Parent company Kingboard Laminates, which owns 64 per cent of the copper foil maker, wants to buy the rest of the company through a cash offer, share swap or combination of both.
The Hong Kong-listed company will buy each Kingboard Copper Foil share for 21 cents or offer 0.374 of a new Kingboard Laminates share of 10 Hong Kong cents each in exchange for one Kingboard Copper Foil share.
The new Kingboard Laminates shares will then be allotted and issued at HK$2.946 (S$0.56) apiece.
Shareholders can also opt to receive both cash and shares of Kingboard Laminates, which closed at HK$3.07 yesterday.
Based on Kingboard Copper Foil's closing price of 18 cents yesterday, the all-cash offer values the company at 16.7 per cent more than its market capitalisation of $130 million.
Its shares gained 1.5 cents, or 9.1 per cent, prior to news of the privatisation after market closed yesterday.
The offer follows a period of 'prolonged undervaluation and illiquidity' of the shares, Kingboard Copper Foil said in a regulatory filing, noting that its shares have been on a 'downward trend' for the past two years.
It said that the proposed privatisation is aimed at streamlining its resources and cost structure to boost its competitiveness, and saving it the compliance cost of remaining listed.
Kingboard Copper Foil, which had a net cash position of HK$193 million at Dec 31, 2008, said that current depressed market conditions mean that it 'is unlikely to require access to the capital markets to finance its operations in the foreseeable future' and can tap its listed parent for funds if necessary.
Kingboard Laminates said that it does not intend to make any major changes to the business of Kingboard Copper Foil, redeploy its fixed assets or 'discontinue employment'.
Kingboard Copper Foil sank into the red in the first quarter ended March 31, 2009, posting an HK$80.3 million net loss versus an HK$49.6 million net profit a year earlier.
In its last financial statement, the company said that it would continue its 'relentless effort on cost control and efficiency improvement', as well as its focus on China as fiscal stimulus measures there boost domestic consumption.
DBS Bank has been appointed financial adviser on the privatisation deal.