Privatisation matters

[karlmarx]

SGX RegCo requires exit offers to be fair and reasonable, shareholder vote to exclude offeror and concert parties

The first change requires voluntary delisting offers to be both "reasonable" and "fair", in the opinion of the appointed independent financial adviser (IFA). 

The second change requires offerors and parties acting in concert with them to abstain from voting on the voluntary delisting resolution. This is the case in jurisdictions such as Hong Kong and Australia, where minority investors ultimately determine the voting outcome.

https://www.businesstimes.com.sg/compani...er-vote-to
...

What is 'fair,' and what is 'reasonable?' Concepts that never seem to me to be on firm grounds.

[ksir]

At this rate of delisting, SIngapore Exchange looks like drying up well.
To me, it’s a sign of pessimistic market and also undervalued companies.

Fishing here is, at the moment, favorable!
As in less fishers and more fat yet low profile fishes.

[desmondxyz]

This explains why there is a rush of privatisation offers came in recently...

[mobo]

The Challenger saga was probably the last straw that prompted SGX to act. The blatant exploitation of the 75% including interested parties loophole and the indefensible thumbs up given by Deloitte of the privatisation was just too glaring.

[weijian]

The Challenger saga was probably the last straw that prompted SGX to act. The blatant exploitation of the 75% including interested parties loophole and the indefensible thumbs up given by Deloitte of the privatisation was just too glaring.

To be clear, SGX regCO first came out with the proposal some time in Nov2018 (consultation closing in Dec) and then Challenger proposed a delisting on 20th March 2019.

Doing some guess work on hindsight, SGX regCO's proposal could have been a major triggering point for Challenger to try to run for the exit before it closed. And then the manner that Challenger's delisting attempt turned into a saga, probably was the last straw for SGX regCO to immediately shut the door close. I remember generally SGX regCO would actually give a timeline to implement such changes in listing rules. The manner of the promptness to shut the door reminds me of the way the Gov tweaks the cooling measures (and then you get agents and buyers scrambling to complete the deals before midnight).

SGX regco: https://www.theedgesingapore.com/sgx-reg...-interests
Challenger delisting proposal: https://links.sgx.com/1.0.0/corporate-announcements/YQVDQPOSHN5EWUFT/ad644892ad6a9b5bb1063b3940a06f1bcdde9d3cdbce00f423c2f6ba0f15701d

[karlmarx]

Delistings and the 'independence' of IFAs

The person agreed that IFA's independence can sometimes be compromised. "We have been in meetings where the company says, 'Can you support or not? Only if you can support then we engage you.' My team will look through the assessment and only when we're comfortable that we can support, then we pitch."

"it would be more difficult for there to be IFA shopping, because now you would have to justify why an offer is fair in quantitative terms, with regard to financial metrics such as NTA and NAV, as opposed to reasonableness, which was the only requirement previously, and is a much more qualitative judgment."

https://www.businesstimes.com.sg/compani...ce-of-ifas

...

1a. Independent Directors, Independent Financial Adviser, Independent Financial Advisor, and whatever that comes with an 'independent' label in the finance should probably stop being represented as such. It gives a false impression to ignorant stakeholders who believe that these people operate without 'fear or favour.' So many corporate governance issues persist because of this 'I' word. For a start, they can try 'Third Party,' which is probably a more accurate descriptor.

1b. Questions of independence aside, I do not believe in the role of an IFA to determine the attractiveness of an offer's valuation. It assumes that minority investors are incapable of evaluating the worth of their shares, and making their own informed decisions. IFAs can make their recommendation, but IDs and Offerors, or anyone else for that matter, should not be able to use it as the basis of a offer's attractiveness. An IFA's recommendation should, at best, be treated as just another source of opinion. If people no longer accept marriage partners based on their parents' recommendation, I don't see why minority investors should feel obliged to accept offers based on an IFA's recommendation.

2a. I am intrigued by this thinking that, an offer can be deemed fair just because it is above NAV/NTA. Different businesses operate on different revenue models, and therefore have different capital structures. There should not be one particular quantitative method or formula to determine 'fairness.' 

2b. If the controlling shareholder wants to 'redevelop' the company, then he/she shall have to make a large premium to 'enbloc' the company. If they want to make ridiculous offers, that is their prerogative, but minority shareholders should not be pressured by rules or 'third parties' to accept. I believe most offerors know, or have the means to find out, the price that the market is willing to accept in a buy out attempt. Some just think they can take advantage of the rules. I think the regulators have done right by balancing the powers between controlling and minority shareholders.

[pianist]

The Challenger saga was probably the last straw that prompted SGX to act. The blatant exploitation of the 75% including interested parties loophole and the indefensible thumbs up given by Deloitte of the privatisation was just too glaring.

just find that there is no need to remove the 'not opposed by 10% of shareholders', which is another important safeguard

I like to ask how come no regulator assess the 'reasonable' and 'fair' by the so called IFA? Is the IFA really independent since it's paid by the offeror itself? How independent are the ids also paid by the offeror
And what is the meaning of the offer price now has to be at least higher than the value of the securities held by the shareholders

[weijian]

The Challenger saga was probably the last straw that prompted SGX to act. The blatant exploitation of the 75% including interested parties loophole and the indefensible thumbs up given by Deloitte of the privatisation was just too glaring.

just find that there is no need to remove the 'not opposed by 10% of shareholders', which is another important safeguard

I like to ask how come no regulator assess the 'reasonable' and 'fair' by the so called IFA? Is the IFA really independent since it's paid by the offeror itself? How independent are the ids also paid by the offeror
And what is the meaning of the offer price now has to be at least higher than the value of the securities held by the shareholders

It seems like the "10% opposing rule" comes in a pair with the ability for the vested majority-in concerted parties to vote - so removal of the former comes with the latter.

The 75% requirement to pass the delisting is actually pretty consistent to other type of schemes (eg. 80% required for enbloc).

SGX shifts voluntary delisting power balance to minorities

One of Mr Tan's learning points from Vard is that the 10 per cent block provision is actually less useful for minorities than it sounds: "The view was that the 10 per cent block would effectively balance out the fact that we allow the controlling shareholders to vote.

"But 10 per cent voting against is not the same as 10 per cent not accepting the offer - that's a passive thing. A 10 per cent block means you have to turn up at the EGM (extraordinary general meeting) and vote against it."

https://www.businesstimes.com.sg/stocks/...minorities

[ghchua]

Hi weijian,

The "10% opposing rule" was well intended previously to protect minorities, but the main problem is that most of the minorities don't come out and vote unless there is a huge activist effort as seen in the Challenger failed delisting attempt case study recently.

So, the 10% was as good as gone previously in most cases, as opposing numbers seen in most delisting EGMs were less than 5%. Which means, though the actual number of votes for were less than 90% of the total number of outstanding shares out there in most cases, the remaining shareholders who didn't vote for the delisting, didn't vote against it as well. So, we can see that the actual support for the delisting might be less than 90% of the total number of outstanding shares, but because of non-voters, it actually pushes the percentage of votes present and voting for delisting to substantially more than 90% in most cases. And some of these non-voters actually don't mind holding unlisted shares as well and intends to hold onto those shares even after delisting, for reasons which I failed to understand why. Why would a minority shareholder prefer to hold onto an unlisted share when they can vote against delisting and continue holding a listed company, especially if some of these companies are not even incorporated in Singapore?

Hopefully, with these new changes, minorities will have a greater say in delisting. Having a greater say is good, but taking action to vote is still crucial.

[pianist]

Another issue noted is in the case of voluntarily General offer whose seems able to drag forever