BreadTalk (SGX: CTN) will be delisted from the Singapore Exchange come 5 June.
Its major shareholders have offered to buy the shares that they don’t already own at S$0.77 per share back in February. That’s a premium of around 20% on the closing price before the announcement was made.
The major shareholders include George Quek, his wife, Catherine Lee, and Thai-listed hospitality company, Minor International (BKK: MINT). Together, they own about two-thirds of BreadTalk shares.
There are a couple of other significant shareholders, namely, US-based Paradice Investment, and Square Investment, which is operated by George Quek and Catherine Lee. The two investment vehicles own about 8.7% of BreadTalk.
The company’s privatisation offer closed on 20 April, with the offeror’s concert parties owning, controlling or agreeing to acquire 98.03% of BreadTalk shares.
The food and beverage giant has seen its share of ups and downs over the years.
The group took on quite a bit of debt for expansion, and ended 2019 with around S$247.3 million of gross debt, against S$157.6 million of cash.
Difficulties faced
A full-year loss for 2019 was incurred, to the tune of S$5.2 million.
The loss caps off a tumultuous period for the group that saw its net profit fluctuate wildly over the last five years, from as high as S$22.2 million in 2014 to S$7.6 million in 2015.
The group’s Bakery division is also mired in red ink, chalking up a loss before tax of S$13.5 million for 2019.
Profit before tax for this division was also steadily declining since 2016, culminating into a full-year loss.
This loss, together with losses from the group’s 4orth division, dragged the entire group into the red for the year.
Get Smart: Redeploy your capital
Perhaps, it is an opportune time for the major shareholders to take the company private.
With the COVID-19 pandemic and related lockdowns and social distancing, the group is bound to suffer even worse losses and cash burn for both its Bakery and 4orth divisions.
Dividends, which were already suspended last year, could take quite a while to be restored.
Also, restructuring and cost-cutting can be better achieved without the constant scrutiny that comes with being a listed entity.
For long-suffering shareholders, the capital released from the privatisation can be better deployed to other more promising businesses that have been severely beaten down.
After all, successful investing is about putting your capital where it has the best chance of growing over the long-term.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
