SC task force found Sime Darby triggered E&O general offer

By Yow Hong Chieh

January 30, 2012

KUALA LUMPUR, Jan 30 — A Securities Commission (SC) task force found that Sime Darby Bhd was obliged to make a general offer for Eastern & Oriental (E&O) Bhd shares after acquiring a 30 per cent stake in the property developer but was superseded by the regulator’s top ruling authority.
Singapore’s The Straits Times reported that the task force was of the view that a general offer obligation had been triggered as a new “concert party” was created between Sime Darby and E&O managing director Datuk Terry Tham, who jointly controlled more than 33 per cent in the property concern after the deal.
Malaysia’s takeover rules stipulate that any party that acquires more than a 33 per cent interest in a publicly-listed entity must carry out a general offer for the remaining shares.
A general offer can also be triggered if a new party buys less than 33 per cent but secures management control of the target company.
But the SC’s final ruling three-member committee ruled “in a majority decision” there was no general offer obligation as Sime Darby and Tham were not acting in concert, according to an affidavit by the agency’s second-most senior commissioner Datuk Francis Tan, which was sighted by the Singapore daily.
The committee also accepted the task force’s recommendation that the three groups which sold the blocks of E&O shares to Sime Darby did not collectively control the company and that the disposal did not trigger a general offer.
Sime Darby purchased its controlling 30 per cent interest from three major shareholders — Tham, Singapore’s GK Goh Holdings and a group of investors led by businessman Tan Sri Wan Azmi Wan Hamzah — at the end of August last year in a deal that valued E&O shares at RM2.30 a piece.
The purchase price represented a 60 per cent premium over the value of the shares in the company on the open market when the deal was announced.
The RM776 million deal triggered unease over the widely perceived coddling by the agency of large state-controlled companies at the expense of minority shareholders when exercising its authority on corporate takeovers.
The SC ruled six weeks after Sime Darby’s purchase of the three blocks that the plantation-based conglomerate did not have to make a general offer, prompting E&O minority shareholder Michael Chow to sue the SC for failing to compel Sime Darby to make a general offer for the rest of the shares.
The legal suit could renew debate over the SC’s handling of alleged irregular trading activities and will put pressure on SC chairman Tan Sri Zarinah Anwar, whose husband, the E&O chairman, raised his personal stock holdings in the company just weeks before Sime Darby announced the acquisition.
The SC has also filed an application to recuse the judge hearing the suit as he used to be with the regulator.