Biosensors stock surges 14% on Citic takeover talk
Shares last traded at 99.5 cents before halt in trading at 3.45pm
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Shares last traded at 99.5 cents before halt in trading at 3.45pm
Kenneth Lim
19 February 2014
Shares in Biosensors International Group shot up 14 per cent in a matter of minutes yesterday on reports that a Chinese private-equity investor may offer to privatise the medical devices company.
Biosensors last changed hands at 99.5 cents before trading was halted at 3.45 pm. The stock had risen by about 15 cents in under 10 minutes to hit a day high of $1.02 at about 12.30pm, following speculation that Citic Private Equity Fund Management Co, a unit of China's Citic Group Corp, could be preparing a bid for Biosensors.
Bloomberg reported that Citic was in talks with several banks to arrange financing for a privatisation bid, citing two sources.
Biosensors halted trading in its stock pending its response to a trading query by the Singapore Exchange.
"This morning there was nothing, then it only started moving around twelvish," one trader said. "There was a sudden surge. The talk was already in town for a while."
Citic currently owns about 21.8 per cent of Biosensors, based on latest numbers by Biosensors, which has been buying back its own stock. Citic bought its stake in November from Shandong Weigao Group Medical Polymer Co for US$312.3 million, or about $1.05 per share.
CIMB analyst Gary Ng, who had raised the possibility of a Citic bid right after the firm's investment into Biosensors, told clients in a note yesterday that Citic cannot bid below $1.05 per share if its offer comes within six months of the Citic-Weigao deal.
"With US$500 million in the company, it might not be a bad idea for the PE guys to look at the deal from a privatisation angle, especially given the potential of upstreaming the cash hoard," wrote Mr Ng, who maintained his "add" recommendation on the stock with a $1.19 target.
He added: "Our optimism does not centre around the take-out play, but earnings uplift from the commercialisation of new products in FY15 (Biosensors has a March year-end)."
DBS analyst Alfie Yeo said a bid by Citic would not be surprising.
"With Citic private equity coming in as a shareholder, a takeover is always going to be on the cards," Mr Yeo said.
But Mr Yeo said that with the stock above his fundamental fair value estimate of 90 cents, "it could be a good idea for shareholders to sell into strength".
Biosensors shares had come off by about 36 per cent from its year-ago close of about $1.35 before yesterday's rally.
The company has had a tough year, reporting a nine-month profit decline of 46 per cent to US$50.9 million before exceptional and non-operating items for the period ended Dec 31.