Dutech Holdings

[RC22SG]

@yoyo, I tend to agree with ghchua that the price will not be revised after they have stated it. If they revise or made purchases above the offer price, they would have breached Rule 20.1 of Takeover Code. This did happen a couple of years ago from OSIM. The SIC statement would have been a good summary of what happened, considerations and actions later taken

SIC statement on OSIM: https://www.mas.gov.sg/-/media/MAS/resou...4F68018993


@RC22SG, This is a poker game that the OPMI must learn to play. If one believes there is value to be realized in future, be ready to stay in the game, else one gets flushed out early on. A business continues to grow whether it is listed or not - and the person who can suffer illiquidity might just be paid an eventual premium. This is also why Buffett espouses buying and then forgetting about your stocks.

Thanks Wei Jian for sharing

[RC22SG]

Anyone decides to continue holding onto the shares? Or wait to see independent directors' opinion first?

https://links.sgx.com/FileOpen/Dutech-Re...eID=675091

[ghchua]

Anyone decides to continue holding onto the shares? Or wait to see independent directors' opinion first?

https://links.sgx.com/FileOpen/Dutech-Re...eID=675091

With approximately 79.03% acceptance level but free float of only approximately 5.66%, it is quite obvious to me that the two substantial shareholders, namely Droege Group (8.8%) and Robert Stone (6.47%) had not accepted the offer to date.

As I have mentioned before, if the two substantial shareholders reject the offer, there is no way that the offeror could exercise compulsory acquisition and delist the company, since they will not be able to reach 90% acceptance level.

Yes, we have to keep a close watch on IFA opinion on the revised offer price and the independent directors' opinion, especially the two representing Droege Group. This might give you an indication whether Droege Group will accept or reject the revised final offer price.

[¯|_(ツ)_/¯]

Dutech@44
https://links.sgx.com/FileOpen/Dutech-Re...eID=675091
Final offer@43.5
Extension till 2 Aug 2021


Stay home and stay safe, everyone.

[setan]

Anyone decides to continue holding onto the shares? Or wait to see independent directors' opinion first?

https://links.sgx.com/FileOpen/Dutech-Re...eID=675091

With approximately 79.03% acceptance level but free float of only approximately 5.66%, it is quite obvious to me that the two substantial shareholders, namely Droege Group (8.8%) and Robert Stone (6.47%) had not accepted the offer to date.

As I have mentioned before, if the two substantial shareholders reject the offer, there is no way that the offeror could exercise compulsory acquisition and delist the company, since they will not be able to reach 90% acceptance level.

Yes, we have to keep a close watch on IFA opinion on the revised offer price and the independent directors' opinion, especially the two representing Droege Group. This might give you an indication whether Droege Group will accept or reject the revised final offer price.

Hi GH,

If the two substantial shareholders reject the final offer and currently the company loss the free float of 10%, what will happen?

Will the share be suspended?

Will the offeror able to revise the offer again? Does the revised price (if able to revise) apply to all accepted shareholders?

Thanks.

setan

[ghchua]

Hi setan,

If the two substantial shareholders reject the final offer and currently the company loss the free float of 10%, what will happen?

Will the share be suspended?

Yes. The shares will be suspended due to insufficient free float. Having said that, we also cannot rule out the fact that the two substantial shareholders can also accept part of their shares (and not all), resulting in each of them holding only 4.99% of the shares. That will mean free float will be more than 10% and the shares can continue trading after the offer closes.

Will the offeror able to revise the offer again? Does the revised price (if able to revise) apply to all accepted shareholders?

No. As mentioned before here, the offer price is final. Having said that, we cannot rule out the fact that they might launch another offer one year later.

[Coco]

GHCHUA: thanks for all the clarity so far. A general question which is not necessarily referring to Dutech:

Under what scenario(s) can minority shareholders refuse a takeover offer and the stock is delisted nonetheless, and minority shareholders then continue to (happily) hold their stakes in the private business? I read somewhere that Aztech was such a case and the minority shareholders received dividends from the private company. Aztech has since resurfaced as as a listco, of course. An intriguing case

[ghchua]

Under what scenario(s) can minority shareholders refuse a takeover offer and the stock is delisted nonetheless, and minority shareholders then continue to (happily) hold their stakes in the private business?  I read somewhere that Aztech was such a case and the minority shareholders received dividends from the private company. Aztech has since resurfaced as as a listco, of course. An intriguing case

Hi Coco,

Aztech Group was delisted in 2017 and it is now an unlisted public company, not a private company. The company that was listed recently was Aztech Global, not Aztech Group. However, Aztech Group is the controlling shareholder of Aztech Global.

Why minority shareholder wants to hold onto a unlisted company? There are 3 main reasons that I could think of. Feel free to add more if you think I missed out some points.

1. There is roadmap to list the company again in the near future at a higher valuation and you are confident of its prospects. There was a case of Financial One, which was delisted from SGX in 2011. It was relisted as Chailease Holding in Taiwan during the same year. The stock had returned almost 890% since its IPO to date.

2. You are comfortable with the controlling shareholders, and wish to stay invested with them for long term, nevermind being an unlisted public company. There was a case of Goodwood Park Hotel, which was delisted from SGX in 2004 at $11.88 per share. In 2016, they offered to buy out the remaining minority shareholders at $43 per share.

3. There are activist minority shareholders who are not related to the controlling shareholders. You might wish to stay invested even after delisting, to tag along with those activist shareholders and fight for higher return than the low ball exit offer price. I think Aztech Group and CK Tang shareholders fall in this category.

[Coco]

Thank you GHCHUA for your insightful answer.
How does a company with an intent to delist from the stock exchange make it possible for minority shareholders to stay on as shareholders in an unlisted public company?

[ghchua]

Thank you GHCHUA for your insightful answer.
How does a company with an intent to delist from the stock exchange make it possible for minority shareholders to stay on as shareholders in an unlisted public company?

One must understand that the intention to delist from the stock exchange doesn't mean that companies have to buy out all minorities. There are certain loopholes in the rules which companies could delist from the exchange and still having public shareholders, which is why I said these are unlisted public companies, not private companies since they have a list of minority shareholders.

Why companies would want to do that? Because once delisted, they no longer need to follow listing rules. Which means, there is no longer a need to disclose material information promptly. There is no need to have a corporate governance report, no need independent directors, no limit to share issue mandate etc. Basically, most can just ignore minority shareholders. For companies incorporated in Singapore, you are still protected by the Singapore Companies Act when they are delisted. For companies incorporated outside Singapore, I would say good luck to you.

Examples of cases where a company was delisted from SGX with minority shareholders. I just give 3 examples here. There are many more and I don't have time to put them all out here.

1. Company A launched a voluntary offer for all the shares. After the offer closes, the offeror obtained more than 90% of the shares. Offeror decides not to exercise its rights of compulsory acquisition. Stock remain suspended due to insufficient free float, offeror decides to execute voluntary delisting with an exit offer after that. Delisting approved by SGX and shareholders, some minority shareholders left holding onto those shares as they did not accept the exit offer.

2. Company B launched a voluntary delisting with an exit offer. Resolution approved by shareholders at EGM. Delisting approved by SGX, some minority shareholders left holding onto those shares as they did not accept the exit offer.

3. Company C was in the SGX watchlist and remain suspended for quite some time after posting losses for x number of years. SGX issue mandatory delisting. Company C could not provide any exit offer, so company was delisted with minority shareholders.