Nera Telecommunications Ltd takeover in Singapore by STE Limited

The acquiror Singapore Technologies Electronics Limited announced the proposed acquisition of all the shares in Nera Telecommunications by the way of a scheme of implementation. In this case, the shareholders will vote on either accepting or rejecting the proposed acquisition. The scheme requires at least 75% of votes present to vote for the proposed scheme with the number of votes no lesser than 50% of the issued shares.

The controlling shareholder of Nera Telecommunications, Eltek ASA, who owns 50.05% of the company's shares, has announcement that they have undertaken an irrecovable undertaking, to the acquirer, to vote all the shares they own in favour of the scheme.

In the event that another potential bidder comes into play, STE limited has the right to withdraw the Scheme and make a voluntary offer instead (Switch Option). This options basically gives STE the rights to be able to navigate quicker in a hostile environment of a potential bidding war and gives them the option to lower the conditional acceptance of the deal ie they can make a voluntary offer for say 50% of acceptance or make the deal non conditional upon the level of acceptance.

Given that Eltek ASA, has already agreed to sell their stake to STE, this deal is a very low risk deal. They only require another 25% of votes from the rest of the shareholders. Given the historical share price of this company, the bid price of $0.45 is a reasonable price. The risk level is also reflected in the price as it last traded at $0.44.

The premium in this deal is 2.2%. Given a 3 month holding period this translates to roughly an annualised return of 8.5%. Even comparing the 2.2% to the local interest rates in Singapore, it is an attractive premium.