auto), financial services (Guggenheim
Capital) and oil and gas (McMoran Exploration, or MMR). While timing for the
divestment of these assets is uncertain, we believe management’s decision
to embark on the path of divestment will unlock the substantial value
embedded within key holdings such as KUH and Helm. Following numerous
rounds of dividends and capital distributions, k1 has to date received more
than its original investment cost of US$56m in KUH. KUH continues to have
a strong capital structure and has expanded the scale of its operations to
overseas markets such as Singapore, Malaysia and United Kingdom in
recent years. More recently, k1’s 1.43% stake in MMR was the subject of a
takeover bid by Freeport–McMoRa Ran Copper & Gold (FCX). The latter made
an offer to acquire MMR for US$14.75/share in cash and 1.15 units of a
royalty trust. Following news of the offer, MMR’s stock price shot up over
80%, valuing k1’s stake at S$44m. If the offer is successful, we believe part
of the proceeds could be distributed to shareholders. Based on the last
traded price of $0.126, k1 is trading at a 53% discount to our RNAV of
$0.27/share. We continue to like the stock and reiterate our BUY
recommendation. (Goh Han Peng)
This is similar to the Natsteel saga where the management offer pathetic takeover price. it was until the white knight, Oei Hong Leong came in and counter proposed which resulted in the offer price more than double.
The offeror, one of which is Mr Jay Green, the CEO has not taken shareholders' interest into consideration. Besides the Guggenheim capital holding, KI Ventures also has a stake in McMoRan which company had discovered oil in the Gulf of Mexico and is in the midst of partnership with an MNC to drill and extract oil.
Me and my group members will definitely not be selling the shares eventhough at 0.135, we stand to gain but there is more to it than meets the eye. The share definitely is worth much more than 0.135.
Offer price is indeed absurdly low.
I hope K1 investors will co-operate together not to sell to them at 0.135 cents. I have a friend bought at 0.17 using her CPF monies for $500,000 to have a contant dividend yield for retirement planning.