- Low Shares Liquidity
- Privatization Lets Shareholders Realise Value at an Attractive Exit Premium
Hop Hing Group Holdings Limited (Hop Hing or the Company, together with its subsidiaries, the Group; HKG: 47) and Ocean Ease Global Limited (the Offeror) has jointly issued the scheme document (the Scheme Document) in relation to, amongst others, (i) the proposal (the Proposal) for the privatization of the Company by way of a scheme of arrangement under Section 86 of the Companies Act of the Cayman Islands (the Scheme); (ii) the offer to all the holders of share options of the Company for the cancellation of every vested and unvested share option (the Option Offer); and (iii) the proposed withdrawal of listing of the Company. The meeting of the Scheme Shareholders convened at the direction of the Grand Court of the Cayman Islands and the extraordinary general meeting of the Company will be held at 10:30 a.m. and 11:00 a.m. respectively on 14 December 2021.
Terms of the Proposal
Under the Scheme, the Scheme Shares will be cancelled and extinguished by way of reduction of the issued share capital of the Company and, in consideration therefore, each Scheme Shareholder will be entitled to receive the Cancellation Price of HK$0.08 in cash for each Scheme Share cancelled, representing a premium of approximately 73.9% over the closing price of HK$0.046 per share as quoted on The Stock Exchange of Hong Kong Limited (Stock Exchange) on 1 September 2021 (the Last Trading Day), being the last trading day prior to the announcing of the Proposal.
The Cancellation Price will not be increased and the Offeror does not reserve the right to do so. Shareholders and potential investors of the Company should be aware that the Offeror would not be allowed to increase the Cancellation Price.
Reasons for and benefits of the Proposal to Scheme Shareholders
The Proposal represents an attractive opportunity to realize value at an attractive exit premium for the Scheme Shareholders
The Offeror considers that the Proposal provides an attractive opportunity for the Scheme Shareholders to dispose of their shares at a price significantly above the prevailing market price without having to suffer from any illiquidity discount and settlement risk.
During the one-year period ended on and including the Last Trading Day, the lowest and highest unadjusted closing prices per share on the Stock Exchange were HK$0.0400 and HK$0.0580, respectively, with a simple average closing price at approximately HK$0.0494. The Cancellation Price represents a premium of approximately 61.9% over the simple average unadjusted closing price and a premium of approximately 37.9% over the highest unadjusted closing price over the above period.
During the 6 months ended on and including the Last Trading Day, the highest unadjusted closing price per Share was HK$0.0540 (on 25 May 2021 and 26 May 2021), and the Cancellation Price represents a premium of approximately 48.1% to that.
Low liquidity of the shares
The trading liquidity of the shares has been at a relatively low level over a prolonged period in recent years, with an average daily trading volume of approximately 4,304,031 shares for the 24 months up to and including the Last Trading Day, representing approximately 0.04% of the total issued shares of the Company as at the Last Trading Day. Given the continued low liquidity of the shares, it is difficult for the Scheme Shareholders to execute on-market disposals efficiently without adversely affecting the market price of the shares, and to dispose of a large number of shares when any event that has an adverse impact on the price of the shares occurs. The Proposal represents an option for the Scheme Shareholders to exit from their investment in the Company.
Opinion from the Independent Financial Adviser
Regarding the prospects of Hop Hing, Somerley Capital Limited (Somerley), the independent financial adviser, points out that, as disclosed in the Company’s 2021 interim report, with imported cases of COVID-19 from overseas rising and sporadic outbreaks still occurring in some regions in the People’s Republic of China (PRC), the consumer market continues to face uncertainty. The pandemic also changed the spending habits of consumers, so the recovery of the Group’s dine-in catering business has been lackluster during the first half of 2021. Furthermore, increasing prices of raw food materials also pose challenge to the Group. Globally, with economic trends remaining complex and severe and increasing global inflationary pressure sending bulk commodity prices on the climb, the Group’s business in the PRC has been affected. Moreover, while the COVID-19 pandemic has largely been contained in the PRC, the catering industry, like the majority of other industries, still faces challenges caused by the fallout from the pandemic.
Somerley sees the Proposal providing the scheme shareholders an opportunity to dispose of their shares for cash at a price premium ranging from approximately 61.0% to 74.7% over the closing share prices for different periods up to and including the Last Trading Day, and premia of approximately 63.9% and 57.8% over the net asset value per share of Hop Hing as at 31 December 2020 and 30 June 2021, respectively, without having to suffer any illiquidity discount and settlement risk. Hence, so far as the disinterested shareholders and the option holders are concerned, the terms of the Proposal, the Scheme and the Option Offer are fair and reasonable.
Shareholding structure of the Company
As at the date of the joint announcement, the total number of issued shares of the Company was 10,070,431,786. The Consortium Offeror Concert Parties beneficially own, control or have direction over 7,214,706,432 shares, representing approximately 71.64% of the issued share capital of the Company, whereas the Non-Consortium Offeror Concert Parties beneficially own, control or have direction over 430,902,120 shares, representing approximately 4.28% of the issued share capital of the Company.
The Scheme Shareholders (which include the Non-Consortium Offeror Concert Parties) hold 2,855,725,354 shares, representing approximately 28.36% of the issued share capital of the Company.
Pursuant to the Scheme Document, when the Scheme becomes effective, all Scheme Shares will be cancelled. The Company will make an application to withdraw listing of its shares from the Stock Exchange, which is expected to take place at 9:00 a.m. on 27 January 2022.
Warning: Shareholders and potential investors of the Company should be aware that the implementation of the Proposal is subject to the conditions being fulfilled or waived, as applicable, and therefore the Proposal may or may not be implemented. Shareholders and potential investors of the Company should therefore exercise caution when dealing in the securities of the Company. Persons who are in doubt as to the action they should take should consult their stockbroker, bank manager, solicitor or other professional advisers.
About Hop Hing Group Holdings Limited (HKG: 47)
Hop Hing is a leading quick-service restaurant (QSR) chain operator in the PRC. By entering into long-term franchises, Hop Hing owns the rights to operate QSR chains of the Yoshinoya and Dairy Queen in the northern region in the PRC. Yoshinoya is a well-known beef rice bowl brand with over a century of history, while Dairy Queen is a popular ice-cream brand with a history of more than 80 years.
For more details, please visit: http://www.hophing.com.
For press enquiries:
Strategic Financial Relations Limited
Heidi So Tel: (852) 2864 4826 Email: heidi.so@sprg.com.hk
Rachel Ko Tel: (852) 2114 2370 Email: rachel.ko@sprg.com.hk
Vivian Cheung Tel: (852) 2114 2821 Email: vivian.cheung@sprg.com.hk