SINGAPORE: Despite the dissatisfaction of some minority shareholders, Digileap Capital's cash flow bid for Challenger Technologies, listed on the motherboard, at S $ 0.56 per share is "definitive" and will not be revised, according to stock market news 12).
The cancellation circular filed with Singapore Exchange (SGX) also included a letter from independent financial advisor Deloitte & Touche Corporate Finance describing the financial terms of the offer as being "fair and reasonable".
WHAT HAS ARRIVED TO THIS DAY
Challenger, a well-known brand of computer products with 38 stores here in Singapore, announced on March 20 its intention to withdraw from SGX after Digileap Capital made a $ 0.56 cash outflow offer for all its shares.
Digileap Capital is a partnership between Challenger CEO Loo Leong Thye and his family, as well as Dymon Asia Private Equity.
The price of the exit bid exceeds the highest closing price of Challenger shares since May 9, 2014, the company said. It also represents a premium of approximately 5.7% over the last traded price of S $ 0.53 per share on the last full trading day immediately preceding the announcement of the proposed write-off.
However, this offer has since been criticized by the minority shareholder Pangolin Investment Management as being "too low".
Challenger "should be valued based on its cash flow to shareholders," said the fund manager in a letter issued several days after the delisting proposal, stating that the fair value of the shares had to be at least 1 , 15 Singaporean dollar.
Pangolin, which holds a 2.94% stake in Challenger through its Pangolin Asia fund, has also called on other shareholders to reject the "derisory" offer at the next extraordinary general meeting.
Challenger reiterated Wednesday that a write-off would give it more flexibility to manage its business, optimize its resources and implement operational changes without the costs, regulatory restrictions and compliance issues inherent in its status as a listed company.
At present, it faces many challenges, such as a saturated electrical and electronic retail environment in Singapore, the moderate retail climate and the disruptions caused by it. boom in e-commerce, and has seen a steady decline in its turnover in recent years. five years.
To cope with this challenging environment, Challenger has stated that it may need to implement changes in its business that could affect the company's dividends.
The electronics retailer added in the write-off circular that it no longer needs to access capital markets in the foreseeable future, since it has not has not conducted any fundraising exercise on SGX since 2007.
A write-off will also save him money on maintaining a listed status and focus those resources on his business operations.
Mr Loo explained that he had begun to explore the possibility of a removal from the list after receiving two unsolicited offers from minority shareholder Pangolin for the sale of his stake.
"The first offer was received in October 2017 and Pangolin offered to sell its stake at S $ 0.435 per share. The second bid was received in March 2018 and does not specify the price at which Pangolin would be willing to sell its shares, "said the managing director.
But instead of making a deal with a single shareholder, Mr. Loo said he "wanted to make an offer to all shareholders and started looking for a partner to start the process."
Challenger reiterated that, given the historically low liquidity of its shares, its delisting plan "represents an opportunity for all shareholders … to make their investments in the company by proceeding with a net exit with premium".
According to the delisting circular, Digileap Capital will review the activities, organization and activities of Challenger after the closing of the exit offer.
It's about determining the optimal business strategy for the group. Subsequently, the group can make changes to Challenger's business activities to navigate a challenging business environment.
Notwithstanding this, Digileap Capital "currently has no intention of making any major changes to the group's business, redeploying the group's fixed assets, terminating the employment of any of the group's existing employees, except in the areas of the normal course of business ".
EGM JUNE 27
Earlier this month, SGX said it had no objection to the cancellation of Challenger, subject to compliance with the registration rules.
Challenger will now have to seek the approval of its shareholders during the General Meeting which will take place on June 27 at 10:00 am The deadline for submitting proxy forms for the Annual General Meeting will be June 25.
To withdraw from the list, he will have to obtain a vote of approval by a majority of at least 75%, as well as rejection votes of up to 10%.
CONFIRMING THE LOCKING OF THE LIST: PANGOLIN
In response to Mr. Loo's comments, Mr. Pangolin stated that when he planned to resell his stake in October 2017 and "determined the company as to whether he could have a buyer", she never made firm offer.
"As fund managers, we always evaluate the advantages and disadvantages of any investment. This is part of the day-to-day operation of managing a fund. It is also useful to know the intentions of the major shareholders, "said director James Hay.
Mr. Hay added that the "thinking about an exit" from his investment was "a consequence of the frustration, not of the operational functioning of the company, but of the slowing of returns for shareholders because the company owned too much money and non essential resources.
Pangolin ultimately decided not to sell its shares and prepared a presentation for the directors of the company containing recommendations on what Challenger should do with its cash surplus for the benefit of all shareholders, Hay said.
"All we know is that this offer, if accepted at such a derisory price and given our research and recommendations, will be beneficial for him and for Dymon, and not for the minorities who have supported Challenger over the years. "
Pangolin said that he was not alone and that he had received "overwhelming support" from other minority shareholders.
"We have so many emails claiming that this company is massively undervalued," Hay told CNA. "They agree with us and are committed to voting against (the offer)."
Including the participation of Pangolin, these represent 9.8% of Challenger shares, just under 10% needed to veto the delisting.
"10% is enough to formally reject this offer and we will get it easily," said Mr. Hay. "Digileap loses time and money by proceeding (with the offer)."
Editor's Note: This article was updated on June 13, 2019 with answers from the minority shareholder Pangolin Investment Management.