Three little bigs: Here are the most notable trade sales recently

They’re from the insurance, dairy, and retail markets.

Takeover plays were popular in recent weeks, but the market was also replete with trade sales, with several companies selling part or significant chunks of their businesses/assets to acquirers and realising substantial gains in the process, a report by DMG said.

Some of the more prominent trade sales in recent days include SHC Asia's sale of its insurance business to ERGO, where it sold SHC Insurance Pte Ltd, to ERGO Insurance Group for $112 million. SHC is dangling the payment of a special dividend of at least 30% of the sales proceeds to shareholders upon the closure of the deal.

Meanwhile, Etika has obtained shareholders’ approval to sell its dairy and packaging business to Asahi for a handsome price of US$329 million, intending to pay part of the proceeds to shareholders while retaining the balance to grow its remaining businesses.

Lastly, Second Chance CEO Mohamed Salleh has inked a deal to sell 45 of his retail properties to a retail fund that plans to list on SGX. The cash proceeds will largely be used to pay down debts and reward shareh
olders with a small dividend. CEO Salleh has a good track record of deploying capital smartly to grow shareholders’ net worth.

Here’s more:

The issue at hand is: can the companies deploy the unlocked capital wisely and find ways to fill the earnings void and grow shareholders’ wealth further? If there are no better ways to deploy the cash, returning them back to shareholders is not a bad option.

The sale proceeds generated flushed the companies’ coffers with cash, but raise the issue of how to redeploy the capital to rebuild the earnings base. In many cases, management is promising to share some of the bounty with shareholders in the form of special dividends.