INTERPLEX: Accept Barings' 82-ct takeover offer, says Lim & Tan

Excerpts from analyst's report

LIM & TAN Singapore Team

Offer price of 82 cents reasonable Interplex provides advanced application development and manufacturing solutions for complex precision mechanical and electro-mechanical components and assemblies. Photo: CompanyInterplex Holdings, formerly known as Amtek Engineering, has received a takeover offer by The Baring Asia Private Equity Fund VI. The offer price of S$0.82 exceeds the highest closing price of the shares in the last four years and represents a premium of: i) 62.4% over the NAV per Interplex share as at end-Sept 2015 ii) 15.5% over the last traded price per Interplex share on 22 Dec 2015, being the last full day of trading of the shares immediately prior to the Off eror’s pre-conditional voluntary general offer announcement. On a PE basis, the offer is priced at 7.3x the firm's FY15 full year EPS of 8 US cents (S$0.113). Baring's offer price of S$0.82 in cash per share values Interplex at S$450 mln. This is the winning bid emerging from a competitive sale process carried out earlier this year by (a) Metcomp Group Holdings and (b) SCPEL jointly with Marina IV LP, who have signed irrevocable undertakings to accept the Offer (if and when made) in respect of their aggregate 57.7% stake in Interplex. Based on Bloomberg consensus, the offer price is in line with the average target price of analysts who cover the stock. Upon the offer turning unconditional, this will provide all of Interplex's other investors with an opportunity to realise their entire investment in cash and at the same price/terms as provided to the undertaking shareholders. We think the offer is reasonable and fair and we are recommending minority shareholders to “accept the offer”.

The offer is subject to the fulfilment or waiver of certain preconditions. These include:
Interplex CEO Daniel Yeong. Photo: Company

i. Necessary governmental and regulatory agency approvals having been received, and relevant filings made, in the United States of America, the People’s Republic of China, and the Republic of Poland,in compliance with their respective anti-trust and anti-monopoly laws;

ii. No government or regulatory body preventing or restricting the Offer;

iii. Consent being obtained from the holders of the S$200 million, 6.9% notes due 2019 issued pursuant to Interplex’s S$500 million multicurrency medium term note programme to
(i) amend the terms of the notes to provide Interplex with the option to redeem the outstanding notes when the Off er turns unconditional
(ii) waive certain terms of the notes;

iv. No occurrence of any material adverse event, where Interplex’s net asset value declines to an amount below US$157 mln.

We believe the offer represents an opportunity for Baring to acquire control in a precision engineering company with a strong track record, global manufacturing footprint, and diversified customer base. Subject to normal business considerations, Baring does not intend to make changes to the management team of Interplex and is unlikely to introduce any major changes to the existing business and employment contracts of Interplex, or redeploy its fixed assets.

Note that the Offer will not be made unless and until the pre-conditions are fulfilled or waived by the Offeror on or before 5:00 p.m. on 30 June 2016 or a later date, which the Offeror may determine in consultation with the SIC of Singapore, and as agreed by the Undertaking Shareholders.