Petronas $2.9 Billion MISC Buyout Bid Too Low, Investors Say

Petroliam Nasional Bhd.’s 8.8 billion ringgit ($2.9 billion) buyout offer for MISC Bhd. undervalues the world’s second-largest liquefied natural gas shipping company, two minority shareholders said.

Penang Development Corp., which claims to own 1.3 percent of MISC, has written to request meetings with the heads of the shipper’s two biggest shareholders, Petroliam Nasional and Employees Provident Fund, according to copies of the letters to the media. The offer price of 5.30 ringgit per share is “on the low side,” said a separate e-mail from Pacific Mutual Fund Bhd., which owns 0.1 percent, according to data compiled by Bloomberg.

“The price offered for MISC apparently undervalues the assets and businesses of the company and its future prospects,” Lim Guan Eng, Penang Development’s chairman, said in the letter to Petroliam Nasional Chief Executive Officer Shamsul Azhar Abbas. The bid is below share price targets at some investment banks, including KAF-Seagroatt & Campbell Bhd. which has an estimate of 6.80 ringgit, he said.

MISC completed a rights issue at 7 ringgit per share in February 2010. The stock subsequently tumbled 44 percent before last week’s offer as the company booked losses and exited the liner industry. It rebounded 17 percent yesterday to 5.22 ringgit, the steepest increase in 14 years.

“Long-term funds may deem the offer not attractive enough,” Ahmad Maghfur Usman, an analyst at OSK Holdings Bhd., wrote in a Feb. 4 report, advising investors to reject the bid. “The upside potential on MISC is worth the wait given that its earnings will continue to improve following its exit from the liner business. Impatient shareholders may opt to take up the offer and exit.”

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Petronas, as the energy company is known, already owns almost 63 percent of MISC shares, according to data compiled by Bloomberg. A buyout would provide it with greater flexibility in deciding MISC’s strategic direction, the group said last week.

MISC rose 0.6 percent to close at 5.25 ringgit in Kuala Lumpur today. The offer price is a 19 percent premium over the stock’s last traded price of 4.45 ringgit before the Jan. 31 bid, a level last seen in April 2012.

Penang Development, a unit of the Penang state government, said it owns MISC shares worth about 300 million ringgit at the offer price. It’s been a shareholder since 1975, said Lim, also chief minister of the opposition-controlled state.

Lim expressed his concern in separate letters to Petronas’ Shamsul and Employees Provident Fund Chief Executive Officer Azlan Zainol, copies of which his office e-mailed to the media.

The Employees Provident Fund, Malaysia’s biggest pension fund, owns 9.7 percent of the shipper, according to data compiled by Bloomberg. EPF isn’t part of Petronas’ buyout bid.

“The offer price is on the low side for investors with longer term investment horizons as we expect MISC’s earnings to bottom in 2012 and start recovering in 2013 and 2014,” said Pacific Mutual, a Kuala Lumpur-based fund which manages about 1.8 billion ringgit.

MISC’s net income is forecast to surge 78 percent to 1.17 billion ringgit in 2013, according to the average of 15 analyst estimates compiled by Bloomberg. This compares with projected net income of 656 million ringgit this year.

Azman Ibrahim, a spokesman for Petronas in Kuala Lumpur, wasn’t immediately available for comment when e-mailed and phoned at his office today.

MISC operates the world’s second biggest fleet of LNG ships after Qatar Gas Transport Co., according to Clarkson Plc, the world’s largest shipbroker. The group shuttered its container-ship business last year to focus on LNG tankers after the cargo-box unit posted $789 million of losses over three years due to global overcapacity and falling rates.

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