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Delong CEO pulls out of privatisation bid on requirement to raise offer price to S$7.42 a share
DELONG Holdings chief executive Ding Liguo has backed out of an attempt to privatise the Chinese steelmaker, after being required to revise the offer price upwards.
The voluntary conditional cash offer of S$7 a share made on Sept 27 was withdrawn on Thursday in an announcement from PrimePartners Corporate Finance, acting for bid vehicle Best Grace Holdings.
It had planned to satisfy the buy-out at the original price by drawing down on loan facilities from Deutsche Bank.
But hiking the offer price to S$7.42 a share will "precipitate very substantial contingent liabilities that materially exceed the financial resources arranged for the offer", said the announcement.
Under Rule 17 of Singapore's Take-over Code, the offeror would be required to raise the offer price to the highest price that a concert party - in this case, an investment vehicle controlled by Mr Ding and his wife, Zhao Jing - has paid in cash for shares carrying 10 per cent or more of the voting rights in the six months leading up to the offer.
Ms Zhao and Mr Ding, who is also executive chairman of Delong, inked a sale and purchase agreement for a 17.33 stake in the company, at S$7.42 a share, on June 1. They were deemed interested in 75.56 per cent of Delong at the time the offer was announced.
"As majority shareholders in the offeree, the offeror and its concert parties seek to be fair to minority shareholders and have been supportive of initiatives to return value to the minority shareholders, including consent for the offeree to distribute the interim dividend of S$0.55 per share," the announcement said. "Whilst the offeror remains supportive of further initiatives, the offeror wishes to emphasise that there is no certainty or assurance that any transaction will occur."
The Securities Industry Council (SIC) - a unit of the Monetary Authority of Singapore that enforces the Take-over Code - said in a separate statement on Thursday that it is "investigating all the relevant circumstances leading to the withdrawal of the offer", especially with regard to whether there has been any breach of Rule 17.
"The investing public and shareholders of the company are advised to exercise caution when dealing with their shares and to refrain from taking any action in respect of their shares which may be prejudicial to their interests," it said.
"In the interest of ensuring that the ongoing investigation is not compromised, the SIC will not respond to requests for comments."
The council added that it would issue further statements "as and when there is any development of public interest".
Delong shares have been suspended since Oct 5, which the company said was a move pending the release of further information about the offer.