Will the Bright World takeover deal fail?

Bright World Precision down 16.4% at $0.435 on above-average volume, extending recent weakness as investors increasingly worried US-listed China Holdings Acquisition's takeover deal will fail. Latter unveiled $0.70/share offer for stamping machine, metal component maker last week, sending stock to 9-month high of $0.665. But shares down almost 22% since deal announced Jul 22.

"Judging by the share price pattern over the past week, it appears that some investors may not be confident that the deal will go through given the numerous hurdles," says Kim Eng.

Among conditions, Bright World's quarterly, full-year net profits for periods ending Jun, Sep, Dec '08 can't fall by more than 10% on-year; also, not more than one-third of buyer's public shareholders can redeem their IPO shares for cash.

FerroChina

Credit Suisse is arranging a US$200 m loan for SGX-listed steelmaker FerroChina to refinance debt and for other corporate needs, banking sources said Tue. The 3-year syndicated loan will offer 450 basis points above the London Interbank Offered Rate (LIBOR), one of the sources briefed on the deal told Reuters.

FerroChina, which makes galvanised steel in China, is widely seen as a takeover target after it appointed Merrill Lynch as an adviser to look at strategic options for the firm. FerroChina was not immediately available for comment.

"In current market conditions, this should be bearish news as US$200 m will add to gearing," said a dealer at a local broker. "Previously the firm also issued some convertible bonds, so market investors may view it as negative news because of its over-gearing, and it looks like their debt-level is pretty high."

FerroChina's long term debt-to-equity ratio is 0.19, which is higher than most other SGX-listed steel firms. In May, Chinese media reported that Australia and Russian firms are eyeing at least a 20% stake in the China-based company.