Best World

[ghchua]

If the selective capital reduction delisting exercise requires conditions such as 75% approval of eligible, offer to be fair and reasonable, etc, is it easier/more likely to go thru' as compared to using Voluntary Cash Offer(VO) route ?

Why not VO or other strategies ?

Hi dreamybear,

I don't think VGO is easier to go through now. Previously, many issuers used VGO because they can create a shell company to make the offer, bypassing the independent shareholders rule for acceptance level. Now that the rule had been fixed, it means that the major shareholders do not count towards the acceptance level. And VGO needs 90% acceptance level for compulsory acquisition, certainly a higher benchmark than selective capital reduction (SCR).

For the other strategies like Scheme of Arrangement (SOR), it requires the offeror to fork out money to take out minorities. Also, SOR has another headcount condition besides 75%, so it makes the outcome more unpredictable. Remember for SCR, it is using the company's money to cancel out minorities holdings in the company. There is no need for the majority shareholders to come out with a single cent to cancel capital.

Delisting resolution also doesn't make sense here, since the aim is to take out all minorities completely. They don't want to be in a Boustead Projects situation whereby the company had been delisted, but there are still some minorities holding onto shares of an unlisted public company.

Do take note that once SCR is approved at a EGM and approved by the court, all minorities holdings in the company will be cancelled, even for those who voted against it or didn't bother to turn up and vote.