KUALA LUMPUR (June 24): The unconditional mandatory general offer (MGO) for furniture maker Eurospan Holdings Bhd(KL:EUROSP) by its substantial shareholders is “fair” and “reasonable”, said independent adviser BDO Capital Consultants Sdn Bhd.

"Accordingly, we advise and recommend that the holders accept the offer,” said BDO in a circular to shareholders on Monday.

Businessman Tan Sri Robert Tan Hua Choon's children triggered the MGO last month after increasing their shareholdings in the loss-making furniture manufacturer to 71.83%.

His son Datuk Seri Tan Han Chuan had acquired 23.5 million shares, representing 52.92% of the total issued shares in the company, for RM39.96 million, cash, or RM1.70 per share through direct business transactions. This raised Han Chuan's stake from 14.22% to 67.14%.

Han Chuan’s sister, Datin Tan Ching Ching, owns a 4.69% stake in Eurospan, giving the duo a collective shareholdings of 71.83%.

The offerors intend to maintain Eurospan’s listing status on the Main Market of Bursa Malaysia.

BDO said the offer price of RM1.70 represents a premium of 27 sen or 18.9% against the fair value of Eurospan’s share of RM1.43.

It noted that Eurospan’s share price had closed below the offer price for one year before the MGO was announced. As such, BDO is of the view that the offer is fair.

BDO said the offer is reasonable, given that the historical trading volume of Eurospan shares is relatively illiquid when compared against Bursa Malaysia’s Consumer Products & Services Index.

The average monthly volume of Eurospan shares over free float shares is 0.5% between June 2023 and May 2024, lower compared to the Consumer Products & Services Index’s percentage of 12.53%.

“Hence holders may have limited opportunities or it may require a longer time for holders to dispose of their offer shares in the open market after the closing date,” it noted.

Given the lack of competing offers to rate offer shares and the fact that Han Chuan and the parties acting in concert controll 71.83% of Eurospan’s share capital, the offer is also deemed to be reasonable, said BDO.

Han Chuan first emerged as a substantial shareholder in the company on April 26, 2024. He is the executive director of investment holding company Jasa Kita Bhd (KL:JASKITA) and the non-executive director of real estate developer JKG Land Bhd (KL:JKGLAND).

Robert Tan is widely known for being Malaysia's first Casio watches distributor, earning him the "Casio king" moniker.

Eurospan has been in the red over the past two financial years, having recorded a net loss of RM4.6 million for the year ended May 31, 2023 (FY2023) and RM6.1 million for FY2022.

For the first nine months of FY2024, the group reported a net profit of RM1.18 million, compared with a net loss of RM3.9 million a year earlier, due to the disposal of properties.