Omni Industrial Ltd
Omni Industrial Ltd
Omni Industrial Ltd
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<strong>Omni</strong> <strong>Industrial</strong> <strong>Ltd</strong> NEUTRAL<br />
Celestica launched offer at $4.25 per share S$3.64<br />
KEY POINTS:<br />
DAILY HIGHLIGHTS<br />
18 June 2001<br />
MITA (P) 266/07/2000 For private circulation only<br />
• Deal values <strong>Omni</strong> at S$1.6b<br />
Celestica proposed to acquire <strong>Omni</strong> Industries at S$4.25 per share or through share swap at 0.045<br />
Celestica share to 1 <strong>Omni</strong> Industries share last Friday. The deal values <strong>Omni</strong> at 35.2x FY00 and<br />
27.2x FY01 earnings, or S$1.6 billion based on Celestica’s last Wednesday’s share price of<br />
US$45.71. The acquisition is scheduled to be completed by early 4Q 2001.<br />
• <strong>Omni</strong> shareholders have two choices – cash or share<br />
<strong>Omni</strong>’s shareholders can opt to accept either cash or share. However, the cash deal is capped by a<br />
total payment of S$860 million. In the event that the shareholders choose to receive more cash<br />
than available, their stakes will be paid in part cash and part share, with the cash portion pro-rated<br />
according to the total number of shareholders opting for cash.<br />
Nonetheless, the maximum of S$860 million cash ensures that <strong>Omni</strong> shareholders will be able to<br />
receive at least 50% of their stake in cash. If all shareholders choose cash over share, they will<br />
receive about $2.08 cash and 0.023 Celestica share for every <strong>Omni</strong> share they own.<br />
• Major shareholder supports the deal<br />
Celestica has already garnered the support of <strong>Omni</strong>’s biggest shareholder Wuthelam, who owns<br />
26%, and six directors, who together owns 6% of the company, to vote favourably for the deal.<br />
• Merger gives both access to new markets and customers<br />
Celestica has been rumoured to be interested in <strong>Omni</strong> since last year. Their coming together gives<br />
<strong>Omni</strong> a global presence and Celestica an Asian presence. As the two companies have minimal<br />
overlap in terms of product and customer mix, they will also gain a broader product range and<br />
customer base through the merger.<br />
• <strong>Omni</strong>'s share price unlikely to hit $4.25<br />
Since the total cash available for the deal is $860 million, some or all of <strong>Omni</strong>’s shareholders will<br />
have to settle for Celestica’s shares if too many shareholders opt for cash (which we think will likely<br />
be the case). That will expose them to the risk of Celestica’s share price fluctuation. Celestica is<br />
expected to issue another 9.5 million new shares for <strong>Omni</strong>’s takeover. As a result, we expect its<br />
share price to head lower due to the dilution effect. It is therefore unlikely for <strong>Omni</strong>’s share price to<br />
reach $4.25, the cash offer price. In the near term, we think <strong>Omni</strong>'s share price will be dictated by<br />
Celestica’s share price.<br />
Although Celestica's offer for <strong>Omni</strong> is priced at a lower valuation than what Flextronics and<br />
Solectron paid for JIT and NatSteel Electronics last year, we are of the opinion that this is a<br />
reasonably attractive offer given the weaker global economic condition this year. For investors who<br />
can afford to hold, the longer term gain will be more handsome once market conditions improve.<br />
At Friday’s closing price of $3.64, <strong>Omni</strong> is trading at 23.3x and 18.0x 2-year forward PERs.<br />
- LOW CHOON KIA<br />
Use of this report is subject to the disclaimer found at the end of this report 1
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Keppel Securities Pte <strong>Ltd</strong><br />
Keppel Securities Pte <strong>Ltd</strong> 10 Hoe Chiang Road, #08-01 Keppel Towers, Singapore 089315 Tel: 2215688 Fax: 2261543 2258576 Telex No: RS21185 KSEC<br />
Every effort has been taken to ensure that the information obtained for this report are from sources believed to be reliable. However, we do not guarantee to its accuracy<br />
and completeness nor warrant its merchantibility, reliability or fitness for any particular purpose or use. Any advice herein is made on a general basis and does not take<br />
into account the specific investment objective of the specific person or groups of persons. All opinions expressed constitute our judgement made on reasonable basis and<br />
are subject to change without prior notice. No liability (whether under tort or contract) is accepted for any loss (including direct, indirect, incidental, consequential or<br />
special damages) arising from use of this report in any event. Keppel Securities Pte <strong>Ltd</strong>, its directors and other connected persons may from time to time have positions in<br />
the securities recommended. The laws of the Republic of Singapore will govern any matters arising in relation to this report.<br />
Carmen Lee<br />
Senior Manager Research<br />
Mak Puay Hoon<br />
Executive Director<br />
Website: www.vianet.com.sg 2
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