On 15th April this year, there was a sudden spike in the price of Unisteel from $1.40 to $1.68. Apparently, there were rumours in the market that there might be some takeover offer for Unisteel.
SGX issued a query to Unisteel which was answered on the following day as such:
The Company is not aware of any reason for the substantial increase in the price of shares on 15th April 2008. From time to time the Company reviews strategic options available to the Company and its subsidiaries with the view to enhance shareholder value. The Company is currently in the preliminary stages of such a review and there is no certainty that the review will proceed beyond the preliminary stages or that any transaction would result from such review. The Company will make the necessary announcement if there are any material developments.
Shareholders are advised to refrain from taking any action in respect of their shares in the Company which may be prejudicial to their interests, and to exercise caution when dealing in the shares of the Company.
Business Times then carried a story on 18th April highlighting the possibility of a buyout offer for Unisteel. This drew the following response from the company:
We would like to state that Unisteel Technology has not informed any analyst (unnamed or otherwise) that unnamed buyers, including private equity firms, had expressed interest in buying the firm.
The company reiterates that the review of the strategic options available to the company and its subsidiaries is in a preliminary stage and there is no certainty that such review will proceed beyond the preliminary stage or that any transaction would result from it. The company would advice its shareholders to refrain from taking any action in respect of their shares which may be prejudicial to their interests and, to exercise caution when dealing in the shares of the company.
At this point, I started monitoring the news and price of Unisteel.
In the absence of news, the price of Unisteel dropped to around $1.56 over the following two weeks.
Then on 2th May 2008, the price jumped from $1.60 to close at $1.76. This was followed by an announcement from the company:
Unisteel Technology Limited refers to certain media reports made today. The company has received preliminary approaches from certain parties in relation to a proposed transaction relating to the company. Macquarie Capital has been appointed by the company to assist in the evaluation of any proposals that are forthcoming for the consideration of the Board of Directors of the Company. The company wishes to state that there is no certainty that any transaction will materialise. Shareholders are advised to refrain from taking any action in respect of their shares in the company which may be prejudicial to their interests, and to exercise caution when dealing in the shares of the company. An announcement will be issued by the company in the event that there are any material developments.
Following this annoucement, the price of Unisteel shot up to $1.90 on the next trading day.
The announcement was a positive development for the possibility of a buyout offer for Unisteel but the entry price was a bit too high for my liking.
Incidently, that was the highest point reached by Unisteel and it closed at a price of $1.57 at the end of May. At that price, it looked like a good support level and I have taken up a very small position in Unisteel with a view on the buyout offer materializing.
Of course, the buyout offer is by no means certain and I will have to be very nimble with my position should things go wrong.