Business

Utico says offer for 88% stake in Hyflux now valued at $535m

White knight investor's offer for 88% stake higher than that of aborted SMI plan

Hyflux is under more pressure to sign a potentially life-saving deal after its white knight investor said its offer for an 88 per cent stake in the debt-laden firm is now valued at $535 million, up from $400 million.

The new figure came yesterday from Utico chief executive Richard Menezes, who touted his rescue package as being higher than the aborted one from SM Investments (SMI).

He said "the equity valuation of (Hyflux) is set at $340 million, though the total deal value could be $535 million, higher than the failed $530 million deal with SMI".

SMI, an Indonesian consortium formed by Salim Group and Medco Group, offered a $530 million plan to help Hyflux fix its defaults under the water contract but the firm canned the deal in April. That prompted water agency PUB to step in.

Hyflux and Utico, a utility based in the UAE, told the Singapore Exchange last week that they are "progressing" towards a $400 million binding deal.

This involves Utico taking an 88 per cent stake, with an investment of $300 million as equity and a $100 million shareholder loan.

In yesterday's statement, Mr Menezes said Utico's offer includes "a $400 million commitment to ensure Hyflux remains a going concern and to grow the business, along with further commitment to (its) retail perpetual securities and preference (PNP) shareholders".

He reiterated Utico's offer of a cash equivalent of a 4 per cent stake in the enlarged Utico group plus additional cash payouts to the PNP investors.

"It implies that the PNP deal is above $100 million. This (deal) could give the PNP shareholders 50 per cent of their first $2,000 to $3,000 as well as a cascade and staggered deal to the rest, thus offering them options to exit and hope for full redemption," he said.

Hyflux did not comment yesterday when asked if it has agreed to the offer.

Mr Menezes said Utico's offer to the PNPs is better than the one from SMI: "Hyflux's value today is at its lowest, akin to a distressed firm. Its recovery could take four to six years or longer.

"Utico has much larger value than Hyflux had at its peak valuation. (SMI's offer of $27 million) and a 10.38 per cent share of a reorganised Hyflux is of no value without a company like Utico, which is in the same sector and a major player."

Mr Menezes said both parties are aiming to enter into a binding deal with the approval of senior creditors and hold a town hall for both PNP and medium-term note holders before the next High Court hearing on Aug 2.

BUSINESS & FINANCE