Blumont scraps $146m bid for Cokal as shares dive
Blumont shares plummet 59% in the morning before SGX suspends trade
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Blumont shares plummet 59% in the morning before SGX suspends trade
Teh Shi Ning
05 October 2013
Blumont Group has called off plans to buy Australia-listed Cokal Ltd for $146 million, for now, after its shares came crashing down to earth yesterday morning.
Less than 12 hours after announcing an agreement to take over the initially unnamed coal mining company, Blumont said yesterday evening that the deal is off because its share trading prices in the morning had “materially and adversely affected the commercial terms discussed with Cokal”.
The two companies have thus agreed not to proceed, though they “continue to believe in the strategic merit underpinning the proposed transactions” and will continue to “explore opportunities” for such transactions.
Blumont, which provides sterilisation services and has been expanding into the mineral and resources sector since late last year, had called for a trading halt on Thursday evening after the market’s close and asked for this to be lifted after it announced the Cokal deal early yesterday morning.
The plan, according to the agreed terms of the deal, was that Blumont would buy Cokal for $145.9 million, by issuing 72.2 million new shares at $2.02 each. Its statement before 8am yesterday did not name Cokal, but said that its takeover target had incurred a total comprehensive loss of $7.9 million for the year ended June 30, 2013.
After trading began yesterday morning, Blumont’s shares plunged 58.5 per cent, its largest drop since the company started trading in June 2000, before the Singapore Exchange suspended the counter.
The sudden acceleration of its gradual retreat - which began on Wednesday, after SGX queried its long and inexplicable rally, and continued on Thursday - meant that Blumont fell $1.17 to 83 cents in less than an hour of trading, before SGX stepped in and suspended trading in its shares “to safeguard the interest of the market as there could be circumstances that would result in the market not being fully informed”.
At its recent high, the company was trading at close to 500 times its earnings over the last 12 months, and its market capitalisation of $6.3 billion made it as valuable as Singapore Press Holdings (SPH), twice as valuable as telco M1, and three times as valuable as SMRT Corp, Wheelock Properties, or Venture Corp.
SGX also queried the firm for a second time this week. In reply, Blumont said that apart from the Cokal deal, another contributing factor to share price volatility could be the fact that a local broking house recently declared Blumont’s shares as “designated securities”.
Its earlier reply on Wednesday to SGX’s first query this week on the sharp rise in its share price, was that its expansion into the mineral and resources sector had drawn interest from abroad, including a fund that could pump in additional funds via a private placement.
That first query from SGX had prompted the Securities Investors Association of Singapore to call on Tuesday for “speedy investigation” into how Blumont’s share price had surged to over 8 times the 30 cents it started trading at at the start of the year. SIAS said then: “We hope there is an acceptable explanation by the company; if not, SIAS calls on the relevant authorities to investigate this unusual stock activity immediately and let all stakeholders known the reasons for the unusual share price hike.”