Gallant Venture

Gallant Venture: lifts trading halt this morning. Gallant will buy a 52.35% stake in Indonesian automotive retailer and distributor PT Indomobil Sukses Internasional (IMAS) for ~US$809.3 m. Gallant will fund the purchase mainly with a 1-for-1 rights issue at $0.28/sh, which will raise ~S$675.5m. The rest of the funding comprises S$128.2 m from borrowings from financial institutions, S$80 m from a convertible bonds issue and S$104.7 m from a non- convertible bonds issue. Upon completion of the proposed acquisition, Gallant would be obliged to make a mandatory tender offer for the remaining shares in IMAS. The proposed acq requires sh/h approval at an EGM. The Salim Group, which has an aggregate interest of 53.4% in Gallant has undertaken to vote in favor of the proposed transactions. Incidentally, PT Tritunggal Intipermata, which owns 18.1% of IMAS, is also a member of the Salim Group. Gallant says the acq will result in the group becoming an even more substantial and diversified conglomerate. The group’s current core businesses include utilities, industrial parks, resorts, property development and mining in Indonesia and property development in the People’s Republic of China. Believes the purchase will enhance its portfolio of investments and allow it to tap the growing Indonesian economy. The acq is also expected to be earnings accretive. IMAS is listed on the Indonesia Stock Exchange with a mkt cap of ~S$1.8b. It is an integrated automotive business group, one of the two largest automotive groups in Indonesia. Its primary business line includes vehicle sales distribution, after sales service and vehicle ownership financing, managing brands including Audi, Nissan, Renault, Suzuki, Volkswagen, and Volvo. Gallant trades at 0.54x P/B, though P/E is not meaningful bcs of minimal profit. IMAS trades at 3.0x P/B, 10.6x P/E. The price per sale share of Rp 5420 is a premium of 1.3% over IMAS’ last closing px of Rp 5350. Attached is the 52 wk share px chart of IMAS.