Yorkey (2788): a successful outcome
20 January 2022
Further to our article of 21-Oct-2021 on Yorkey Optical International (Cayman) Ltd (Yorkey, 2788), we are pleased to note that on New Year's Eve, Webb-site Founder and shareholder activist David Webb, who holds a blocking stake, undertook to vote in favour of an increased offer to privatise the company at HK$0.999 per share, as announced on 4-Jan-2022. That's a 13.5% increase on the original offer of $0.88. The offer price is now final.
The offer document was published on 18-Jan-2022.
This followed the publication on 15-Dec-2021 of valuation reports on Yorkey's 3 properties. We accepted the valuations of the 2 Hong Kong properties, which were done on a market basis citing comparable transactions. We did not agree with the valuation report on the mainland factory site, which the valuer did on a "depreciated replacement cost" basis, as nobody in their right mind would build a factory on that site today. We stuck with our valuation on that in our article.
As a result, we estimated that the true NAV at 30-Sep-2021 was about $1.171, including about $0.757 of net cash (taking into account earnings up to that date). So the effective discount is 14.7% to adjusted Sep-2021 NAV, or 41.5% to the non-cash NAV (but of course, you do need some cash to run a company, just not a humongous cash pile). We were ready to veto at any lower offer price, and continue our history of activism to push for distribution of the cash pile, including vetoing related party transactions.
And you might be wondering, how did the final offer come out at $0.999 rather than $1? That was a gesture of goodwill on our part, to improve the optics.
So, we recommend all shareholders of Yorkey to vote in favour of the transaction. To other companies in which we hold a blocking stake of more than 10% of the independent shares (some of which are in our "Webb chips" disclosed holdings), we would just say that our door is always open to privatise at a reasonable price, if you decide that the costs of being a small listed company are no longer worth the benefits.
© Webb-site.com, 2022
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