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.