TTJ Holdings

[dreamybear]

The IFA report is out now: https://links.sgx.com/FileOpen/T%20T%20J...eID=721717

Having considered carefully the information available to us as at the Latest Practicable Date, and based on our analyses, we are of the opinion that the financial terms of the Offer are on balance, not fair and not reasonable. Accordingly, we advise the Recommending Directors to recommend Shareholders to REJECT the Offer.

.......

Shareholders should follow the advice of the IFA and recommending directors and reject Mr Teo's current offer.

While I am not vested in TTJ, I can understand the disappointment of the minority shareholders.

Am grateful to past help and support by buddies in my investment journey, so I actually wrote to RegCo regarding this issue, particularly the adherence to the "fair and reasonable" clause. Hopefully, this could provide some moral support or at the very least, help readers here to learn.

I got a fairly lengthy reply and extracted part of it here : "Pursuant to Listing Rule 1308(1)(b), Rules 1307 and 1309 do not apply to a delisting following an offer under the Takeover Code provided that the offeror is exercising its right of compulsory acquisition. As the Company is incorporated in Singapore, the Offeror's voluntary cash offer for all paid up and issued shares of the Company is subject to Section 215(1) of Singapore's Companies Act....."

I think in essence it means if the offeror managed to get 90%, the "fair and reasonable" does not apply. I had always thought the loophole was to more easily reach the compulsory acquisition threshold(BT article below). I think the loophole is actually more easily to get to the threshold so as to avoid the "fair and reasonable" rule ?

I wonder how many retail investors really understand the rulebook, especially when we do not have the luxury of engaging a legal counsel to explain to us. Perhaps what could help would be the provision of examples of how the rules work.

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SGX RegCo requires exit offers to be fair and reasonable, shareholder vote to exclude offeror and concert parties
https://www.businesstimes.com.sg/compani...er-vote-to

SGX Rule 1309
http://rulebook.sgx.com/rulebook/1309-0#...reasonable.
"If an issuer is seeking to delist from the Exchange:—
(1) an exit offer must be made to the issuer's shareholders and holders of any other classes of listed securities to be delisted. The exit offer must:
(a) be fair and reasonable; and......."

Takeover loophole disadvantages minority shareholders of TTJ Holdings
https://www.businesstimes.com.sg/compani...j-holdings

[ghchua]

Hi dreamybear,

Essentially, what it means is that the Takeover Code overwrites SGX listing rules. SGX listing rules is just an overlay over the Singapore Companies Act. Singapore Companies Act is law, SGX is listing rules.

But you can come back and tell me, can SGX Regco changed its listing rules to fix this loophole? Yes, they can. So, you change the listing rules to tell companies that you cannot delist unless your offer is deemed "fair and reasonable" by the IFA. But you cannot stop the compulsory acquisition, since they are exercising their right under the Company Act (i.e. law). So what happens? We have a company listed on SGX with the controlling shareholder holding 100% of the company. Stock is possibly going to be suspended indefinitely. Eventually, you have no other choice but to delist the company if they are not going to restore their free float to maintain their listing status.

Therefore, there is no point changing the SGX listing rules. The change has to come at the Companies Act level.

[weijian]

I wonder how many retail investors really understand the rulebook, especially when we do not have the luxury of engaging a legal counsel to explain to us. Perhaps what could help would be the provision of examples of how the rules work.

hi dreamybear,

All these information is public and is readily available for one to read and understand. Personally, through VB.com and kind sharing from ghchua, I have learned and taken down notes that helped me and I do not think I need to engage a legal counsel.

It is really on me (OPMI) to learn this aspect of the game, and as a result up my overall game.

Something recent I read that I thought is applicable in this area (courtesy of Morgan Housel at Collaborative fund)

Liebig’s law of the minimum (agriculture): A plant’s growth is limited by the single scarcest nutrient, not total nutrients – if you have everything except nitrogen, a plant goes nowhere. Liebig wrote, “The availability of the most abundant nutrient in the soil is only as good as the availability of the least abundant nutrient in the soil.” Most complex systems are the same, which makes them more fragile than we assume. One bad bank, one stuck container ship, or one broken supply line can ruin an entire system’s trajectory.

https://www.collaborativefund.com/blog/l...rld-works/

[dreamybear]

Hi dreamybear,

Essentially, what it means is that the Takeover Code overwrites SGX listing rules. SGX listing rules is just an overlay over the Singapore Companies Act. Singapore Companies Act is law, SGX is listing rules.

But you can come back and tell me, can SGX Regco changed its listing rules to fix this loophole? Yes, they can. So, you change the listing rules to tell companies that you cannot delist unless your offer is deemed "fair and reasonable" by the IFA. But you cannot stop the compulsory acquisition, since they are exercising their right under the Company Act (i.e. law). So what happens? We have a company listed on SGX with the controlling shareholder holding 100% of the company. Stock is possibly going to be suspended indefinitely. Eventually, you have no other choice but to delist the company if they are not going to restore their free float to maintain their listing status.

Therefore, there is no point changing the SGX listing rules. The change has to come at the Companies Act level.

Thanks so much ghchua for your detailed explanation.  If the "fair and reasonable" couldn't be applied in real life situations, why change the rules ... hmmm, sigh.

@weijian : Thks. I do agree ghchua has very good knowledge in this area and is also very helpful, but not the issue that the rules are meant to be read and (completely) understood by layman retail investor. I believe the primary audience are the professionals(e.g. IFA, company's legal dept) and the set of rules wld probably have undergone the multiple lens of various legal/compliance/financial experts, etc to adhere to regulations/statutes rather than whether it is reader-friendly to a layman. I suppose you might be in the one of the related fields and at least have a base to pick up on.   I do agree though that it is up to the individual to up his/her own game but it seems the available avenue(other than VB) is to email RegCo to seek clarifications/explanations which is hardly efficient for both retail investors and RegCo.

[ghchua]

Thanks so much ghchua for your detailed explanation.  If the "fair and reasonable" couldn't be applied in real life situations, why change the rules ... hmmm, sigh.

It does apply to some real life situations. For example, during the Vard delisting resolution last time before the changes, the delisting was pushed through despite IFA opinion that the offer was "not fair but reasonable".

Therefore, having this "fair and reasonable" IFA opinion actually prevented a lot of companies from using Voluntary Delisting Resolution and Scheme of Arrangement methods to delist a company from SGX, unless they are very confident that their offer price is decent. After the changes, you can see that most companies did not use these methods to delist their companies.

Which left the General Offer route via the Takeover Code and the definition of "independent" shareholders to execute compulsory acquisition. Now, this is tricky as it need changes at the Singapore Companies Act level, which affects not only listed companies, but also unlisted ones. Let's see how it goes and hopefully, we can see some changes soon.