The new Sime Darby (or, Synergy Drive) Theoretical Price

Based on the closing price of the various acquiree companies that will be merged to form the new Sime Darby (or, Synergy Drive) & the applicable Swap Ratio, the Theoretical Price of the new Sime Darby (or, Synergy Drive) can be computed (as shown below). For example, a shareholder of the original Sime Darby can choose to exchange his shares for the shares in the new Sime Darby (or, Synergy Drive) at a Swap Ratio of 1.23. The Swap Ratio is arrived at by dividing the original Sime Darby price as at the Offer Date with the Theoretical Price of the new Sime Darby (or, Synergy Drive). As the share prices of the various acquiree companies have appreciated, the Theoretical Price of the new Sime Darby (or, Synergy Drive) was bumped up.



We can compute the average Implied Theoretical Price of the new Sime Darby (or, Synergy Drive) to be RM8.81 as at October 17. Since then, the market has gone through a lot of changes. Two things could affect the price of the new Sime Darby (or, Synergy Drive). They are the injection of Bakun Dam into the group & the appreciation of the price of CPO (the main business of the group). Assuming that we exclude the Bakun Dam factor (because it was common knowledge that the government was planning to do so), the CPO factor must be accounted for. From October 17 to November 29, the Plantation index has gone from 6848 to 7239 (or 5.7%) and if we factor this rise into the price, the Fair Value of the new Sime Darby (or, Synergy Drive) could be about RM9.31.