SINGAPORE (Sept 23): A married deal last year between the Lim family controlling Chip Eng Seng (CES) and billionaire couple Gordon and Celine Tang, has come under the scrutiny of the Securities Industry Council.
In the Oct 5, 2018 deal, the Tangs, with an estimated net worth of US$1.4 billion ($1.9 billion) according to Forbes, had acquired a 29.73% controlling stake in CES for $200.1 million. This was just below the 30% threshold, which, under the Singapore Code on Take-overs, would require them to buy out minority shareholders at the acquisition price of $1.08 a share, 14.8% higher than the Oct 5, 2018 share price of 94 cents.
The seven shareholders who had sold their shares to the Tangs were all related and, with the exception of one, held various senior appointments in the group. On Oct 8, CES disclosed that two Lim sisters would retain stakes of 1.55% and 0.38%, respectively, in the company after the deal while the other five shareholders would no longer hold any shares.
On Oct 11, Celine was appointed non-executive chairman, and two executive directors related to the former controlling shareholders resigned. Raymond Chia Lee Meng, then executive chairman and group CEO, also stepped down as chairman, although he remained as executive director and CEO.
When the transaction was made back then, there was little noise or complaint from anyone about the deal until last month, when CES announced a renounceable underwritten one-for four rights issue at an issue price of 63 cents each.
In connection with the rights issue, the Tangs, along with Chia, have given irrevocable undertakings to subscribe fully to their entitled rights shares of 49.3 million. In addition, the Tangs entered into a sub-underwriting agreement to subscribe for all the rights shares which were not subscribed for. What this means is that the Tangs’ stake could hit 43.43% based on the enlarged share capital, following the rights issue.
At Chip Eng Seng’s extraordinary general meeting on Sept 13 2019, independent shareholders, among other resolutions, approved one where they waived their rights to mandatory offer from the Tangs in the event the Tangs crossed the 30% threshold as a result of taking up their entitlements and sub-underwriting the rights issue. Such shareholder approval was one of the conditions for a whitewash waiver granted to the Tangs by the SIC. As set out in the Code, the SIC would normally grant a whitewash waiver in the case where a mandatory offer is incurred as a result of an acquisition of new securities, such as subscribing for rights shares.
Corporate governance expert Mak Yuen Teen cried foul, positing that the Tangs would gain effective control of the company after the rights issue without having to make a general offer at the same $1.08 price to other shareholders.
Since the furore, SIC said it was investigating the October 2018 transaction between the Tangs and the controlling shareholders. “SIC is looking into the acquisition of shares in the company in October 2018 by the relevant parties. As our enquiry is ongoing, we are not able to comment further at this point,” the regulator said in a statement.
When The Edge Singapore reached out to Celine for comments on the investigation, she replied in an email: “The share acquisition was transacted in accordance with the relevant regulations and we are giving full cooperation to the SIC. As there is an ongoing enquiry by the SIC, it would not be appropriate for us to comment further on this.”
Corporate governance experts and lawyers whom The Edge Singapore spoke to have also declined to comment, highlighting the sensitivity of the case. While SIC investigates and deliberates over its findings, the directors at CES have made it clear that the company will be going ahead with the rights issue, with the whitewash waiver by SIC still in effect.
