On IOI Properties Privatisation Again

Comments made to the posting: IOI Properties Minority Shareholders: You Do NOT have to SELL!

Maverick said...

• Did you see the timing of this announcement:
  
  Date of shares cancelled from : 27/03/2009 to 27/03/2009
  
  Number of treasury shares cancelled (units) : 17,469,800
  
  IOI Prop cancelled about 2% of the shares of the company that they had bought back in the past. Is it possible that without this 2% IOI Corp would not have reached the necessary 90%? If that is the case, then the minorities are really screwed, they happily approved the buyback program in the past, which is now used against them.
  
  The timing is very peculiar, they never cancelled these shares until 27th March, announced it on the 30th March at the same day as which they announce that their shares will be suspended since IOI Corp owns 90.5% of the shares.

Here is the proper link: Notice of Resale/Cancellation of Treasury Shares - Immediate Announcement

I do understand your point. And if what you are suggesting is true, here's another reason why one should not INVEST in a listed subsidiary!

ps: I have nothing against a company being taken private.

I only HATE it when I see a listed company taking its own listed subsidiary private.

Everything is insanely lopsided against the minority.

Why bother investing in a stock when its holding can take it private whenever they feel like doing so?

Jasonred79 said...

• You do not "HAVE" to sell... but you must realise that any shares you have there becomes as good as worthless.
  
  So, the only reason for holding onto them is merely to "protest".
  
  Sigh.
  
  Actually, many people have long had a lot of issues concerning majority shareholders totally abusing the subsidiaries.
  
  Sigh.

Jason,

This is why I had stressed so many times against the investment in listed subsidiary. The risk being short changed makes the investment such an unreal handicap. Do you remember Privatisation of VADS?

It was the same old story.

And remember how I STRONGLY objected against an investment in the company - mainly because it was a listed subsidiary ? Yes, one did make profits but the profits made were never adequate considering the risks the minority shareholder had to take in investing long term into the company.

Over the past many years, I had seen way too many incidents. From Bumi Armada ( see http://whereiszemoola.blogspot.com/2006/09/pirates-which-siezed-armada.html2. http://whereiszemoola.blogspot.com/2006/09/more-on-privatisation-issue.html ) to Propel to Metro Jaya ( http://whereiszemoola.blogspot.com/2006/11/muis-purchase-of-metrojaya_02.html ) to Powertek to Vads to Johor Port ( see http://whereiszemoola.blogspot.com/2005/12/privatisation-issues_16.html ) and so on.

Anyway, Jason, these shares are not worthless.

One is merely holding shares in a delisted company and one is still ENTITLED to future dividends paid by the delisted company. Selling the shares of course would be tedious and problematic.

Let me show or rather let me highlight back once more, the disgusting tale in MetroJaya privatisation.

Let me refresh some points made. See MUI's purchase of MetroJaya

------------

1. MetroJaya was in a clean slate of health. No borrowings at all.
2. Piggy bank cash totalled 100.149 million.
3. Amount due from holding company was 85.268 million.
4. MetroJaya total number of shares totals some 124.921 million.

Now consider this, if the holding company, PMI repays the moolah owed to its subsidiary, this would mean that Metrojaya's cash alone would total some 185.417 million.

This would work out to some cash per share value of 1.48 sen per share. (185.417 divided by 124.921 million)

Soooooo how does one rate the fairness of this whole deal?

A VGO offer of 1.25 when the company's cash per share is 1.48.

--------

Surely that was not fair right. MetroJaya was simply cash rich at that time and to privatised it less than the cash per share was rather disgusting!

Now less than one year after the privatisation, MetroJaya announced the following Interim Dividend.

Big fat dividend of 34% less tax. (MetroJaya normally paid only 5% less tax when it was listed!)

So after forcing out the minority shareholders, the company then pays out a massive dividend. ( Now, not all minority shareholders sold out. Some still held on to their shares. And these brave shareholders were duly rewarded with the dividends! See they are not worthless! )

This issue made news.

• Metrojaya declares 34% dividend
  By Doreen Leong
  
  Metrojaya Bhd, which is being taken private by Pan Malaysian Industries Bhd (PMI), has declared a gross interim dividend of 34% for the first six months ended Sept 30, 2004, which is the biggest in recent years for the company.
  
  The biggest beneficiary of the windfall would be PMI, which owns 90.6% or 113.26 million shares in the department store operator as at Jan 20 this year, according to filings.
  
  Trading of Metrojaya shares has been suspended since Jan 26, as it did not meet public shareholding spread. It was last traded at RM1.21. PMI had then offered RM1.35 per Metrojaya share under a voluntary general offer.

Note: The VGO was raised from 1.25 to 1.38 because their initial offer was not met kindly! :p2

Sorry link to the article is gone.

Here is one huge article written on the Star back in 2004.

• A question of timing
  By Siow Chen Ming

  Metrojaya Bhd has started to distribute the bulk of its cash reserves via generous dividends even as its controlling shareholder Pan Malaysian Industries Bhd (PMI) is in the process of privatising the retail outfit.

  PMI has raised its stake in Metrojaya to 90.67% from 64.72% through a voluntary general offer (VGO) made last January.

  Last Monday, Metrojaya declared an interim dividend of 34 sen per share gross or a total payout of RM42.84 million for the current financial year (FY) ending March 31, 2005, to be paid on Dec 22.

  This came shortly after it paid RM18.9 million, or 15 sen per share, in interim dividends for FY2004 on June 18.

  Both dividends add up to RM61.74 million (before tax), which is three times Metrojaya's accumulated profits of RM21.1 million as at Sept 30.

  PMI's portion of the dividend proceeds is estimated to be RM56 million (before tax) by virtue of its 90.67% stake in Metrojaya. In effect, the cost for PMI to finance the VGO exercise of around RM63.5 million has been largely offset by Metrojaya's generous dividends.

  PMI is majority-owned by tycoon Tan Sri Khoo Kay Peng.

  PMI's share price rose 20% from Monday's 7.5 sen to nine sen last Thursday after Metrojaya announced the generous interim dividend.

  But while Metrojaya's minority shareholders (which now hold 9.33%) are finally reaping some rewards from the company's attractive cash reserves, perhaps not everyone is happy.

  "Those who had accepted the VGO and sold their shares in January cannot benefit from the recent generous dividends," says a broker. He says these ex-minority shareholders had previously accounted for 25.95% of Metrojaya's shareholding.

  Should Metrojaya have paid out the generous dividends before the VGO to benefit more minority shareholders?

  Timing of payout
  Under the VGO exercise in January, some minority shareholders sold their shares to PMI at RM1.35 each. The VGO price, though at a premium to Metrojaya's market price at the time, was at a huge discount to Metrojaya's net tangible assets (NTA) per share of around RM2.50, which is backed by its strong cash reserves and assets.

  [ In simple langauge: They are SCREWING THEM MINORITIES BY SHORTCHANGING THEM BIG TIME. Just using the simplistic NTA valuation method, a GO price of 1.35 is utterly shocking and disgusting!!! ]

  Having sold their shares below NTA, these ex-minority shareholders are also missing out on the recent generous dividends.

  While some believe Metrojaya should have distributed the generous dividends before the VGO exercise, which aims to take the company private, others point out that it is perhaps not in PMI's interest to do so.

  Metrojaya was not obliged to pay generous dividends before the VGO as this would have driven up the company's share price, hence increasing the cost of the VGO for parent PMI. But a good dividend payout before the VGO would have pleased more minority shareholders at the time.

  "By making the generous dividends after the VGO, PMI has been able to retain more dividends from Metrojaya as it has a higher shareholding of 90.67%," says a market observer.

  Having said that, the minority shareholders could have chosen not to accept the VGO if they had deemed the offer price unattractive and unreflective of Metrojaya's huge cash reserves, some market observers say.

  "Some minority shareholders saw the VGO as an avenue for a fast exit because they were not clear about the company's future direction," says a broker.
  
  Metrojaya returned to the black in FY2004, with a net profit of RM12.22 million, which is a turnaround from two years of consecutive losses. The company was in the red in FY2003 and FY2002, with net losses of RM19.82 million and RM4.92 million respectively.

  Amid its inconsistent financial performance, dividends distributed by Metrojaya fluctuated in the past several years despite its cash holdings averaging more than RM100 million.

  A dividend of five sen per share was paid in FY2003, three sen per share in FY2002 and six sen per share in FY2001.

  The 34 sen per share dividend announced recently will be paid out of Metrojaya's cash holdings of RM99.11 million as at Sept 30. After the dividend payment, there will still be sufficient cash reserves in Metrojaya to deal with its current liabilities of RM50.6 million. The retailing outfit has zero borrowings.

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Edit: Got a new set of comments.

棕油网 said...

• pardon my disagreement.
  
  i think Maverick overlook the cancellation.
  
  in the take-over procedure , cancellation of share has no influence on their actions, bcos the code is only enforced by "effective number" of share.
  
  simply said, the "effective number" was already increase when buy-back , but not in cancellation.
  
  second, i don't think this is malignant action.
  
  The condition of "Mandatory Acquisition" is depend on level of voting share from attandance.
  
  for example, suppose IOI existing share in IOIPROP is 60%, IOI must take another 36% (90% of 40% remaining share) to trigger the MA.
  
  in the level of 90.5%, imply that only 75% of minority accept the offer, meanwhile, the 25% minority who not accepting in voting(or absence in voting) still has the right to hold their share , this is what watchdog implicate.

some ammendments.

• after reading deeply , allow me to amend some words. forgive my mistake.
  
  
  "mandatory acquisition"
  should be
  "compulsory acquisition"
  
  "level of voting share from attendance"
  should be
  "level of valid acceptance"
  
  "voting"
  should be
  "offer"
  
  let me try to further explain what i found, Maverick, please refer to annoucement made on 17/03/2009 (before cancellation of treasury share)
  
  http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/LsvAllByID/48256E5D00102DF54825757C003235C7?OpenDocument
  
  at the bottom of page 2/2 from the pdf Attachments, note the treasury share is excluding from calculation.
  
  nevertheless , my point of view on this subject is, all the offer is unwelcome and unfair , but not always evil.