When is a takeover not a takeover?

Enter the Jardine group. It announced yesterday a takeover of Singapore''s Cycle & Carriage û but it did so in the genuine hope that the offer would fail.

Confused? It's all thanks to Singapore's securities regulations that state a mandatory offer must be made whenever a shareholder goes over 25%. Jardine Strategic previously owned 24.98% of the Singapore car group, but now wants to increase it stake.

However, it doesn't want to buy the company outright, just increase its stake in what it sees as an undervalued company. So it has made a general offer for the whole company, in the conviction that the general offer will fail.This may be a 'first', even by the confusing standards of Asian M&A.

Under Singaporean law, the Jardines offer needs to be taken up by more than 50% of shareholders if the general offer is to succeed û and then Jardines would be able to buy full control. But Jardines doesn't think this is likely. It has made an offer for the company û of which it has been a shareholder since 1992 û at S$3.30.

This is a very low price, given the company's shares peaked at over S$17 in 1996. It is also the maximum price Jardines payed for the shares in the last twelve months and is the price at which the shares last traded before they were suspended. In other words, the offer price is not at any premium to the market price.

Jardine Strategic fully expects that no shareholders will take up its general offer, and this will leave it free to acquire shares in the open market at S$3.30. It thus achieves its objective of increasing its stake in Cycle & Carriage, without infringing Singaporean regulations.

Jardines move is an interesting one, and represents the new, and more proactive approach the group is taking under new taipan Percy Weatherall. After many years of glacial corporate finance, the group at last seems to be doing some interesting things.

It has clearly taken the view that Cycle & Carriage is a sound investment. Having resolved its dealer arrangement with DaimlerChrysler and also made good its investment in Indonesia's Astra, this is probably sound thinking.

The other major shareholders in Cycle & Carriage are Malaysia's Employee Provident Fund and Malaysian car distributor, Eon. What is interesting about all of this is Jardines overall strategy in the car distribution business. As readers of FinanceAsia will know (July/ August issue) it recently privatized its car business, Jardine International Motors û in large part because the UK car distribution business was performing so badly.

Speculation has abounded for some time as to whether such assets û along with the Hong Kong Mercedes Benz distribution business û would be sold to Cycle & Carriage. This particular deal does not make the likelyhood of this happening any less. In fact, by upping its stake in Cycle & Carriage, that would make the sale of its other car assets û to Cycle & Carriage û more palatable.

One other interesting aspect of this transaction is Jardines choice of adviser. Traditionally it had predominantly used Jardine Fleming for its corporate finance work û and as a 50% shareholder, well it might. However, having sold Jardine Fleming to Chase this year, that relationship may no longer be so watertight. On this occasion, it has chosen to use UBS Warburg instead.

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