Natsteel: major setback for Oei?
By Mano Sabnani, Business and Financial Consultant
First published in TODAY
11-12 Jan 2003

Tycoon Oei Hong Leong must have hoped against hope that 98 Holdings would not make it to the 50 per cent plus one share level in Natsteel. In the event, circumstances moved in favour of the Ong Beng Seng-led consortium, especially as the offer finally drew to a close on Friday, 10 Jan 2003.

Jittery fence-sitting small shareholders and some fund managers sold Natsteel in the market from Wednesday onwards, allowing 98 Holdings to accumulate the shares at 2.06, its takeover offer price. By Thursday night, 98 Holdings had 39 per cent of the company in the bag with another 7 plus percent in acceptances. Further purchases and some new acceptances yesterday until the close at 3.30pm allowed 98 Holdings to cross the 50 per cent mark.

So the long drawn takeover tussle has drawn to a close, with the best possible outcome. There is one major shareholder in the saddle at the cash-rich steel and construction group and fears of a hung situation, where decision making would be slow and acrimonious, can be put to rest. It is clear now that 98 Holdings will dominate the board of Natsteel and determine the company's direction.

The remaining small shareholders can expect the company to pay out the 97 cents special dividend but Oei's demand for a higher payout is not going to be realised. For the experienced asset trader, the main focus now will be on how to maintain the value of his over-$200-million-dollar investment and, eventually, to realise it in cash.

If Oei were to approach 98 Holdings now to take over his shares at $2.06, he is likely to be snubbed. He is unlikely to even try that. Instead, he is likely to push for a few board seats but even here, he is likely to be rejected. That leaves him with the option of selling the shares in the market or to third party investors. But given the size of his block of over a 100 million shares or just under 30 per cent in the company, this is going to be difficult.

Oei's expected desire to exit Natsteel is going to put a lid on the share price in the forseeable future. Any future major rally in the stock above the $2.06 level will throw up rumours of his share sales. On the other hand, with Natsteel in 98 Holdings' bag, there can be no expectations of any new takeover bid.

All said, Natsteel shares are in for a dull period unless the company can stage a very sharp turnaround in profitability and demonstrate that its shares are really worth more than what its major shareholders have been prepared to pay up to the present time.