Spindex Industries

[grubb]

Regarding CY, it is not over if you vote against. The company will remain listed.

thanks for the clarification. another point to highlight is - if the management already owns more than 50%, wouldnt they have fulfilled the minimum acceptance level (which was the only condition to fulfill). if so, I presume the next step is for the offer to turn into a mandatory unconditional general offer?

The offer has turned unconditional as of 3/10, after first announcing the mandatory G.O. when they triggered the 30% threshold on 3/7.

3/7 mandatory offer announcement with 44.68%: http://infopub.sgx.com/FileOpen/Offer%20...eID=442179
3/10 offer turns unconditional: http://infopub.sgx.com/FileOpen/Uncondit...eID=442815

The next milestones will be 90% of total shares for suspension (in which they stated they will not make attempts to release it from suspension) and 44.68 + 0.9*(100-44.68) = 94.47% of total shares for compulsory acquisition. If the offer is indeed undervalued as voiced by forumers here, then i think there is still a long way to go.

Let's just say (however unlikely) that at the close of the offer, the Tans have 92% of total shares. This lies between 90% and 94.47%, meaning suspension of shares but not compulsory acquistion. 

If I did not accept the offer, and this happens, does it mean that the Tans are not required to acquire my shares - i.e. I may not get paid the 85 cents and am holding on to Spindex shares that cannot be sold on SGX because their trading has been suspended?

Trading will be suspended, then this will go on to the next process where the company can apply to extend the offer to shareholders to tender their shares at the offer price. If you don't tender, then you will end up holding on to shares of a private company. I can't remember the name of the next step but you can check it out under the keppel corp / keppel land thread where it was discussed during the keppel land privatization.

[julianbream]

Ok, thank you, grubb.

[ghchua]

Under Section 215(3) of the Companies Act, u have the right to require the offeror to acquire ur shares at offer price if they hold 90% or more after the offer closes even if they cannot compulsory acquire ur shares and stock is suspended

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[(cy)]

given the price that Tans have offered to carry out this LBO, it is quite a low ball compared to peers' valuation (e.g. Innovalues, IPE in HK). as long as they are unable to secure 90%, they will have to remain listed and essentially they may be re-rated after. 

in recent years, Fischer Tech had the same move, tried to do a LBO at 80c but failed and share price is at $2 today. another classic example is Ellipsiz, offered at 38c and remain listed, today it is 55.5c. 

for all you know, it could just be a move by Tan to take the opportunity to increase their stake in the open market to above 50% so that they will not be vulnerable to hostile takeovers in future. this would leave them with greater options to exercise how they can best maximise their returns in the mid-long term - potentially trade-sale it thereafter such as what they did with MMI. 

from a business fundamental perspective, Innovalues recently reported good set of results for FY2016. being a direct competitor to them with similar clientele base, expect Spindex to also be a beneficiary. why else would Northstar had wanted to pursue acquiring Spindex after only recently buying over Innovalues?

[weijian]

Regarding CY, it is not over if you vote against. The company will remain listed.

thanks for the clarification. another point to highlight is - if the management already owns more than 50%, wouldnt they have fulfilled the minimum acceptance level (which was the only condition to fulfill). if so, I presume the next step is for the offer to turn into a mandatory unconditional general offer?

The offer has turned unconditional as of 3/10, after first announcing the mandatory G.O. when they triggered the 30% threshold on 3/7.

3/7 mandatory offer announcement with 44.68%: http://infopub.sgx.com/FileOpen/Offer%20...eID=442179
3/10 offer turns unconditional: http://infopub.sgx.com/FileOpen/Uncondit...eID=442815

The next milestones will be 90% of total shares for suspension (in which they stated they will not make attempts to release it from suspension) and 44.68 + 0.9*(100-44.68) = 94.47% of total shares for compulsory acquisition. If the offer is indeed undervalued as voiced by forumers here, then i think there is still a long way to go.

Let's just say (however unlikely) that at the close of the offer, the Tans have 92% of total shares. This lies between 90% and 94.47%, meaning suspension of shares but not compulsory acquistion. 

If I did not accept the offer, and this happens, does it mean that the Tans are not required to acquire my shares - i.e. I may not get paid the 85 cents and am holding on to Spindex shares that cannot be sold on SGX because their trading has been suspended?

Trading will be suspended, then this will go on to the next process where the company can apply to extend the offer to shareholders to tender their shares at the offer price. If you don't tender, then you will end up holding on to shares of a private company. I can't remember the name of the next step but you can check it out under the keppel corp / keppel land thread where it was discussed during the keppel land privatization.

i think it will still be a "public" unlisted company (>50shareholders) in the sense where a shareholder registry needs to be maintained and there needs to be a AGM held every year, with a share certificate for each shareholder.

A "private" company would involve all the shareholders tendering their shares to be privatized from a public unlisted company. Recently GK Goh, who owns ~7.5% of the unlisted EUNetworks did something similar.

http://www.gkgoh.com/Reports/9037/GKGH%204Q2016.pdf --> page 2
Our 7.5% stake in euNetworks Limited (“EUN”) was revalued from our carrying cost of 75 cents per share to S$1.16 per share following the delisting of EUN. Through the privatisation exercise, we have effectively disposed all our EUN shares and subscribed for new interest into a partnership entity with the major investors. The disposal resulted in a transfer of S$13.5 million to investment income from the fair value reserve.

http://eunetworks.listedcompany.com/news...t_2016.pdf

[julianbream]

Under Section 215(3) of the Companies Act, u have the right to require the offeror to acquire ur shares at offer price if they hold 90% or more after the offer closes even if they cannot compulsory acquire ur shares and stock is suspended

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Hi ghchua,

You are right - that is what the offer document says. However, the same paragraph of the offer document ends with a statement which is somewhat worrying. Quoting pg 14 of the offer document, para 7.2:

"In addition, pursuant to Section 215 (3) of the Companies Act, if the Offeror acquires such number of Shares which, together with the Shares held by it, its related corporations and their respective nominees, comprise more than 90% or more of the total number of issued Shares, the shareholders who have not accepted the Offer have a right to require the Offeror to acquire their Shares at the Offer Price. Such shareholders who wish to exercise such a right are advised to seek their own independent legal advice."

That last sentence in bold worries me. If I don't accept the offer, and the Tans and concert parties secure more than 90% of total shares but less than 90% of total shares other than the shares they already own, before the end of the offer, does that mean that I may have to engage a lawyer to enforce my right to require them to pay me the 85 cents per share? The prospect of that for a retail investor (not to mention the uncertainty of the outcome!) is daunting, to say the least.

I know it seems very unlikely they will even cross 90%. But what if they do? Get a lawyer? Then have the lawyer tell me I can't get my 85 cents? Or maybe then fight it out in court for an uncertain outcome? If that's the case, should I just chicken out now?

I'm sorry if I'm reading too much into that last sentence, but it does say that... what's a small time retail guy to do?

[ghchua]

Under the act, u already have the right. It is very unlikely for them to challenge it and on what basis if they wish to challenge? It is pretty straight forward case at least for me. And yes, i have personally exercise this right before by writing to a company stating my right in my letter to them. Btw, i didn't engage a lawyer.

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[ghchua]

Back to this Spindex,my sense is that if they get more than 90% but cannot compulsory acquire,most likely they will seek voluntary delisting since they already stated in the offer document that they do not intend to preserve its listing status. So, u can also accept the delisting offer.

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[YMPL]

Under the act, u already have the right. It is very unlikely for them to challenge it and on what basis if they wish to challenge? It is pretty straight forward case at least for me. And yes, i have personally exercise this right before by writing to a company stating my right in my letter to them. Btw, i didn't engage a lawyer.

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To supplement the good answer by ghchua

A company who is exercising Section 215's mandatory acquisition, will distribute two FORMs, the infamous Form 57 and 58. The company exercises its right via Form 57, and shareholders exercise their right via Form 58.

Unless you challenge the company on the right, there is no reason for lawyer engagement, IMHO.

[BlueKelah]

KISS
Keep it simple.
Just sell on market and spend ur time look at the next investment.

If dun delist , down cycle can buy in again.


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