And E&O Plunges After SC Denies MGO Rumours

The day after And The Sources Strikes Big At E&O

• Published: Monday August 13, 2012 MYT 9:17:00 AM
  E&O slides after SC refutes MGO report
  KUALA LUMPUR: The securities of Eastern & Oriental Bhd (E&O) fell after the Securities Commission refuted a portal news report that it would force Sime Darby Bhd to undertake a mandatory general offer for the remaining E&O shares.
  
  At 9.01am, E&O fell 30 sen to RM1.60 with 2.57 million shares done, the call warrants, E&O-CA fell 10.5 sen to six sen, E&O-CE tumbled nine sen to 10.5 sen and E&O-CG lost 6.5 sen to 20.5 sen.
  
  The FBM KLCI rose 2.74 points to 1,648.10. Turnover was 29.13 million shares valued at RM25.05mil. There were 81 gainers, 45 losers and 94 counters unchanged.
  
  Last Friday, the SC said its position on the MGO requirement in the Sime Darby E&O share acquisition remained unchanged as per the SC statement issued on Oct 11, 2011.
  
  "The decision is now subject to judicial review which is pending in court," it said in a statement.

Here's how the stock traded today.

The daily chart tells a better picture.

But none tells a better than the following chart.

Note how the stock shot up after the 'according to sources' news was posted after 4 pm.

Shall we say thanks to the 'sources' now....

And The Sources Strikes Big At E&O

Far too long I have been highlighting the According To Sources issue on this blog. After a while this blog gets caught in a repetitious cycle of repeating and repeating and repeating itself. Is like, do you guys and gals really care? Or perhaps it only matters if it happens to us ( I do hope not). I just don't know.

As mentioned before:

• Yeah, our financial news can be really incredible at times. Many a times, a story will be spun by our financial news wizard reporters. The way they write, the way they spin the story around and around, they can really make any given stock sounds soooooo sexy.

And sexy stocks do sexy stuff. The stock prices soar.

Think about it.

I write an article, I throw in the 'according to sources' this and that and that is going to happen. It's going to make Fly Kacang Fly Bhd fly!

Punters read the story, they treat those words as gold.

They get on the phone, they call their remisers and orders truckloads of the Fly Kacang Fly stock. Or they just let their fingers walk the talk by keying their truckloads of the stock via on-line trading.

And as long as they make their money, they don't care whether the story is really true or whether the story just cooked up to seduce them to punt the stock 

Take for example, the last posting made on this According To Sources issue: And According To Sources .... . Did that sexy story came out exactly as what the so-called sources clam??

And I said many times, anyone could a source of imformation. The Fly Kacang Fly's mak cik who brings the tea for the Boss could be a source of information, yes? The toilet cleaner also could be one. Anyone in Fly Kacang Fly could be a source. Whether they are reliable source is another issue.

Or what if the source does not even exist? What if the 'according to source' is used just to lend some form of credibility to the said rumours?

Not possible?

Anyway, yesterday, the SOURCES hit big time. Really big time. Center stage. It's showtime!

On MalaysiaInsider: http://www.themalaysianinsider.com/malaysia/article/sc-to-order-sime-general-offer-for-eo-say-sources/

• SC to order Sime general offer for E&O, say sources August 10, 2012
  
  KUALA LUMPUR, Aug 10 — In a volte face, the Securities Commission (SC) will now order Sime Darby Bhd to make a general offer for Eastern & Oriental Bhd (E&O) shares after buying a 30-per cent stake last year, say government sources.
  
  The Malaysian Insider understands the decision was made after a review by the leadership under new SC chairman Datuk Ranjit Ajit Singh.
  
  “The SC has reviewed the matter and decided to overturn the earlier decision made when Tan Sri Zarinah Anwar was the chairman,” a government source told The Malaysian Insider.
  
  Ranjit, who was the SC managing director, took over as chairman after Zarinah ended her term last March 31.
  
  Another source confirmed the review and said the decision will be made public soon.
  
  Sime Darby purchased its controlling 30 per cent interest in the property developer from three major shareholders — managing director Datuk Terry 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 need not 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 has renewed debate over the SC’s handling of alleged irregular trading activities and had put pressure on Zarinah, whose husband — the E&O chairman — had 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. But the judge dismissed the application, only for the SC to file an appeal with the Court of Appeal, which heard the case yesterday.
  
  Singapore’s Straits Times reported last January that a SC task force found that Sime Darby was obliged to make a general offer for E&O shares after acquiring a 30 per but was superseded by the regulator’s top ruling authority.
  
  The daily 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 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 adjudged “in a majority decision” that 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 that 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.

That news came late in the afternoon.

This sexy piece of stock started a buying frenzy. It was incredible. Some were screaming for the stock to go limit up. This piece of news whose sole credibility was based on  sources, un-named sources. ( Ever wonder who these sources are?)

Notice how E&O took off for the moon at around 4 pm.

And then came the news at 5.50pm.

http://biz.thestar.com.my/news/story.asp?file=/2012/8/10/business/20120810174923&sec=business

• Published: Friday August 10, 2012 MYT 5:50:00 PM
  SC's position on GO in Sime-E&O remains unchanged By Joseph Chin
  
  KUALA LUMPUR: Sime Darby Bhd does not have to make a general offer for the remaining shares in Eastern and Oriental Holdings (E&O) after it acquired a 30% stake, according to the Securities Commission.
  
  The SC said in a statement on Friday that its position on the GO requirement in the Sime Darby-E&O acquisition remained unchanged as per the statement issued on Oct 11, last year.
  
  "The decision is now subject to judicial review which is pending in court," the SC said.
  
  Securities of E&O surged in active trade late Friday on a news portal report that the SC would now order Sime Darby to make a GO for the remaining E&O shares.
  
  E&O surged 42 sen to close at RM1.90 with 44.74 million shares done while its call warrants E&O-CA jumped 16c to 16.5 sen.
  
  In the Oct 11 statement, the SC had stated it concluded the review of the circumstances surrounding the acquisition of 30% equity interest in E&O by Sime Darby for any Take-Over Code implication.
  
  The SC had then stated in the course of the review, parties involved in the transaction were interviewed and relevant documents procured.
  
  It said the review included an assessment of possible concert party relationships between and amongst the parties involved. Precedents in Malaysia and practices and rulings in other jurisdictions on similar issues were also examined.
  
  "Having analysed all the evidence gathered, it is the SC's finding that the acquisition of the 30% equity interest in E&O by SDB had not given rise to a mandatory offer obligation under the Malaysian Code on Take-Overs and Mergers 2010," according to the statement.

Oh oh!

How now brown cow?

SC is now denying the news published on Malaysia Insider.

And this is a delima. A massive delima for punters who punted based on the news released by Malaysia Insider.

All thanks to Malaysia Insider's un-named government sources, these punters will be worried about the fate of their punt made yesterday afternoon.

Will the denial send the stock plunging?

How now brown cow?

Would you continue to punt on stocks based on news sources who quotes un-named sources?


( see also: http://cgmalaysia.blogspot.com/2012/08/sc-to-order-sime-general-offer-for-e.html )

( ps: if this blog posting was published at 4:30 pm, I wonder what would be the reaction?  Would I get 'Here we go again... pouring cold water again... Ah Chi Ah CHor so much ..... )

How To Expect Proper Governance With All These Conflict Of Interests?

Of course MSWG had questioned the Sime/E&O deal.

• Minority Shareholders Watchdog Group (MSWG) chief executive officer Rita Benoy Bushon had also questioned the deal and asked if there would be an MGO although the share purchase was below the 33 per cent threshold to trigger a mandatory buy.
  “Where does this leave the minority shareholders? Is it fair to them?
  “We believe that in the circumstances, the Securities Commission should investigate whether the other conditions for an MGO have been fulfilled,” Bushon wrote in The Star newspaper yesterday.

But here lies the problem.

Fair to which minority shareholder?

Because the problem is the conflict of interest between SC Chairman and and E&O chairman. They are related. Husband and wife.

And E&O chairman stake would still be considered a minority shareholder.

So if MSWG and SC calls it unfair to the minorities and forces Sime to do an MGO, what's the implication?

What if someone asked for whom did MSWG and SC fought the case for?

See the complication caused by this conflict of interest?

In my opinion, this conflict of interest must be stopped.

The local stock market cannot have A Securities Chairman whose husband is so actively involved in the stock markets.

Yesterday, blogger M.A.Wind blogs on SC & BM: (perceived) Conflict of Interest? 

Let me highlight this following issue from that posting.

• Conflicts of Interests
  
  An integral part of ethics and integrity is the avoidance of conflict of interest. In this regard, all SC staff and their immediate family members have the obligation to avoid putting themselves in situations of conflict where their personal interest is conflicted with the interest of the SC. A process on declaration of interest has been put in place within the SC to ensure that SC employees adhere to this requirement.

(Mind you that was taken from SC own website! http://www.sc.com.my/main.asp?pageid=980&menuid=983&newsid=&linkid=&type= )

!!!! Exactly!

Despite what was written, the Malaysian stock market have this messed up conflict of interest between SC Chairman and her husband!

Where's the integrity in the stock exchange if this was to continue on?


Consider one older incident.

Now, I have seen many privatisations deals in the market the past several years. Most of the time, the minorities shareholders attempt to stop the privatisations failed. There was this case where a privatisation attempt actually failed. Jan 2010: Be fair to minority shareholders

For me, despite what was written, it wasn't a clear case against the privatisation offer. And as mentioned, in the article, the offer carried a decent premium.

• On Jan 11, when the proposal was first mooted, that would have given entitled shareholders a chance to exit their investment at a premium of about 23% and 33% over the five-day and three-month volume-weighted average market price. Of course, the shares have since rallied in response to the news, and today, sit just short of the offer price

But thanks to MSWG, the minorities won. I was surprised.

And guess who is one of the minority shareholder in MBF Holdings? Datuk Azizan Abd Rahman!

How?

How would you want to interpret this?

And from a conflict of interest perspective, won't one question why MSWG fought so hard to stop the privatisation? And why didn't MSWG fought harder in many more clear cut cases where the minorities shareholders were clearly shortchanged?

And yes, sadly, that MBF Holdings case would have been one stellar victory for the minorities but the problem is that one of the minority is such a prominent figure, and one who is related to the Securities Commission.

How?

Isn't it all so disappointing?

What If Sime Is Forced To Do A MGO?

So much had been said about the shambolical Sime/E&O deal.So SC is reviewing the deal thoroughly. I could be wrong but that's something I don't see too often,

And yesterday Sime shares were spooked and Sime shares tumble on MGO worries.

Now let's think about it... I am not sure about you about I am certainly wondering about it. Ok, a MGO perhaps might be fair and it could benefit the minorities .... but then.....

Remember the Chairman? Yeah , And All The E&O Chairman Said Was 'He Was Not Aware .... '

Here's the so called transaction.

Changes in Director's Interest (S135) - Datuk Azizan Bin Abd Rahman

From that announcement he owns some 4,500,000 shares in E&O.

Just imagine... if Sime is forced to do the MGO.... errr.....

And then of course.... the conflict of interest .... the conflict of interest between SC Chairman and E&O Chairman....

Sigh.

Now this doesn't represent good corporate governance, does it?

And then...... what about the minority shareholders of Sime then? What would they be feeling if Sime is forced to make this MGO?

And All The E&O Chairman Said Was 'He Was Not Aware .... '

On Business Times:

• Zarinah steps aside in Sime-E&O review
  Published: 2011/09/13
  
  The reviews are being led by the two most senior commission members, Datuk Francis Tan and Datuk Gumuri Hussain
  
  Kuala Lumpur: The Securities Commission (SC) chairman, Tan Sri Zarinah Anwar, will not be involved in the regulator's review of a corporate deal to avoid a conflict of interest.
  
  The SC is examining if Sime Darby Bhd should make a general offer (GO) for the rest of Eastern & Oriental Bhd (E&O) after buying 30 per cent of the developer. It is also looking at all stock transactions by all parties.
  
  "In accordance with the SC's internal governance processes, the reviews are being led by the two most senior commission members, Datuk Francis Tan and Datuk Gumuri Hussain and the SC chairman had, from the onset, recused herself," an SC spokesperson said.
  
  On August 28 2011, Sime agreed to buy the stake from Datuk Terry Tham, Tan Sri Wan Azmi Wan Hamzah and Singapore's GK Goh Holdings.
  
  Zarinah's husband, Datuk Azizan Abd Rahman, the chairman of E&O, had bought E&O shares prior to the announcement.
  The SC was responding to questions from Business Times on whether Zarinah had issued an internal memo to her staff about the deal.
  
  The SC did not deny that such a memo was sent out.
  
  A copy of the internal memo obtained by Business Times also stated that Zarinah had briefed Prime Minister Datuk Seri Najib Razak on the matter.
  
  "You would have read in the papers and the blogs the criticism and allegations in respect of the purchase of E&O shares by Sime Darby. While this is a commercial decision made by Sime Darby, it does raise the issue of whether the transaction has takeover code implications and an MGO (mandatory general offer) should be carried out.
  
  "The second issue of course relates to my husband's purchase of shares in E&O. He has been the chairman and shareholder of E&O since 2002 and has purchased shares in the company since then.
  
  "The latest acquisition is just part of his normal acquisition, with all purchases made in the open and duly reported to Bursa. Naturally he had no knowledge of the Sime Darby purchase at the time as this is a sale by the major shareholders and the board was not told of the negotiations until later.
  
  "In any case, I have instructed that both the issue of the MGO and the acquisition of shares be thoroughly looked into. Given that I am conflicted, in accordance with our governance procedures, I have recused myself and have asked our two most senior commissioners, Datuk Francis and Datuk Gumuri, to lead the review of this case working together with Dr Nik and Datuk Ranjit," the memo said.
  
  "I have also briefed the Prime Minister who had expressed his understanding," she added.
  
  Datuk Francis Tan Leh Kiah is also the managing director (MD) of Azman Davidson & Co, advocates & solicitors, while Datuk Gumuri Hussain is SME Bank chairman.
  
  Datuk Dr Nik Ramlah Mahmood is the SC's MD and executive director for enforcement while Datuk Ranjit Ajit Singh is the MD and executive director in charge of market supervision.
  
  The Edge weekly, in its latest issue, quoted Sime Darby's president and group chief executive officer Datuk Mohd Bakke Salleh as saying that the deal was within the law.
  
  Sime Darby also wanted a 30 per cent stake mainly because it did not want to make a GO without the benefit of a due diligence.
  
  Datuk Azizan, meanwhile, said that he was not aware of the transaction between the three vendors and Sime Darby at the time.

( For reference: posted last friday: Featured posting: Sime Darby's E&O bid poses policy dilemma )

The most tacky issue in my opinion is that  Zarinah's husband, Datuk Azizan Abd Rahman, the chairman of E&O, had bought E&O shares prior to the announcement


The Chairman of E&O purchased shares just prior to the announcement?

And all he said he was not aware!!!!!!!!!?

That's it?

Are you satisfied?

Me?

I am not.

How could the husband of the SC Chairman holds position in any listed company?

How could this even happen?

How could the investing public trust that there's no conflict of interest at all?

How could the investing public believes in good corporate governance when the SC itself cannot keep its house in good order?

Something just got to give!

Featured posting: Sime Darby's E&O bid poses policy dilemma

Blogger M.A. Wind featured an article by writer Leslie Lopez written on the Straits Times: http://www.straitstimes.com/Money/Story/STIStory_711037.html

The opening line of the article:

• The plot tickens and all the attention is on the SC. With the Chairman of the SC being married to the Chairman of E&O, who bought shares of E&O just before the takeover by Sime Darby, making things even more intriguing. It is time for SC's next move, and everybody is watching.

WOW!

The Chairman of E&O BOUGHT shares before the takeover???

And he's married to Chairman of SC?

WOW!

Do read the rest of the posting Sime Darby's E&O bid poses policy dilemma

In another blog, the following was posted: GO or no GO, Zarinah and SC under scrutiny

Should Media Continue To Spin News To Drive A Stock Up?

Yup.. the media publishes the According To Sources spin, the stock flies, the company denies and very soon, the stock falls back down.

And over time... everyone forgets all about it... how the media helped push up the stock.

On Bursa website: Eastern & Oriental Berhad ("E&O" or "the Company") Article in The Edge, 2 August 2010, "Are E&O shareholders looking at privatisation?"

• We refer to the article entitled "Are E&O shareholders looking at privatisation?" published in The Edge on 2 August 2010.
  
  E&O would like to clarify that the Company has not received any notice from any of its shareholders pertaining to plans to privatise the Company. The Company is also not aware of any such plans by any of its shareholders.
  
  This announcement is dated 2 August 2010.

Let's look at how the E&O fared yesterday.

The stock of course opened GAP up, with a 6 Sen Gain!

Many thanks to the power of the pen!

Glee!

It would be nice if the Bursa have a look at why the Edge constantly publishes such news and oh, do check out if the author constantly pens such articles.

PS... in regards to yesterday trading....

ps: The media publishes the article in the weekend and the very first thing the stock does is to open gap up with higher than normal volume. Go figure that out.

ps/ps: if the stock markets is a sport, would you score this as an assist for the media?