Local small and mid caps are starting to get their day in the sun but privatisations are still taking place. Following what some market observers have described as a "fast and furious" pace of delistings over the last few years, manufacturer Spindex Industries has become the latest to be potentially taken out of the equities market.
On Sept 26, investors in concert with Spindex's own chairman Tan Choo Pie and his son, managing director Tan Heok Ting, are offering $1.43 per share in cash to other shareholders, valuing the company at around $165 million.
Spindex shares, typically thinly-traded, last traded at $1.34 on Sept 26 with just 100 shares changing hands. Nonetheless, Spindex shares have gained more than 41% year to date.
Spindex was incorporated in 1987 and listed on the then Sesdaq in Nov 1998, and was upgraded to the mainboard in April 2001.
The company describes itself as a maker of precision-machined components and assemblies, operating manufacturing locations in Singapore, Malaysia, China and Vietnam.
Its customers are in imaging and printing, machinery and automotive systems as well as consumer-related products.
See also: Property tycoon Koh Wee Meng and Aspial launch 11-cent offer to take AF Global private
The Tans already hold in total 74.95% of Spindex shares. They plan to delist the company if the scheme is successful.
The offerors are doing so because they want "greater flexibility" in running the company for a "longer horizon".
As a non-listed company, Spindex can save on listing costs and focus its resources on its business operations.
Spindex has not carried out any equity fund raising on the SGX since its listing and currently has no intention to do so.
"Accordingly, the offeror believes that the company's listing status is of limited utility to the company," reads Spindex's announcement on Sept 26.
The company insiders are making the offer in conjunction via a vehicle called Skyline II, with backing from private equity firm PrimeMovers Equity, which focuses on mid-sized deals involving local manufacturers in this region.
This deal with Spindex will be the PE firm's third acquisition in less than 12 months. PrimeMovers had earlier acquired Excel Marco Industrial Systems in May and Techcom Technologies through its portfolio company, Engtek, in December 2024.
“For more than 40 years, Spindex has been a trusted manufacturing partner for global blue-chip customers,” says Soo Jin Goh, co-founder and CEO of PrimeMovers Equity.
“With its strong foundation, diversified capabilities, global footprint and progressive leadership, Spindex is an excellent platform for growth both organically and through strategic acquisitions,” adds Goh.
CGS International Securities Singapore is the sole financial advisor to the offeror.
For more stories about where money flows, click here for Capital Section
Drew & Napier is the legal advisor to the offeror and PrimeMovers Equity is advised by a team led by Tao Koon Chiam at Ashurst ADTLaw.
Insight Provider Arun George of Global Equity Research who publishes on Smartkarma, observes that the offer has not been declared as final.
He points out that the implied trailing EV/EBITDA of 4.9x is at a material premium to historical trading ranges, but is just below Spindex's book value of $1.459 per share.
Relative to precedent transactions, the offer is "light". For example, Sunningdale Tech and Grand Venture Technology were privatised at a trailing EV/EBITDA of 5.8x and 11.8x, respectively.
"However, the lack of a disinterested shareholder holding a blocking stake and moderate retail ownership lowers the vote risk," adds George.
