Keppel Limited

[grubb]

The companies act section 215(1) to (3)

Power to acquire shares of shareholders dissenting from scheme or contract approved by 90% majority
215.—(1) Where a scheme or contract involving the transfer of all of the shares or all of the shares in any particular class in a company (referred to in this section as the transferor company) to another company or corporation (referred to in this section as the transferee company) has, within 4 months after the making of the offer in that behalf by the transferee company, been approved as to the shares or as to each class of shares whose transfer is involved by the holders of not less than 90% of the total number of those shares (excluding treasury shares) or of the shares of that class (other than shares already held at the date of the offer by the transferee company, and excluding any shares in the company held as treasury shares), the transferee company may at any time within 2 months, after the offer has been so approved, give notice in the prescribed manner to any dissenting shareholder that it desires to acquire his shares; and when such a notice is given the transferee company shall, unless on an application made by the dissenting shareholder within one month from the date on which the notice was given or within 14 days of a statement being supplied to a dissenting shareholder pursuant to subsection (2) (whichever is the later) the Court thinks fit to order otherwise, be entitled and bound to acquire those shares on the terms which, under the scheme or contract the shares of the approving shareholders are to be transferred to the transferee company or if the offer contained 2 or more alternative sets of terms upon the terms which were specified in the offer as being applicable to dissenting shareholders.
[15/84; 8/2003; 21/2005]

(2) Where a transferee company has given notice to any dissenting shareholder that it desires to acquire his shares, the dissenting shareholder shall be entitled to require the company by a demand in writing served on that company, within one month from the date on which the notice was given, to supply him with a statement in writing of the names and addresses of all other dissenting shareholders as shown in the register of members, and the transferee company shall not be entitled or bound to acquire the shares of the dissenting shareholders until 14 days after the posting of the statement of such names and addresses to the dissenting shareholder.

(3) Where, in pursuance of any such scheme or contract, shares in a company are transferred to another company or its nominee and those shares together with any other shares in the first-mentioned company held by the transferee company at the date of the transfer comprise or include 90% of the total number of the shares (excluding treasury shares) in the first-mentioned company or of any class of those shares, then —

(a)
the transferee company shall within one month from the date of the transfer (unless on a previous transfer in pursuance of the scheme or contract it has already complied with this requirement) give notice of that fact in the prescribed manner to the holders of the remaining shares or of the remaining shares of that class who have not assented to the scheme or contract;

and (b)
any such holder may within 3 months from the giving of the notice to him require the transferee company to acquire the shares in question,

and where a shareholder gives notice under paragraph (b) with respect to any shares, the transferee company shall be entitled and bound to acquire those shares on the terms on which under the scheme or contract the shares of the approving shareholders were transferred to it, or on such other terms as are agreed or as the Court on the application of either the transferee company or the shareholder thinks fit to order.

[Boon]

Every time a new offer comes out I learn something new about the Companies Act. It turns out that in this case, the minimum threshold for Keppel Corp before they can exercise compulsory acquisition is >95%. See below for the extract from page 12 of the offer letter:

========================
For the avoidance of doubt, the Offeror will extend the Higher Offer Price to all Shareholders, including those Shareholders who, at the date on which the Compulsory Acquisition Threshold is reached, have already accepted the Offer. For purely illustrative purposes only, based on a total number of:

(i) 1,545,288,730 issued Shares (excluding treasury shares) as at the Latest Practicable Date, in order for the Compulsory Acquisition Threshold to be reached, the Offeror must acquire or agree to acquire (whether pursuant to valid acceptances of the Offer or otherwise) an additional 40.9 per cent. of the total number of issued Shares, which when aggregated with the number of Shares owned, controlled or agreed to be acquired by the Offeror as at the date of the Offer, represents 95.5 per cent. of the total number of issued Shares; and

(ii) 1,625,703,507 issued Shares (excluding treasury shares), being the maximum potential issued share capital of the Company , in order for the Compulsory Acquisition Threshold to be reached, the Offeror must acquire or agree to acquire (whether pursuant to valid acceptances of the Offer or otherwise) an additional 43.3 per cent. of the maximum potential issued share capital of the Company, which when aggregated with the number of Shares owned, controlled or agreed to be acquired by the Offeror as at the date of the Offer, represents 95.2 per cent. of the maximum potential issued share capital of the Company.

=====================================
And the reason is because of a difference in company act 215(1) and 215(3). I went to read the company act but I still dont understand the difference. From page 21 of the offer letter:

====================================
Dissenting Shareholders have the right under and subject to Section 215(3) of the Companies Act, to require the Offeror to acquire their Shares in the event that the Offeror, its related corporations or their respective nominees acquire, pursuant to the Offer, such number of Shares which, together with the Shares held by the Offeror, its related
corporations or their respective nominees, comprise 90 per cent. or more of the total number of issued Shares as at the final Closing Date of the Offer. Dissenting Shareholders who wish to exercise such right are advised to seek their own independent legal advice. [u]Unlike Section 215(1) of the Companies Act, the 90 per cent. threshold under Section 215(3) of the Companies Act does not exclude Shares held by the Offeror, its related corporations or their respective nominees.[/u]
=====================================

However, if the freefloat drops below 10%, the company will be suspended. I think Boon meant suspended not delisted right?

Also Zaobao yesterday mentioned that the level of acceptances will only be announced daily after it has crossed 72%.

Taking all the information into account, I believe that delisting is likely to fail.

(1) The minimum threshold is higher than the 90% that I thought.
(2) Because Kepcorp has stated that it will not revise the offer, and because the offer is structured in such a funny way, I believe rational shareholders will rather sell on the market than tender their shares. New shareholders who bought on the market will not be so silly to tender $4.38 and lose money. They will rather wait for other people to tender to be sure they can get $4.60.
(3) The despatch date was 12 Feb. It is already halfway through the tender period but 72% is still not crossed yet. The closing date is on 12 March 2015. I believe that an extension will be likely.

If the price drops upon failure, it may be a good chance to acquire Keppel Land shares and wait for the next offer 1 year later. I believe there is a 12 month moratorium on a new offer if the current offer fails, just like Pertama.

Did I get anything wrong? What does everyone think?

Hi grubb,

Yes, suspended should be the more appropriate word.

KepCorp owns 843,797,572 shares = 54.60% of 1,545,288,730 issued shares.

KepCorp does not own the remaining 45.40% of issued shares.

I think compulsory acquisition threshold is reached when 90% of the remaining 45.40 % has been acquired.

0.9 x 45.40% = 40.9%

54.6 + 40.9 = 95.5%

[Boon]

T = 1,545,288,730=Number of issued shares

If KepCorp crosses 90% of T but less than 95.5% of T, => delisting but no compulsory acquisition => KepLand become a “private company”.

I guess section 215(3) of the Companies Act provides a way out for the Dissenting shareholders under such circumstance.

[Layman A]

The companies act section 215(1) to (3)

Power to acquire shares of shareholders dissenting from scheme or contract approved by 90% majority
215.—(1) Where a scheme or contract involving the transfer of all of the shares or all of the shares in any particular class in a company (referred to in this section as the transferor company) to another company or corporation (referred to in this section as the transferee company) has, within 4 months after the making of the offer in that behalf by the transferee company, been approved as to the shares or as to each class of shares whose transfer is involved by the holders of not less than 90% of the total number of those shares (excluding treasury shares) or of the shares of that class (other than shares already held at the date of the offer by the transferee company, and excluding any shares in the company held as treasury shares), the transferee company may at any time within 2 months, after the offer has been so approved, give notice in the prescribed manner to any dissenting shareholder that it desires to acquire his shares; and when such a notice is given the transferee company shall, unless on an application made by the dissenting shareholder within one month from the date on which the notice was given or within 14 days of a statement being supplied to a dissenting shareholder pursuant to subsection (2) (whichever is the later) the Court thinks fit to order otherwise, be entitled and bound to acquire those shares on the terms which, under the scheme or contract the shares of the approving shareholders are to be transferred to the transferee company or if the offer contained 2 or more alternative sets of terms upon the terms which were specified in the offer as being applicable to dissenting shareholders.
[15/84; 8/2003; 21/2005]

(2) Where a transferee company has given notice to any dissenting shareholder that it desires to acquire his shares, the dissenting shareholder shall be entitled to require the company by a demand in writing served on that company, within one month from the date on which the notice was given, to supply him with a statement in writing of the names and addresses of all other dissenting shareholders as shown in the register of members, and the transferee company shall not be entitled or bound to acquire the shares of the dissenting shareholders until 14 days after the posting of the statement of such names and addresses to the dissenting shareholder.

(3) Where, in pursuance of any such scheme or contract, shares in a company are transferred to another company or its nominee and those shares together with any other shares in the first-mentioned company held by the transferee company at the date of the transfer comprise or include 90% of the total number of the shares (excluding treasury shares) in the first-mentioned company or of any class of those shares, then —

(a)
the transferee company shall within one month from the date of the transfer (unless on a previous transfer in pursuance of the scheme or contract it has already complied with this requirement) give notice of that fact in the prescribed manner to the holders of the remaining shares or of the remaining shares of that class who have not assented to the scheme or contract;

and (b)
any such holder may within 3 months from the giving of the notice to him require the transferee company to acquire the shares in question,

and where a shareholder gives notice under paragraph (b) with respect to any shares, the transferee company shall be entitled and bound to acquire those shares on the terms on which under the scheme or contract the shares of the approving shareholders were transferred to it, or on such other terms as are agreed or as the Court on the application of either the transferee company or the shareholder thinks fit to order.

[Layman A]

My english no good, but entitled and bound to means they are entitled and they compulsary have to acquire right ?

So which part of The companies act section 215(1) to (3) state that there is a case which the minority will be stuck in a delisted PRIVATE COMPANY ?

[Layman A]

Actually I am not interested to read their offer documents, these are well formatted SOP document out to confuse the general public .

As I have have mentioned above, Keppel has hastily work out a counter-productive offer that shoot in their own feet.
The outcome of the % acceptance could well be humiliating.

I have stated that my reasonable price to acceptable the offer is S$5.48 .

Whether Keppel Corp want to revise ( and how they do it ) I am not so concerned.

$4.60 to buy out Kepland is simply too low !

[Boon]

Now, if I am not wrong, it seems that there could be 4 possible scenarios instead of 3, at close of the offer:

If T = total number of shares issued

1) If KepCorp crosses the compulsory acquisition threshold (>95.5% of T, or adjusted equivalent threshold ) => compulsory acquisition of shares by Offeror AND subsequent delisting of KepLand.
2) If KepCorp crosses 90% but less than 95.5 of T, => No compulsory acquisition of shares but KepLand would be delisted on the basis of “non-free-float-compliance” and become a private company. Dissenting shareholders are entitled to demand that their shares be bought out by the offeror at the same “takeover” offer price. Otherwise, remain as minority shareholders of a private company.
3) If KepCorp fails to cross 90% of T, but KepLand still meets the “free float” requirement of the Listing Manual (i.e. at least 10 per cent of the total number of issued Shares are held by at least 500 Shareholders who are members of the public) => KepLand would remain listed.
4) If KepCorp fails to cross 90% of T, AND KepLand does not meet the “free float” requirement of the Listing Manual => KepLand would be suspended initially by SGX, and subsequently delisted if the "free-float" condition could not be restored after the grace period.

[Layman A]

Weather forecast did not say the haze will hit Singapore today , but how come there is so much smoke in the air ?
Cough , Cough , Cough ( almost choke to death )

Back to Kepland :
I dig out the recent case of Capitaland cash offer for Capmall Asia for comparison, and found some links :
http://infopub.sgx.com/FileOpen/CMA%20Of...eID=301540
http://media.corporate-ir.net/media_file...140414.pdf

Capitaland first offer is $2.22 , which is 20.7% premium to Net Asset Value .
Capataland then further sweeten the deal to $2.35, which is 27.7% premium to the NAV .

If we were to applied the same premium to Kepland NAV of $4.95,
that would work out to be $5.97 ( 20.7% premium )
and $6.32 ( 27.7% premium )

Too bad, if and only if Keppel Corp are Gentleman like Capitaland.
CEO of Capitaland, Mr Lim Ming Yan, deserved my respect ! Salute !

[GFG]

Hi Boon,

Thanks for the info.

Hi Boon,

Can you explain to me how a scenario 3 could happen.

KepCorp holds 89%, less than 500 other shareholders who are members of the public hold the other 11%.

Hi Boon and Layman A

Scenario 3 technically cannot happen straight away. Because if KepCorp fails to cross the 90% threshold, that means at least 10% is "free float" aka in the hands of the public. So the company will not get delisted.

I am just trying to say that that's not a good scenario for minority shareholders because the share price will drop after the offer expires, and there's nothing to stop Kepcorp from accumulating slowly to eventually reach 90%. It just takes a bit longer but after everything is done and dusted, they can actually accumulate at a lower price.

They just have to accumulate to reach 90%, and they have already indicated their intention to purposefully NOT maintain an adequate free float to force a delisting.

This happened to Pertama Holdings just a few years back. I was one of the minorities that accepted the buyout offer, but they couldn't trigger the 90% threshold. So those who didn't accept, got stuck. The share price was in limbo for over a year, with very low liquidity. (Most of the shares were held by the major shareholder)

Hi GFG & Layman A,

Under the the “takeover-code/companies act”, once, the Offeror crosses the 90% compulsory acquisition threshold level, the “public free-float” would be less than 10% - hence delisting.

Under the SGX-Listing-rules, if public free-float condition no longer complys – SGX would delist the company until the public free-float condition is restored.

These are two separate rules

As for Pertama, HN holds only 83.1% (< 90%), and it was delisted because the free-float was at 7.77%

Presumably, the remaining 9.14% was held by SSH who are not a concerted party to the Offeror and whose shareholding would not be counted as “free-float”.
________________________________________________________________________________________________________________
Electronics company Pertama Holdings told to delist from SGX, exit offer to be made
Published on Jul 8, 2013
http://www.straitstimes.com/breaking-new...be-made-20

By Fiona Chan

The Singapore Exchange (SGX) has directed Pertama Holdings, a retailer, wholesaler and distributor of consumer electronics products in Singapore and Malaysia, to delist from the bourse.

This comes as shares in Pertama have been suspended from trading since January 27 last year, after the proportion of shares in public hands fell below 10 per cent. Only about 7.77 per cent of Pertama's total issued ordinary shares are held by the public.

The controlling shareholder, Harvey Norman Singapore, and its 60 per cent subsidiary Harvey Norman Ossia (Asia) together hold 83.16 per cent of Pertama's shares.

Harvey Norman said in a statement on Monday morning that it has no intention to restore Pertama's public float to enable it to continue its listed status.

Thanks for digging this up.
That's my point actually.
Isnt this current scenario very similar to the Pertama case if Kep Corp fails to garner >90%?
They'd be forced to suspend trading according to SGX rules, and after a prolonged period of low liquidity, SGX will ask them to delist.
The statement "no intention to restore public float ......" is the same as KepCorp offer. The suspension period is meant for companies to pursue ways to increase free float, but with this statement, they are basically saying they will not do anything to increase free float since that works in their favour to force a delisting.
With delisting in this manner (lack of free float), minority shareholders will NOT be forced to sell to KepCorp, but they will be stuck with a tiny stake in an unlisted company with no way to exit.
On top of that, KepCorp would only have to pay $4.38 to those who accepted earlier instead of $4.6
Doesn't sound like a bad scenario for them, although it will take longer to delist

[GFG]

Ok, I did a quick check on the previous CK Tang delisting offer, and this is what I have found :

https://singaporepropertyhighlights.word...sh-carrot/

http://news.asiaone.com/News/The+Straits...cheme.html

https://www.scribd.com/doc/210213149/1/C...vatisation

You can follow the links above to find out the details, but I'll summarize the critical facts here for easy reading :

1. A controlling shareholder cannot forced a SUSPENSION of trading if they did not trigger the critical 90% threshold.
As in the case of CK TANG, the 90% threshold was not met. So the controlling shareholder cannot force delist the company even though there was only 470 minority shareholders.

2. After failing to delist CK Tang in the first two attempts, controlling shareholder attempt to using "Option Scheme" to dilute the minority shareholding in 2007. The delisting was not successful.

3. In a final delisting push in 2009, CK Tang offer $0.83 to the minorities, and forced thru the privatization in a controversial voting.

3. Angry minorities complaint to SIAS, which in turn ask regulators to intervene.

4. In 2011, the remaining minority shareholders was cancel out in a capital reduction exercise with a final price of $1.30 .

5. Finally my observation :
The hardcore minority shareholders gets a final offer of $1.30, which is 3.1x of the first privatization offer of $0.42 .

So, being stuck in an illiquid stock post privatization is not necessary a bad thing.

I dug out this old post from our forum which explains why CK Tang delisted but did not exercise their compulsory acquisition option upon crossing 90%.

http://www.valuebuddies.com/thread-1057-...l#pid61412

I am not familiar with CK Tang delisting (was not involved)
but just a quick look through the linked thread illustrated the concerns I brought up earlier.
They ended up with a 88% or so stake, failed to delist, but gradually bought more shares over the coming months (presumably at a lower price after the offer expired), and eventually, still managed to delist after crossing 90%.
Only difference now is that those who accepted earlier in the kepcorp case would then have failed to get a $4.6 price.