Hong Kong-based conglomerate Citic Pacific has reportedly made a bid to fully acquire luxury car and consumer goods distributor Dah Chong Hong Holdings. Citic reportedly wants to take the company private through a deal estimated to be worth $385 million.
Citic Pacific currently owns a 56.81 percent stake in the 70-year old publicly-traded company. In its bid to take full control of the company, Citic has offered to pay HK$3.7 per share for the remaining 43.19 percent stake in the company.
The bid price represents a substantial 37.55 percent premium over the Dah Chong Hong Holdings' market price in its last closing, which stood at HK$2.69 per share.
Following the news of Citic Pacific's offer to take over the company, Dah Chong Hong Holdings saw its share prices surge by as much as 30.85 percent to HK$3.52 per share on Monday.
Dah Chong Hong Holdings is one of China's oldest and largest consumer goods and vehicle distributors. The company has over 100 shops and showrooms throughout China and other Southeast Asian countries.
In terms of its vehicle offering, the company currently carries popular car brands such as Honda, Bentley, Audi, and Infiniti. Dah Chong Hong Holdings also operates hundreds of DCH Food Mark stores, which offer premium meats, seafood, fruit, and other grocery items.
Citic Pacific's offer to acquire the company will be giving current investors the chance to cash out their shares at a substantial premium. During a stock exchange announcement on Sunday, Citic Pacific mentioned to investors that their decision should translate into a huge opportunity to Dah Chong Hong shareholders given the stock's thin trading volume.
Dah Chong Hong's stocks have had an overly prolonged period of low liquidity, standing at around 0.07 percent in the last 12 months. The stock also has a relatively average daily trading volume of around 1.40 million shares.
As for its plans for the company, Citic Pacific announced in a statement that it aims to fully transform Dah Chong Hong Holdings' business for it to deliver more long-term growth.
The distributor currently faces a number of hurdles on various fronts from increasing competition and from the rapidly changing business landscape.
Citic Pacific mentioned that it plans to "re-engineer" Dah Chong Hong Holdings' business, which will require a massive amount of investment over the coming years.
The company clarified that its plans will take time to execute and there will be some risk involved. Citic Pacific acknowledged that there may be some volatility in Dah Chong Hong Holdings' operations and finances moving forward, but it should still be able to turn the company around further down the line.
