According to The Star's analysis yesterday, the ball is on the Securities Commission's feet or court, which ever way one may like to call it, to determine the party in control of Eastern & Oriental Berhad (E&O).
Sime Darby only purchase 30% stake in E&O from vendors Datuk Tham Ka Hon, Tan Sri Wan Azmi Wan Hamzah and GK Goh Holdings Ltd. The usual practise to require a Mandatory General Offer (GO) is 33% or more.
However there is more to it than just that.
Our highlight of the possibility of an insider trading infringement yesterday here by E&O Chairman and "Mrs Zarinah", Dato Azizan Abdul Rahman and long time business associate, Dato Kalimullah's ECM Libra attracted an interesting view from an anonymous commentator.
There is the possibility that Azizan and Kalimullah's ECM Libra with their associates is taking a lucrative greenmail ride to cash out on a GO by Sime Darby.
This leads to the game Dato Nazir Abdul Razak's CIMB is playing. Have this big bad 'I Banker" been ethical in this dealing?
The Chairperson may not literally have the balls but it is at her feet. GO or no GO, the SC's actions or inactions and decisions or no decisions hereon are under public scrutiny.
Collaboration, Collusion or In-Concert
The Star's analysis yesterday, below:
Will SC require general offer on remaining shares of E&O?The collaboration agreed between the Sime Darby the acquirer and the three vendors is for current management under Dr Tham to remain for three years.
Tuesday September 6, 2011
PETALING JAYA: Questions have been raised as to whether Sime Darby Bhd will be required by the Securities Commission (SC) to launch a mandatory general offer (MGO) for the remaining shares in Eastern & Oriental Bhd (E&O).
This stems from the recent announcement by Sime Darby that it was buying a 30% stake in E&O from a group of shareholders at a price that worked out to a 60% premium to market at the point of the announcement.
While the Takeover Code states that an MGO is only triggered by a 33% or more change in shareholding, there are other instances in which an MGO can be required by the regulator.
According to Para 6.2 of Practice Note 9 of the Takeover Code 2010, the SC has the right to consider all surrounding circumstances to deem if control has been passed to a new party, thereby mandating the new party to launch a general offer.
Among the specific criteria laid out in Para 6.2 is “the consideration for the acquisition of the voting shares” in other words, the premium to market that was paid for those shares.
Other criteria that will be looked at include changes to the composition of the board and to the business of the target company.
A corporate lawyer explained: “Under this provision, acquisition of voting shares higher than the fair value or market price of the voting shares may tend to suggest that the acquirer has obtained control of the company.
“Ultimately, the SC would need to be satisfied that all the evidence gathered demonstrates that the vendor is acting in concert with the acquirer such that the acquirer could exercise control, which is equivalent to having more than 33% in the company and which in turn requires it to conduct an MGO.”
Just before the Hari Raya break, Sime Darby had announced it was acquiring a 30% block of E&O at a price of RM2.30 per share when the market price of those shares was RM1.45. The deal is scheduled to be completed this Friday.
Sime Darby is set to acquire 273 million shares in E&O and 60 million irredeemable convertible secured loan stocks, representing a 30% equity interest, for RM766mil cash.
When the deal is done, Sime Darby will be the single largest shareholder of E&O.
The vendors of the block are E&O managing director and founding member Datuk Tham Ka Hon, Tan Sri Wan Azmi Wan Hamzah and Singapore-listed GK Goh Holdings Ltd.
E&O's share price has risen steadily since the acquisition was announced, closing yesterday at RM1.67 just three sen short of its three-year high of RM1.70 at the peak of the rumours about its supposed merger with SP Setia Bhd.
The most recent uptrend in E&O's share price began since Aug 24.
Just two weeks prior to that, several shareholders of E&O had raised their stakes in the company. GK Goh, on three consecutive days, increased its stake to 12% while Datuk Azizan Abd Rahman, a director of E&O, purchased 100,000 shares.
However, it should be noted that the possibility of triggering the MGO would not arise if the vendor of the shares did not hold any more shares in the target company.
Such was the case of Khazanah Nasional Bhd's divestment of its 32.2% stake in Pos Malaysia Bhd. As Khazanah did not own shares in Pos after the divestment, the buyer could not be deemed to be in control of Pos.
In Sime Darby and E&O's case though, all three vendors of the 30% block will still hold a collective 12% stake in E&O post-transaction.
In an interview with a business weekly, Sime Darby denied any collusion with the vendors of the block. As at press time, the SC had not replied to queries from StarBiz.
While Sime Darby may have denied they are in-collusion with the vendors, it raises another issue to the issue of vendors still holding on to some shares.
The collaboration means that Sime Darby is working-in-concert with the vendors. The block of
Sime Darby's 30% and the vendors collective 12% adds up to 42%. That has obviously exceeded the 33% trigger point and a GO is mandatory.
Probably CIMB dealmaker Nazir in their capacity as adviser to ECM Libra may have missed out on this possibility. How will SC, particularly SC Chairperson, Tan Sri Zarinah act? GO or no GO?
Bigdog's reading of the situation when it was known that Kalimullah's ECM Libra entry into E&O yesterday:
This story about Sime Darby ‘talking for the acquisition’ surfaced at The Edge about a month ago. It is believed that Riong Kali ‘leaked’ the deal to the press.In Bigdog's view, "if their adviser is also CIMB, it would be up their avenue for that kind of corporate game."
The intention is very clear. ECM Libra has vested interest in property developer. Probably, they are looking into controlling E&O. The end game of the acquisition is most probably do an asset stripping exercise baloney style, ‘slice-by-slice’.
Of course it was not about value adding into the property development plc. It was never their skill or ability to inject any projects or even any brand to the acquired company.
Most probably, it was about getting a quick buck from the garage sale.
Will they cash out upon a MGO? If they do, just like what happened to Khazanah on the Parkway deal, Sime Darby will be the sucker. This will invite public uproar.
Prime Minister and Finance Minister, Dato Najib should take notice. Public funds is involved and the dealmaker is his own brother whose least interested in saving the brother's face.
Bigdog added further that "SC should be looking into this probable insider trading since ECM Libra already got its footing in a few months ago. Then again if the deal is about the involvement of ECM Libra, it is doubtful that SC under Zarinah would actually do anything. Selective prosecution had always been the SC practice under her."
E&O's Chairman Azizan bought into E&O prior to announcement of this collaboration and there is that possibility that Kalimullah's ECM Libra bought into it with tips from Azizan. As Chairman, Azizan should be subjected to investigation on insider dealing too.
Will Zarinah allow SC to investigate her husband?
Nazir's double dealing
There could be another possibility that CIMB's Nazir decided that rather than allow ECM Libra do an asset stripping, it is better to take the deal to another of their client, in this case Sime Darby, whose more genuine businessman.
This means that CIMB was double dealing. ECM Libra could be bastards at one time but it unethical for an Investment Banker to betray the trust and interest of it's clients in favour of another client. SC should investigate the business conduct of CIMB.
It should be more glaring now for PM to stop thinking that Nazir should be viewed as a separate individual than himself and he is entitled to his own life.
In the same manner Omar Ong have been prancing himself around, Nazir may have abused his position as brother and misrepresented or gave the perception that his proposals and suggestions as directive of the PM.
Both these two close advisers of the PM including Dato Idris Jala have been influencing policies that is making PM increasingly unpopular with BN's traditional voters, particularly the Malays.
BN has opened itself vulnerable to a possible loss in the next general election due to these individuals. Many traditional segment of voters have began to be sceptical with Government for many peculiar reasons and generally it originates from these individuals.
Party members and supporters should also take notice to not allow such risk and voice their concern.
In the meanwhile, all eyes on Zarinah and SC.