Friday, September 14, 2012

Glenealy: Sad Day For Investing

They won.

And the minority shareholders who fought gallantly lost.

  • 85% of Glenealy shareholders say aye to buyout bid Posted on 13 September 2012 - 08:36pm

    Eva Yeong

    KUALA LUMPUR (Sept 13, 2012): Glenealy Plantations (M) Bhd today saw 85.31% of its shareholders approve a RM396.32 million buyout offer by parent Samling Global Ltd (SGL), despite allegations of unfairness by a small group of disgruntled shareholders.

    Under the proposed exercise, SGL, which owns a direct and indirect 53.8% stake in Glenealy, is offering investors RM7.50 per share to take Glenealy private, a 6% discount to today's closing price of RM7.95.

    In a filing with Bursa Malaysia, Glenealy said 331 shareholders voted for the privatisation bid, representing 85.31% of the total number of shareholders present in person or by proxy at the court-convened EGM.

    "The total nominal value of the Glenealy scheme shares held by the scheme shareholders who voted for the resolution was RM36.1 million, representing 94.17% of the total nominal value of the scheme shares held by the scheme shareholders who voted," it added.

    Thus, only 4.23% of the total nominal value of votes were against the resolution.

    "All the three conditions were met, that is, more than half of those present in person or by proxy voted in favour (of the proposed deal), and secondly the nominal value was more than 75% of those present. The third condition is that less than 10% of the total scheme shareholders voted against the resolution," Glenealy independent non-executive director Md Yusof Hussin told reporters after the four-hour meeting.

    He expects the privatisation exercise to be completed in November, with cash payments to be made to shareholders in mid-November.

    Earlier, a group of disgruntled minority shareholders said the offer price of RM7.50 was too low, adding that an independent adviser should have been appointed to advise shareholders on Glenealy's plantation land valuations.

    "Basically, there was no valuation done. The market average that they gave us was RM39,000 per ha but they offered us RM23,000 per ha for the planted land. They have not accounted for the unplanted land but they have acknowledged the RM39,000 per ha market average valuation," said a shareholder who only wanted to be known as Low.

    He said the group had brought up the issue to the Securities Commission (SC) and Bursa Malaysia, but did not receive any response from either party.

    Low said the Minority Shareholders Watchdog Group had also raised some questions during the EGM but these questions were not addressed properly.

    He claimed that the SC is not protecting the minority shareholders and there is no corporate governance, which would also affect foreign investments.

    "There were various questions (from shareholders) but it's a question of valuation. Basically, we got an offer and we have to table it to the shareholders. It is really their decision. The valuation is an art, not a science and there's a problem when you take an average valuation because in plantation, you have various types of land," said Yusof.

    "You can't just say per planted hectare. Planted hectare could be newly planted, could be newly matured, could be prime maturity and could be due for replanting. These are all attached to values. Obviously on one side of the scale, where it's just newly planted, it's basically on the land value with little bit of planting," he added.

    He said the age profile of the trees varies from company to company but the investment advisers have already indicated that the valuation is within the acceptable range, which the board members have taken into consideration.

    Glenealy has some 10,000ha of oil palm plantation in Sabah and 20,000ha in Sarawak. Yusof said the land in Sarawak have leases up to 2051 with very young plants, while the land in Sabah are all matured, with some due for replanting.

    Upon completion of the privatisation, Glenealy will make an application to Bursa Securities to delist the company and it will become an indirect unit of Samling Strategy Corp Sdn Bhd.
Here's something I had mentioned before.

Remember in investing, prevention is always better than cure.

The issue of trust is so important in investing. Remember when you invest, you are buying a stake of the company and when you buy a stake of the company, you should think yourself as a partner of the business (Sadly, in the corporate world, the term business partners doesn't seem to exist and minority shareholders are merely treated as OPM (other people money) and since they are the OPM, they are there to be taken advantage of. Yes, the OPM is there to be screwed!) .

Now if the stake purchase represented a private company and not a listed stock, what would you have done?

Would you take extreme precaution and address the issue of TRUST?

Yes, my dear.

Let's say you were going to invest or invited to invest in a saloon business with this gal friend, Mandy, what would you do?

Two things, one is you are going to ask about the profitability of this business venture and the other issue you will address whether you TRUST Mandy. Will Mandy screw you over the moment you have your eyes turned away from this saloon business.


Now the amazing thing is a lot of retail investors don't ask this TRUST question.

All they care is whether the stock can make money and whether the stock can go up.

How ironic isn't it?

Look at all the recent issues involving privatisation.

Could they have been avoided if the investors prevented themselves from being a minority shareholder of these companies?

Yes, treat corporate integrity and transparency seriously!

If you cannot trust the company, don't invest in it.

Don't be a minority shareholder of such a company!

Don't be an OPM waiting to be screwed!

Ok, one of the questions raised was Glenealy did not carry a property valuation of their plantations during this privatisation.

If that was true, then this privatistion offer was simply absurd.

How could SC allow an offer to be made without any proper valuation?

From Star article:

One line stood out.
  • Minority shareholders led by Patrick Low were displeased with the offer price, pointing out that it was too cheap a valuation considering that Glenealy’s land had not been re-valued since 1998.
Mr. Patrick Low has made a very solid point.

But on the other hand, I am left wondering, why be an investor in such a company?

Why invest and be a BUSINESS PARTNER of a business whose owners had not bothered to make a land revaluation since 1998????

What does this say of such business ownership and management?

Hasn't the integrity issue stood out like sore thumb?

Ah... but this where some local retail investors tend to be overly smart. For some, they think because the revaluation exercise is not done, there is value to seek, profits to be made.

So they invest or perhaps I should say speculate.

Look at the end result today.

Investors tried their very best to cure the malaise. They argued. They highlighted the gross unfairness, the injustice.. They protested. They tried to stop the privatisation.

In the end they got peanuts for their pot of gold.

So this is a harsh reminder.

AVOID companies with integrity issues.
DON'T invest in companies where you don't trust the owners/management.

PREVENTION by avoiding is much better CURING via protesting.