DMCI launches mandatory tender offer for CHP public float

DMCI Holdings [DMC 11.50 unch; 76% avgVol] [link] will conduct a tender offer to acquire up to 1.37 billion common shares of Cemex PH [CHP 1.60, up 3.2%; 107% avgVol] at P1.42/share. This is a mandatory tender offer that is required by the PSE’s Listing and Disclosure Rules following the change of control that occurred when the Consunji Family, through DMC, acquired majority control of CHP from Cemex Asia B.V. earlier this year. The actual company that will purchase the tender offer shares is Dacon Corp, the Consunji Family’s private holding company. The tender offer will run from October 23 through November 21. 

> Timeline of events:  DMC said that it expects its underlying acquisition of CHP’s parent company to close in November. The tender offer is scheduled for settlement on November 28. Then, DMC said that it would sell a small portion of its stake to a third party to bring CHP’s public float back into compliance and keep the company listed. The stake sale would happen “within six months after the acquisition”, which is the maximum amount of time that CHP could be suspended for a minimum public ownership (MPO) violation before it is forcibly delisted by the PSE.

> Basis for P1.42/share price:  DMC said that the $305 million purchase price of the controlling interest in CHP implies an equity value of $340.1 million that, when divided by CHP’s total outstanding shares (13,489,226,623), “would result to PHP 1.42 per share of CHP.” 

> What happens if the price changes?  Since the final purchase price of the family’s acquisition of CHP’s parent company is subject to the “customary closing adjustments based on CHP’s estimated working capital, cash, and debt levels”, the Tender Offer Report said that any changes in the per-share price of the acquisition shares would be reflected in the final price of the tender offer shares. If the final price is higher than P1.42/share, anyone who tendered will receive an “upward adjustment” from Dacon within 180 days from the close of the acquisition transaction. If the final price is lower than P1.42/share, Dacon will not “claim a refund” from tendering CHP shareholders. They’re fully assuming that risk.

> Do I have to tender?  No. It’s mandatory for DMC and Dacon to conduct this tender offer, but it’s 100% voluntary for shareholders to participate. If you tender, you’ll get at least P1.42/share on the settlement date. If you don’t tender, you’ll still own your CHP shares, but it sounds like CHP will get suspended for a period of time before DMC’s stake sale to bring it back into minimum public ownership compliance.

> Should I tender?  That depends on you, but shares are currently trading at P1.60/share and have recently traded in the P1.70/share region, so if you wanted out that badly you probably have a decent chance of doing it now, on the open market, without having to wait for a settlement date. 

MB bottom-line:  I’ve seen some reports that the Consunji Family is trying to sell the CHP stake in time to prevent an MPO suspension, but the statement from the linked article (the 6 months from closing part) seems to assume that CHP will be suspended but then brought back into compliance by the sale. That said, if the market price of CHP remains above the tender offer price, there’s a chance that nobody tenders, and the settlement date passes with no MPO suspension. It’s also possible for DMC to close the acquisition transaction in early November and then sell that “small stake” to prevent an MPO suspension from happening on the November 28 tender offer settlement date. This feels like a relatively low-stakes situation since non-tendering shareholders are still going to hold CHP shares and DMC intends for CHP to remain publicly listed. Not like the Metro Pacific Investments tender offer, where non-tendering shareholders were left with the prospect of holding shares in a public company with no easy way to sell those shares once the stock was delisted. 

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