ING says Smartone offer isn't fair

ING - in its role as IFA - tells independent shareholders to say no to Sun Hung Kai''s general offer for Smartone.

Just over a week ago, ING was hired by the independent directors of Smartone to offer its opinion on whether independent shareholders should accept Sun Hung Kai's general offer to buy Hong Kong telco, Smartone.

SHK made its offer at HK$8.25 a share, which amounted to a major discount to Smartone's previous closing price of HK$8.80 a share. (Sun Hung Kai was forced to make a general offer when its shareholding tipped over 30%.)

ING has given its verdict. It has said the offer is not "fair and reasonable" and advises independent shareholders not to accept the offer.

But, then again, it is not quite that simple. ING goes on to caution those with large shareholdings that there is low liquidity in this stock. It goes on to say that shareholders - who because of the size of their stake - are unable to sell their stake in the market at a higher price than the offer, should accept Sun Hung Kai's price.

This may prove a convenient verdict for the UK's BT, which has long wished to liquidate its Asian holdings, of which Smartone is one. Based on the offer price it would get $130 million for its stake and Sun Hung Kai would lift its stake to close to 50% at a time when the Hong Kong cellular sector has finally begun to make profits.

UBS Warburg has a price target of HK$12 on the stock (ie 41% upside) and projects net income for this year of HK$115 million, HK$160 million for 2002 and HK$360 million for 2004.

Sun Hung Kai's offer expires at the end of December, so BT will have to make its mind up soon.