Suncity now at RM4.28 is 16% discount off Offer Price at RM5.10

To recap, at 24 November 2010, Sunway Sdn. Bhd. had offered to acquire Sunway City Berhad (Suncity) at RM5.10, which shall be satisfied by:

1. issuance of new company share at RM2.80 per share, representing 80% of the Offer Price of RM5.10;
2. cash, representing 20% of the Offer Price of RM5.10;
3. new warrants in new company on the basis of one (1) new company warrant for every five (5) new company shares, issued for free, and having the indicative terms set out in the offer letter. 

In summary, what it means is, with every 1000 shares of Suncity you have, you will:

1. Get back RM1,020 in cash
2. Get 1,457 shares of the new company which shall be listed at RM2.80
3. Get 291 warrants in new company

As at 12:30pm today, the last traded price for Suncity is RM4.28. This is a good deal, considering that if you buy 1000 shares of Suncity at RM4.28 now (roughly RM4,280 of investment), you are getting the above offer at 16% discount, of course subject to the floating price of the new company.

When the acquisition first announced, the company share shoot up to RM4.64 and even hit RM4.74. It had been declining since, especially when the overall market had been down due to sentiments and also middle east crisis.

As a norm with past historical examples of company acquisition, as the days neared to the acquisition date (especially last week before the acquisition date), the price shall hover around 3% to 10% discount to the offer price.

For those who are not willing to wait for the deal to materialized, they can sell first, which means, if it hits RM4.59 (10% off the Offer Price), they are earning RM310 (RM4,590 - RM4,280), which is a 7.2% return of RM4,280 investment (ROI).  If it hits RM4.84 (5% off the Offer Price), they are earning RM560 (13% ROI).

However, there are risks to take note. The main concern is, past historical acquisition examples are generally backed by cash offers that can be quantified, while this offer is mainly satisfied by swapping your existing shares into a relatively new company (which the respective new company offer price might not be the "right" price for the stocks, and it is still subject to the floating price).

It is your call to determine whether the current price is attractive or not.