Boustead will undertake a series of corporate exercises (CIMB)

Boustead Holdings will undertake a series of corporate exercises to pare down its 97.81% stake in Pharmaniaga to 55%, in compliance with Bursa Malaysia’s listing rules. It will raise gross proceeds of up to RM93.6m from a proposed restricted offer of sale and RM77.6m from a proposed divestment, creating total combined proceeds of RM171.2m which will be used to pare down its current gearing. The proposed corporate exercises include:

16.0m dividend-in-specie of Pharmaniaga shares to its shareholders on a 1:57.5 basis

16.4m restricted offer of sale of Pharmaniaga shares to all Boustead shareholders excluding Lembaga Tabung Angkatan Tentera (LTAT) on a 1:24 basis 

Divestment of 13.5m Pharmaniaga shares for a sale consideration of RM5.75 per Pharmaniaga share to LTAT, Boustead directors, employees and identified investors 

94m new Boustead bonus shares to Bousted’s shareholders on a 1:10 basis 
Pharmaniaga will also undertake a proposed bonus issue of 10.7m bonus shares to its shareholders on a 1:10 basis. (Starbiz)

This announcement is not a surprise as management has indicated in the past of their intention to pare down their stake in Pharmaniaga. For every 1,000 Boustead shares, one gets free 17.4 Pharmaniaga shares and at RM5.75 per Pharmaniaga shares, this free Pharmaniaga share is worth RM100, equivalent to only RM0.10 per Boustead share. The whole corporate exercise is expected to be completed by the end of 2011 and this will reduce its gearing from 0.75x to 0.72x.