Chemrez final tender offer round ends

After the final round of tender offer undertaken by D&L Industries for the remaining minority shares in Chemrez Technologies Inc., none of the latter’s shareholders opted to part with their residual shares.

This was despite the fact that the new round of tender offer—a requirement before Chemrez can go on voluntary delisting from the Philippine Stock Exchange by Jan. 10—would no longer be covered by preferential tax rates because trading on Chemrez had been suspended.

Only 0.3 percent of Chemrez is not owned by D&L at present after the latter conducted an earlier tender offer aimed at making the company a full D&L subsidiary.

The Lao family, the controlling shareholder of both companies, believes that Chemrez’s small size in terms of revenues and market capitalization was not large enough to attract sufficient attention from investors, resulting in the “mispricing” of shares but was an opportunity for D&L to grow its market capitalization.

By owning 100 percent of Chemrez, D&L envisions to broaden its portfolio, strengthen its capabilities, including cash generation, and boost growth as the specialty chemicals business continues to improve.

The Philippine Stock Exchange earlier approved the voluntary delisting of Chemrez but subject to the completion of a new round of tender offering which was, however, more challenging as D&L had to undertake this while Chemrez was under trading suspension, which meant that regular capital gains taxes and other taxes applied.

The PSE earlier said it could not lift the trading suspension as it might be viewed by the Bureau of Internal Revenue as a violation of a tax ruling that gives preferential tax rates only to trades under a stock transaction tax regime.

While trades of listed companies are given a preferential tax rate of ½ of 1 percent, any transfer or sale of shares outside the PSE is subject to a capital gains tax of 5 to 10 percent of net capital gains aside from documentary stamp tax of P0.075 per P200 and value added tax on gross receipts.

Based on the latest tender offer report on Chemrez, it was reported that after D&L’s offer to buy the rest of minority shares at P6 per share from Nov. 17 to Dec. 15, tendered shares were rejected. As such, D&L now owns 99.7 percent of Chemrez, with the residual shares still held by minority investors, based on the report from tender offer agent IGC Securities Inc.