Aspion's ex-directors countersue Top Glove over RM1.37b deal, breach of employment

Singapore

TWO individuals whom Malaysia's Top Glove Corp has accused of a conspiracy to defraud the firm over its RM1.37 billion (S$455 million) buyout of Aspion last year have filed counter suits in Malaysia, charging that the world's largest glove maker's claim for loss and damages towards a "discount" is "hypothetical" and "fictitious".

Aspion's former directors Low Chin Guan - the firm's founder - and Wong Chin Toh are also alleging that Top Glove's actions including "repeated" attempts at freezing orders against them in Kuala Lumpur and Singapore courts were done in bad faith to renege on an estimated RM650 million earn-out provision, according to documents obtained by The Business Times.

The earn-out clause or "Finessis incentive" was for a new breakthrough, "game-changing" range called Finessis gloves developed inhouse by Aspion and was to be paid out over three years.

According to court papers filed by the duo, the incentive was a pivotal aspect of the Aspion sale which led the vendor Singapore-incorporated Adventa Capital and its directors (Mr Low and Mr Wong) to pick Top Glove as winning bidder although it had not offered the highest price in an open tender process that was handled by Credit Suisse, Singapore.

But now, it appears that the prospect of that earn-out clause is dim for Adventa Capital, particularly for Malaysian businessman Mr Low, who had built Aspion from a single-plant facility in the late 1980s to eventually the world's largest surgical glove producer and the other shareholder of Adventa Capital, investors of a fund under private equity firm Southern Capital Group. Mr Wong is managing director of Southern Capital, which has offices in Singapore and Malaysia.

Last year, Top Glove removed Mr Low as Aspion managing director and adviser as well as from Top Glove's board. Mr Wong was also removed as Aspion director. Mr Low is now suing Aspion for breach of employment contract for his wrongful termination.

Without being able to manage Aspion, the men claim that they are no longer able to maximise the potential of the Finessis products nor have control over the expected significant returns by way of the Finessis incentive.

When contacted, a Top Glove spokesperson said the Singapore and Malaysian-listed company was not at liberty to comment as this is an ongoing case.

Since June 2018 - barely three months after the Aspion buyout was done and dusted - Top Glove has made several attempts to seek Mareva injunctions against Adventa Capital and its two directors in KL and a worldwide injunction in Singapore. It has also filed a main action in KL alleging fraudulent misrepresentations against the individuals.

The Mareva applications have been dismissed in both countries but Top Glove is undeterred. In KL, Top Glove has appealed against the High Court's decision to dismiss the Mareva Injunction and has been granted an Erinford injunction, essentially an interim injunction, pending hearing at the Court of Appeal.

In Singapore, the glove maker has also been granted an Erinford order pending its application for the same injunction to the arbitration tribunal. The date for the arbitration proceedings at the Singapore International Arbitration Centre (SIAC) has yet to be fixed.

The legal wrangling over the much-publicised buyout of Aspion last year is shaping up to be a prolonged and complex drama, one that has piqued great curiosity in the corporate space of both sides of the causeway, not least because it involves Top Glove, a stalwart in the glove-making space that was founded and led by Lim Wee Chai, a veteran 60-year old entrepreneur and one of Malaysia's wealthiest.

The glove giant is claiming RM640 million for damages. Mr Wong, in his defence and counter suit, described Top Glove's claim for loss and damage towards such a "discount" as "hypothetical", "fictitious" and a "mere after-thought".

Court documents also reveal that Top Glove had lodged police reports against both Mr Low and Mr Wong.

"The legal actions by Top Glove against Adventa Capital, Wong and I are without merits. We reject the claims vigorously and will take all efforts to resist them," Mr Low told The Business Times.

Mr Low's suit was filed on April 24 at the KL High Court against six parties including Top Glove and its executive chairman Mr Lim Wee Chai and executive director Lim Cheong Guan while Mr Wong's was filed a day before against Top Glove, Aspion and Top Care, the wholly-owned unit that undertook the buyout. Mr Low is being represented by Shearn Delamore & Co while Mr Wong is represented by Logan Sabapathy & Co.

Skrine is representing Mr Lim Wee Chai and Mr Lim Cheong Guan while Ranjit Singh & Yeoh are solicitors for Top Glove.

In Top Glove's reply to the defence and counterclaim filed last month, it said Mr Low cannot take advantage of his own alleged wrong to insist that he remains on Aspion's management team. In their joint replies, Mr Lim Wee Chai and Mr Lim Cheong Guan denied all the allegations by Mr Wong and Mr Low. They also denied that their actions were premeditated, adding that it was well within their rights to file a police report as they were victims. They also said the second Mareva was filed due to change of circumstances and uncovering of new evidence.

There has been no certain outcome about a year since Top Glove launched legal proceedings against Adventa Capital and the duo.

Top Glove alleged that they had overstated Aspion's assets by RM74 million and overvalued the surgical glove maker by a whopping RM640.5 million - nearly half the amount Top Glove had coughed up for the asset that was paid mostly in cash and some RM137 million via the issue of Top Glove shares last year.

The glove maker which turned in a revenue of RM4.2 billion in 2018 and has a market value of RM12 billion, claimed that forecast profit after tax of Aspion as presented by the trio was "falsely inflated and not highly achievable", and hence it was fraudulently induced into agreeing to pay RM1.37 billion "when in fact Aspion was worth less".

When Top Glove first disclosed the legal action a year ago, its stock on the Malaysian exchange got hammered; the knee-jerk reaction saw the counter hit limit down, losing 30 per cent of its value on investor concerns that the discovery of irregularities in Aspion and alleged overstatement of its acquisition price - these arose from a review commissioned to an independent accounting firm by Top Glove - may necessitate impairments.

However, up to now, Top Glove has not made impairments on the asset, a point Mr Low and Mr Wong make in their counter claims.

Court filings by the two men also reveal that Top Glove has been pursuing Aspion as early as 2015 and had in fact made several overtures for Aspion every year since, till it finally landed the asset in 2018.

Top Glove's key niche prior to the deal was in examination gloves while adding Aspion under its belt turned it into the world's largest producer of surgical gloves, they argued.

The trial dates for the KL hearing was earlier set to start in September this year but that is no longer the case after the presiding judge recused herself in late June this year. The parties are currently waiting for a new judge to call for case management with a timeline that for now, remains unclear.