Review of compulsory acquisition requirements underway

• Review of compulsory acquisition requirements underway

• TTJ privatisation offer 'unfair'

• Takeover loophole disadvantages minority shareholders of TTJ Holdings

The Business Times, 1 June 2022

Review of compulsory acquisition requirements underway

We refer to the letters, "Takeover loophole disadvantages minority shareholders of TTJ Holdings" by Mano Sabnani published on May 25, "TTJ privatisation offer 'unfair'" by Patrick Wright published on May 26, and the commentary "Compulsory acquisition loophole back in the spotlight as TTJ minorities get lowball offer" by Ben Paul published on May 30.

We thank the writers for their views and feedback.

As part of the Accounting and Corporate Regulatory Authority (Acra)'s efforts to ensure Singapore's corporate laws and regulatory framework stay competitive, Acra has reviewed several areas in the Companies Act, through a Companies Act Working Group, comprising members from local and international law firms, and industry regulators and associations.

One of the areas reviewed included matters relating to the compulsory acquisition framework, and in particular exclusions of the shares of persons and corporations which may influence or control the offeror, from the computation of the 90 per cent threshold which must be obtained before an offeror can exercise the right of compulsorily acquisition.

We will be proposing amendments to the compulsory acquisition framework, with a view to addressing the concerns raised while ensuring that our requirements do not make it onerous for companies to restructure.

Ms Shirley Loo

Divisional Director, Corporate Development Division

Accounting and Corporate Regulatory Authority

The Business Times, 26 May 2022

TTJ privatisation offer ‘unfair’

THE offer for TTJ Holdings : K1Q 0% is, in my opinion, deeply unfair to minority shareholders. The consideration of 23 cents per share represents a 37.5 per cent discount to TTJ's unaudited net asset value per share of 36.79 Singapore cents as of Jan 31.

If shareholders were to simply receive the net asset value that their shareholding represents, it would be 60 per cent higher than the current offer.

TTJ executive chairman Teo Hock Chwee's intention is to increase his shareholding to 90 per cent, and then exercise his right to compulsorily acquire the shares of remaining holders, including those who do not support the deal.

As the announcement notes, the offer is structured so as not to be subject to rules 1307 and 1309 of the listing manual, which protect minority shareholders, including by requiring exit offers to be "fair and reasonable". In my opinion, Teo's offer is neither fair nor reasonable, and it deeply undervalues the company. There is no justification for the offer to be at such a large discount to TTJ's net asset value.

Teo should make a fair exit offer rather than seeking to enrich himself at the expense of minority shareholders.

Patrick Wright

The Business Times, 24 May 2022

Takeover loophole disadvantages minority shareholders of TTJ Holdings

THE Securities Industry Council (SIC) needs to move urgently to close a gaping loophole that exists in our corporate takeover rules.

Take the case of TTJ Holdings, a profitable and cash-rich mainboard-listed SGX entity. Due to the depressed condition of the construction industry in the last 2 years, the stock last traded at 16.9 Singapore cents versus an audited net asset value of 37 cents.

TTJ is a well-established structural steel construction specialist which had been profitable until the Covid-19 restrictions hit in 2020. It is now on the cusp of a major recovery with the relaxation of operational rules and contracts resumed or newly won.

However, its executive chairman Teo Hock Chwee, who I respect, is now moving to buy out the minority shareholders at 23 cents per share. He and family already own 84 per cent of the company.

Instead of directly making an offer, he has formed a S$100,000 company called THC Venture Pte Ltd to launch the offer. Since THC Venture owns no shares in TTJ, it will be entitled to compulsorily acquire dissenting minority shareholders' interests in the company once it secures 90 per cent of TTJ via the 23 cents offer.

Now, as Teo HC has already committed to accept the offer for his entire shareholding, THC Venture will immediately secure 84 per cent of TTJ and just needs to secure 6 per cent of outstanding shares to hit the 90 per cent threshold.

After that, THC Venture will have the right to compulsorily acquire the remaining 10 per cent of TTJ not yet owned by it.

This will be manifestly unfair to minority shareholders like me who have been long-term investors and wish to ride the impending business upturn.

Why should we be forced out of TTJ at the low-end or trough of the business cycle? TTJ had, in pre-Covid years, paid decent dividends and the offer price of 23 cents is a far cry from my own fair value of 50 cents per share.

The problem in these unfair takeovers lies in the loophole where a major shareholder need not secure 90 per cent of minority shares before compulsory acquisition and delisting can take place. He/she is allowed to use a new shell company to launch the takeover.

In TTJ's case (and several other buyouts in the past 2 years), Teo does not need to secure 90 per cent of the 16 per cent equity he does not already own. He just needs THC Venture to secure 90 per cent of the overall equity, including his own 84 per cent.

So there is no need for him to make a much-better offer. TTJ will likely be privatised and delisted via the current desultory offer of 23 cents per share.

But this fait accompli need not play out if the SIC can intervene. Minorities can only hope something will be done before it is too late.

Mano Sabnani