Grindrod Transport Inventory: Minority Shareholder Buyout Proposal May Not Move (NASDAQ:GRIN)

Notice:

I’ve coated Grindrod Transport Holdings Ltd. (NASDAQ:NASDAQ:GRIN) beforehand, so buyers ought to view this as an replace to my earlier articles on the corporate.

Grindrod Transport Holdings Ltd. or “Grindrod Shipping” is a medium-sized dry bulk delivery firm targeted on the smaller, geared vessel courses.

In late 2022, main shareholder Taylor Maritime Investments Restricted (OTCPK:TMILF) or “Taylor Maritime” launched a cash tender offer with an mixture worth of $26 per frequent share.

Whereas Taylor Maritime managed to build up a 83.23% stake in Grindrod Transport, the corporate failed to achieve the obligatory acquisition threshold of 90% required for a subsequent squeeze-out of remaining shareholders.

Over the previous 12 months, each Taylor Maritime and Grindrod Transport have been engaged on lowering debt ranges and integrating operations below the management of Taylor Maritime founder Edward Buttery.

After the shut of Thursday’s common session, Taylor Maritime launched a brand new effort to attain 100% possession in Grindrod Transport (emphasis added by writer):

The Board of Taylor Maritime Investments Restricted (“TMI” or the “Company”), the listed specialist dry bulk delivery funding firm, is happy to announce that its subsidiary, Grindrod Transport Holdings Ltd (“Grindrod”), has at this time introduced that it proposes to implement a selective capital discount train (the “Selective Capital Reduction”) pursuant to sections 78G to 78I of the Firms Act 1967 of Singapore.

Underneath the Selective Capital Discount, Grindrod proposes to cancel all the shares held by its shareholders, apart from the shares held by Good Falkirk (MI) Restricted (“Good Falkirk”), comprising 3,479,225 shares. Good Falkirk is a wholly-owned subsidiary of the Firm by way of which the Firm at present holds its current stake in Grindrod.

Every collaborating Grindrod shareholder will, topic to the implementation of the Selective Capital Discount and the satisfaction of sure circumstances described under, obtain US$14.25 for every Grindrod share that’s cancelled.

The Selective Capital Discount should be authorized by means of a particular decision at a unprecedented normal assembly of Grindrod. The Firm, Good Falkirk and their respective live performance events will abstain and never vote on the particular decision regarding the Selective Capital Discount. (…)

If the Selective Capital Discount is efficiently accomplished, Grindrod will develop into a wholly-owned subsidiary of the Firm.

In layman’s phrases:

Grindrod Transport affords to purchase out minority shareholders in opposition to a money cost of $14.25 per frequent share.

Not surprisingly, the information resulted within the firm’s shares staging a 30% rally on Friday on a lot higher-than-average quantity:

Nonetheless, with controlling shareholder Taylor Maritime not permitted to vote on the proposal, approval will not be a straightforward activity, notably with Singapore regulation setting a really excessive hurdle.

To be extra exact, shareholders can be supplied the chance to vote on the proposed selective capital discount at a unprecedented normal assembly. On the assembly, a particular decision in favor of the proposal must be handed by minority shareholders, however this is able to require approval of not less than 75% of all shares voted by shareholders current and voting on the assembly.

Nonetheless, passing the required particular decision could possibly be an uphill battle as the corporate is now providing simply $14.25 per share to largely the exact same shareholders that determined in opposition to a $26.00 per share money tender provide in late 2022.

As well as, based mostly on my calculations, the provide represents an roughly 12% low cost to estimated internet asset worth (“NAV”):

Granted, there may need been some turnover within the shareholder base because the expiration of the Taylor Maritime tender provide in late 2022 however contemplating the inventory’s measly common buying and selling quantity, it’s honest to imagine that almost all shareholders have been sticking to their holdings.

Given this subject, reaching the 75% threshold seems like a Herculean activity and individually, I would not be shocked to see Grindrod Transport falling properly in need of the required quantity.

With approval something however sure and shares buying and selling simply 4% under the proposed buyout worth, I’d strongly advise buyers to contemplate promoting into the open market subsequent week to keep away from the danger of shares giving again all of Thursday’s positive aspects in case the particular decision would not move on the but to be scheduled extraordinary normal assembly.

Backside Line

No less than for my part, the chances are stacked in opposition to Taylor Maritime’s renewed effort to achieve 100% possession of Grindrod Transport.

Nonetheless, with shares buying and selling simply barely under the proposed buyout worth, Grindrod Transport shareholders ought to think about promoting into the open market and shifting on as a way to keep away from the danger of shares giving again all of Thursday’s positive aspects in case of the buyout proposal not being authorized on the upcoming extraordinary normal assembly.

Editor’s Notice: This text discusses a number of securities that don’t commerce on a significant U.S. trade. Please pay attention to the dangers related to these shares.