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SGX sets precedent with requirement of advance notice from Datapulse
THE Singapore Exchange (SGX) set a precedent when it recently put a company on notice over a controversial factory deal, it has confirmed.
Mainboard-listed Datapulse Technology announced on Feb 1 that it must notify the SGX in advance of any possible acquisitions involving businessman Ang Kong Meng. This is the first time a company has been asked to publicly disclose such a requirement, the bourse operator said in an e-mail to The Business Times.
Disk drive maker Datapulse has been roiled by an internal feud since a new controlling shareholder, Ng Siew Hong, showed up late last year.
A fresh set of directors came on board and they approved the acquisition of Wayco Manufacturing, a personal care product business, from Mr Ang's Way Company. Datapulse has since said it is weighing options that include also acquiring Way Company.
The board disclosed that "extensive due diligence" was not carried out for the Wayco deal. And it has emerged that Ms Ng, who had prior ties to Mr Ang, put board members in touch with him before their appointment.
Tan Boon Gin, CEO of Singapore Exchange Regulation, told BT: "The deal is done. We cannot unwind it by now requiring shareholder approval.
"What we can do and which we have done, is to address the immediate risk at hand by requiring the company to announce that it has to notify us in advance of any third-party transaction involving a business associate."
BT understands that the hasty completion of the Wayco deal - announced on Dec 12, 2017 and finished three days later - was a factor behind the SGX's move, as was the connection between Ms Ng and Mr Ang.
Under SGX rules, the acquisition of Wayco does not meet the technical definition of an interested person transaction (IPT). But Mr Tan said that the order to Datapulse "puts the company and the market on notice that we are keeping an eye on the self-dealing risk here, and that we will require shareholder approval if we see what is in substance an IPT".
Nanyang Technological University accounting professor El'fred Boo told BT that the move "could be regarded as intrusive", but "unusual circumstances demand unusual response from SGX to protect wider investor interest".
"Any bad company decisions, including questionable acquisitions, announced post-event, will be too late for shareholders and investors to act on," said Prof Boo.
"SGX is unlikely to block any acquisitions, and trading of the company's shares will have to be suspended if any such advance notification is made public. Under such circumstances, whether (there is) advance notification or not, there is little that investors can do."
Wang Jiwei, from the Singapore Management University's School of Accountancy, called the bourse operator's move "a great effort from SGX to make more transparent disclosure and protect the interest of minority shareholders". He said it was likely that it made its request under Rule 703 of its Mainboard Listing Rules.
The rule states that an issuer must announce information needed to avoid the establishment of a false market or which could materially affect securities' price or value.
Prof Wang speculated that further deals involving Mr Ang might lead to a reverse takeover of Datapulse by Wayco, "which will establish a false market, as Datapulse investors now believe it is the acquisition of Wayco rather than the other way (around)".
The family of Datapulse co-founder Ng Khim Guan - no relation to Ms Ng - has called for an extraordinary general meeting to halt the company's business diversification and force out the new directors. But the company has challenged the Ngs' shareholding and the validity of the meeting requisition notice.
Mr Tan said that the SGX will require the shareholder requisition matter to be resolved "before we will allow the company's proposal to diversify its business to go to shareholders".
"And we will ensure all material information is included in the circular to shareholders so they can make an informed decision," he added.