(ACCEPT OFFER, S$1.40, TP S$1.56)
Mitsui offers S$1.40 per share for Portek, trumps ICTSI’s offer by 17%. Mitsui & Co has announced a voluntary conditional offer for Portek at $1.40 per share, representing a 17% premium to the offer by ICTSI. This values the entire firm at an equity value of $221m, and represents P/Es of 17x FY10 and 14.4x FY11F, on our estimates. Mitsui is a general trading company in Japan with a diverse business portfolio spanning mineral resources trading, lifestyle businesses and ownership of infrastructure assets with a market capitalization of US$32b. In its offer documents, it highlighted its intention to expand the transportation logistics business, which encompasses, among other things, terminal operation and development. The acquisition of Portek will enable it to gain immediate access to emerging market port operations and leverage on Portek’s existing platform and management expertise to expand its terminal operations. Separately, Portek also released its nine months results ended March 2011 yesterday. Net profit was up 16% yoy to $9.5m, with substantial improvement in the engineering division (operating profit +108% to $5.3m) offsetting a 14% decline in earnings from port management.
Accept revised offer. Mitsui has secured irrevocable undertakings from major shareholder Larry Lam and members of his management team, who together owned 78.3m shares or 51.3% of the outstanding float. Technically, this will render the offer unconditional. We think the offer, while at 10% discount to our fair value estimate of $1.56 per share, is fair and enables shareholders to realize a meaningful premium over the ICTSI offer. Investors should take up this latest revised offer.
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