SINGAPORE (July 30): Shares in Delong Holdings are up 94 cents, or 15.6%, at $6.95 with 2.2 million units traded, after its suspension from trading was lifted following an announcement.
The Securities Industry Council (SIC) publicly censured law firm Shook Lin & Bok and financial advisor PrimePartners Corporate Finance for their roles in the aborted privatisation attempt last September.
The offeror Best Grace, which is owned by Delong chief executive and chairman Ding Liguo, was also censured by the regulator over the failed buyout attempt.
Delong is the China-based steel manufacturer and trader.
To recap, Ding, via Best Grace, had made a $7.00 per share voluntary conditional cash offer for all the Delong shares it did not own. At that time, Ding and concert parties had owned a 75.56% stake in the company.
However, Best Decade Holdings, a concert party with Best Grace, had in June bought a 15.04% stake in Delong at a higher price, the US dollar equivalent of $7.42 a share.
As this took place less than six months before the offer, according to Singapore takeover rules, the offeror should have extended the offer at $7.42 to all shareholders.
On Oct 1, Shook Lin & Bok informed SIC that Best Grace had failed to comply with regulations, resulting in a trading halt in Delong shares, which were subsequently suspended the next day.
Although Best Grace was given the chance to increase its privatisation offer to $7.42, it did not go ahead with the deal as it failed to secure the necessary funding.
Subsequently, a five-member hearing committee was formed by SIC to investigate if Best Grace had breached the takeover code and if the advisors had failed to ensure the offeror complied with the code.
In its findings, the committee concluded that there had been a breach, but deemed not necessary to give compensation to Delong shareholders, given there was “limited impact of the breach”.
It noted that Delong shareholders were not prejudiced as they were not in a position to accept the offer and the privatisation offer was withdrawn before the offer document was dispatched.
The trading halt in Delong shares was also called within three days of the offer announcement and only lifted after the offer was withdrawn.
The committee said Shook Lin & Bok fell short of the standards expected of a legal advisor and while the firm had breached the code, this was not deliberate.
The committee also said PrimePartners should have exercised due care and independent judgement when relying on advice it received from Shook Lin & Bok on the offer price.
Although PrimePartners was aware of the cash purchases and clarified with Shook Lin & Bok on the offer price, it accepted the law firm’s explanation that the relevant price reference period was three months because the offer was voluntary.
As restitution, David Chong Keen Loon, partner at Shook Lin & Bok who advised the offer, has volunteered to abstain from takeover code-related work for 15 months.
PrimePartners' Mark Liew Wai Weng and Yong Chin Vei who advised on the offer, have also voluntarily abstained from undertaking takeover code-related work for nine months.
Meanwhile, Ding and his wife, Zhao Jing, have made a new buyout offer for Delong at $7 each.
It has obtained an SIC waiver from the rule that bars an offer from being re-introduced within 12 months of a withdrawal.
In this latest offer, Stirling Coleman Capital will be replacing PrimePartners.
Currently, Best Grace and its concert parties together hold an 81.48% stake in Delong.
