Tender Offer

A preemptive strike from DELTA Electronics (Taiwan) after a sudden disclosure of a 100% “tender offer” for DELTA Electronics (Thailand) Public Company Limited or DELTA at ฿71/share through their subsidiary, Delta Electronics International (Singapore) Pte. Ltd. (DEISG). Currently, DELTA Taiwan holds 20.93% stake in DELTA Thailand, which requires 79.07% or 986.27 million shares to complete this 70 billion baht deal. There are two points to consider: 1) Is the tender offer price at ฿71/share too low? (Though higher than the market at the time when the offer was made) 2) What is the reason for DELTA Taiwan to invest a large amount of money to acquire DELTA, when there does not seem to be any intention to remove DELTA from the listed companies? Let’s break the first point down before moving to the second one. Many opposes that the price at ฿71/shares is too low, considering DELTA’s potential profit in 2019 that will grow 30% by estimation along with 4-5% dividend per year. Second, there are possibilities that DELTA Taiwan is aiming for a dividend, which is about 3 billion baht per year. While, it is also possible that this “takeover” will lead to another taking over from other companies or to combine Thailand and Taiwan business together. It remains unclear on the second aspect that the holder will be in DELTA’s group or someone else. DELTA’s core business is to manufacture power supply and electronic parts, such as DC fan, EMI filter and solenoid, which is a world leading company in these business sections. Currently, DELTA is moving to alternative energy, such as solar energy, wind energy, electric vehicle (EV), and hybrid electric vehicle (HEV). This is to compensate the slow movement of income from their main business. DELTA has two factories in Thailand, located in Bang Poo Industrial Estate, Samut Prakarn province and Well Grow Industrial Estate, Chachoengsao province. DELTA also owns factories established in India (Rudrapur and New Delhi), Slovakia (Dubnica nad Vahom and Liptovsky Hradok) and Myanmar (Rangoon). However, DELTA is at risk from the global economy fluctuation, that will affect their main income from export business. Protectionism may also result in slowing the business down, as well as unstable currency rates. Going back to the point of what strategy should be played on DELTA’s shares when the market price almost reaches the tender offer price at ฿71/share? There is no capital gain, so all speculators are out of the game, while the best scenario for investors seems to be putting it on “HOLD” Whether holding and later selloff to DELTA Taiwan at a higher price or wait for dividend…..whatever suits you.