Sunday, 20 March 2016

Will the proposed acquisition by Sona go through?

Updated on 22 March 2016

For the deal to go through, the proposed acquisition requires approval of at least 75% of the total value of issued Sona shares held by all holders of Sona shares present and voting. The initial investors, holding 28,571,500 shares, are permitted to vote.

Credit Suisse holds 173,582,200 Sona shares (12.305%) and is crucial to the outcome of the EGM.

We saw Credit Suisse re-emerged as a substantial shareholder in Cliq (announcement dated 2 March 2016) after the company said it would soon be resolving the process towards its liquidation and returning monies in the trust account to the entitled shareholders. We can conclude that Credit Suisse is a yield investor in the case of Cliq, and probably in the case of Sona as well.

Assuming Credit Suisse is a yield investor and would vote against the Sona's proposed acquisition, what is the chance of the proposed acquisition going through?

Assuming all entitled shareholders vote (total 1,128,571,500 shares), it requires approval of at least 846,428,625 shares. Assuming Credit Suisse votes against and for the deal to go through, it requires 88.6% of approval from the remaining 954,989,300 shares. The required approval rate would be higher as it is unlikely that all entitled shareholders would vote.

I see the situation unfavourable to the management and initial investors. Let's see the outcome.

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