BOUSTEAD Singapore has been in the headlines recently after Singapore Exchange Regulation (SGX RegCo) issued a Notice of Compliance (NOC) directing the group to make a fair and reasonable exit offer for Boustead Projects.

The move comes more than seven months after Boustead Singapore made its voluntary offer for the real estate unit. The offer resulted in Boustead Projects’ shares being suspended due to a loss of free float.

As Boustead Singapore announced on Tuesday (Oct 17) that it is in discussion with Boustead Projects on an exit offer proposal, The Business Times summarises the sequence of events that resulted in Boustead Projects’ shares being suspended for months.

Original offer

On Feb 6, Boustead Singapore launched a voluntary unconditional offer to acquire all the issued and paid-up ordinary shares in Boustead Projects, other than those it or its concert parties already owned.

At the time, Boustead Singapore and its chairman Wong Fong Fui already held over 70 per cent of the shares in Boustead Projects.

The initial offer price was S$0.90 apiece, and Boustead Singapore said its intention was to privatise Boustead Projects. It noted that it would not be able to avail itself of the powers of compulsory acquisition under the Companies Act.

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Analysts at the time noted that the offer price favoured Boustead Singapore, with estimates for Boustead Projects’ revalued net asset value at around S$1.79 per share.

Later that month, the Securities Investors Association (Singapore), or Sias, urged Boustead Singapore to up its offer price as the discount to asset value was “simply too large to ignore”. Boustead Singapore raised its offer price shortly after, with a final offer of S$0.95 apiece.

Not fair, but reasonable

The independent financial adviser (IFA), PrimePartners Corporate Finance, ruled that the offer was “not fair but reasonable”.

In its report, the IFA noted that the final offer price of S$0.95 was not within its final estimated valuation range of between S$1.17 and S$1.38.

Sias told shareholders they should reject the offer from Boustead Singapore. It also called for SGX RegCo to require Boustead Projects to restore its free float even if it loses it, as the requirements for an exit offer had not been met.

Under listing rules, at least 10 per cent of a company’s shares must be held by the public at all times. If delisting conditions are not met and free float is lost, a company’s securities would be suspended.

All companies in such a situation are obliged thereafter to restore their free floats, for example by way of a placement. Companies that are unable to do so may be required to delist. In doing so, they would need to comply with rules that require an exit offer to be both fair and reasonable.

At the close of the offer on Mar 27, the total number of shares owned, controlled or agreed to be acquired by Boustead Singapore and its concert parties, as well as valid acceptances of the offer, stood at 95.5 per cent of the total number of shares.

Boustead Projects’ shares were suspended as it no longer met the free-float requirement.

Extensions

In April, Boustead Projects sought a three-month extension to comply with the free-float requirements, as Boustead Singapore was “exploring various options”.

The company sought a further three-month extension in June as the offeror was “continuing to explore various options”, and had requested for the further extension to September.

In both instances, SGX RegCo said it had no objection for the extension to explore options to comply with listing rules.

In its annual general meeting minutes released on Aug 25, Boustead Singapore said it was caught between two sets of rules. On the one hand, it is required to restore its free float under the SGX Listing Rules. On the other hand, it is not allowed to make another offer that is better than the first within a period of six months, under the Singapore Code on Takeovers and Mergers.

When the extended deadline expired in September, Boustead Projects’ free float was still not restored.

The market regulator then directed Boustead Projects to delist, with Boustead Singapore and/or Boustead Projects to make an exit offer to shareholders that is fair and reasonable.

The companies were given a one-month deadline to provide their proposal on the exit offer.

Boustead Singapore sought an extension, as the companies had to release their results for the half-year ended September.

SGX RegCo granted the extension, on the condition that Boustead Singapore provide a progress update on its compliance with the NOC by Tuesday.