Landmark- Greenmail & White Knight.

I've read this piece of news with mixed feeling. As reported, Syed Yusof and parties close to him has sold off their 17% stake in Landmarks at RM2 apiece. The buyer is reportedly gaming and power group, Genting Bhd.

The report states that Syed Yusof has successfully completed a greenmail. A greenmail refers to a maneuver in which the buyer of a block of shares (commonly known as the raider) has agreed to sell his shares (normally at a big profit) to the existing owner of a listed company (commonly known as the management). The management offered to buy the block of shares in order to retain control of the listed company.

The Landmark saga could have ended there if the buyer of the block is the management of Landmark. As reported, it is not but instead it is a third party, Genting Bhd. The question that immediately springs to mind is whether Genting is merely acting as a conduit to complete the buyback by Landmark's management or has Genting acted independently. If it is the latter case, has Genting made a similar arrangement with Landmark's management? If so, Genting could end up with Syed Yusof’s 17% stake plus the management’s stake of 18.65% (or, 26.7% if you include in the stake held by Dynaura Trading Sdn Bhd, a party deemed friendly to the management). If so, Genting would have ended up with a stake of between 35.65% & 43.7% in Landmark & would have to make a general offer for Landmark at RM2.00 apiece. So, which is it?

Over the next few days, I expect uncertainty to rule the share price of Landmark. If the management has bought back the shares via Genting, the share price will drop back. You may want to take profit as soon as possible, in that scenario. If Genting were to announce latter that it has done a similar deal with Landmark’s management, Genting will have to offer to takeover Landmark at RM2.00 apiece. In this scenario, you have to weigh the opportunity cost of going for the GO as compared to sell into the market now (the price at 10.00 a.m. is RM1.86).

The one thing that you can safely rule out is that Genting has stepped into Syed Yusof's shoes & pursue a hostile takeover of Landmark. Genting, which makes its money from the sensitive casino business, will not go down that route.