RI takeover boosts Singapore's Econ

RI takeover boosts Singapore's Econ

SINGAPORE (Reuter): A takeover bid by Indonesian businessmen sent shares in a small Singapore construction company soaring yesterday, focusing attention on a recent surge of Jakarta investment into the island's stock market.

Econ International Ltd shares rocketed almost 50 percent to an all-time high of Singapore $2.05 (US$1.46) after news that Indonesian-owned Yenville Pte Ltd had offered S$1.46 per share for the company on Wednesday evening.

More than 72 million shares, including 60 million off-market block deals, were traded in Econ in the first two hours alone -- almost half the entire volume on the Stock Exchange of Singapore.

Before the bid was announced, Yenville owned 46.71 percent of Econ's shares and 33.69 percent of the company's warrants. It is too early to tell how many shareholders will respond to the offer.

The bid is the latest in a long-line of high-profile takeovers by Indonesian entrepreneurs who are moving into Singapore to take advantage of its strong currency and low interest rates to expand their businesses.

"Econ may be a good target for the Indonesians," said William Cliffe, the manager of institutional sales at DBS Securities. "It is a specialist construction company with good margins, but it is small and will probably be a good base for expansion."

Control

Like many other recent targets of Indonesian investors, Econ is fairly inexpensive to control.

Floated in October, 1994, for just 90 cents (64 U.S. cents) a share, its 131 million shares were worth just S$1.28 (91 U.S. cents) each until last week, when trading was suspended on August 17. At that price a controlling half-share would cost under S$85 million ($60.70 million).

Its business, engineering and piling, is very similar to another recent acquisition, construction company L&M, which was bought two weeks ago by a group led by Indonesian President Soeharto's son Bambang Trihadmodjo.

Econ also has subsidiaries in several other Asian growth economies, including Vietnam and China.

Yenville is owned, via a holding company, by a group of Indonesians including Andry and Wilson Pribadi, related to Henry Pribadi, who recently bought a large stake in property group Amcol Holdings.

Analysts say small Singapore firms are an attractive target for Indonesian investors who want a secure foreign base nearby.

"Singapore is next-door. It is well-managed and there are a large number of small companies on hand available to take over," Cliffe said. "And interest rates here are fairly low. Much of the money used for the purchases is not Indonesian, but borrowed locally at attractive interest rates."

Dealers said this factor was probably responsible for the huge rise in Econ's share price, well above the offer level, after news of the bid was announced.

By the midday close on Thursday, Econ shares stood at S$1.83 ($1.31), up 40 cents (26 cents). Warrants in the company were at S$1.25 (89 cents), up 41 cents (27 cents).