Dutech's CEO offers to acquire all shares to privatise company

THE chief executive officer of mainboard-listed Dutech Holdings, through TSI Metals HK Limited, has proposed to acquire all 356.54 million issued and paid-up ordinary shares of Dutech for 40 cents per share in cash, with a view to delist the firm from the Singapore Exchange (SGX).

TSI Metals, an investment holding company, has an issued share capital of HK$50,000 (S$8,516) solely held by Dutech's CEO, executive chairman and director, Johnny Liu. 

This unconditional offer represents a "unique cash exit opportunity" for Dutech shareholders to realise their entire investment at a premium over the market prices of the shares up to and including May 28, 2021 amid low trading volumes, said UOB KayHian (UOBKH) in a bourse filing issued on behalf of TSI Metals on Monday. 

That said, TSI Metals has the right to reduce the offer price in the event that any dividends, rights, other distributions or return of capital is declared, made or paid by Dutech to its shareholders. 

On Monday, Spectacular Bright Corp -  a company owned by Dr Liu which holds 152.44 million shares representing about 42.76 per cent of total shares in Dutech - and Willalpha International - a company owned by Dr Liu's brother, Liu Bin, which holds 56.28 million shares representing some 15.79 per cent of shares in Dutech - have also executed an irrevocable undertaking where both companies will accept TSI Metals’ offer.

Mr Liu Bin is also Dutech's executive vice-chairman and director.  

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Spectacular has further agreed to be alloted and issued new ordinary shares in the capital of TSI Metals for a subscription price that will be set off against the cash consideration payable for Dutech shares. 

The total number of shares held by Spectacular and Willalpha amount to 208.72 million shares representing about 58.54 per cent of Dutech's total shares. 

According to the filing, the offer is an option to shareholders which "may not otherwise be readily available" due to the low trading liquidity of Dutech shares, without incurring brokerage and other trading costs.

The shares have an average daily trading volume of about 23,725 shares, 45,181 shares, 37,717 shares and 56,802 shares respectively during the one month period, three-month period, six-month period and 12-month period up to and including May 28.

Dutech's shares last traded at S$0.25 on May 28. TSI Metals' offer price of S$0.40 per share represents a 60 per cent premium.

In the filing, UOBKH said TSI Metals had made the offer with a view to privatise Dutech and to exercise any rights of compulsory acquisition that may arise. It believes that privatisation will give Dutech more flexibility to manage the business, optimise the use of its management and capital resources, and facilitate the implementation of any operational change.

In maintaining its listed status, the firm also incurs compliance and associated cost. A delisting will help save on expenses relating to the maintenance of a listed status and focus its resources on its business operations.

If TSI Metals garners offer acceptances exceeding 90 per cent of the total number of issued shares, SGX-ST will suspend trading of the shares at the close of the offer.

UOBKH said TSI Metals does not intend to take any step for the public float to be restored and/or for any trading suspension of the shares to be lifted in the event that, inter alia, less than 10 per cent of total shares are held in public hands.

According to SGX-ST rules, a company may be delisted if it fails to raise the percentage of its total shares held in public hands to at least 10 per cent within three months of trading suspension, or a longer period that SGX-ST may be agreeable to.

In its offer, TSI Metals also reserves the right to seek a voluntary delisting of Dutech. In addition, if it acquires at least 90 per cent of Dutech's total shares, TSI Metals can also exercise the right to compulsorily acquire all the shares of the shareholders who have not accepted the offer.

TSI Metals currently has no plans to introduce any major changes to the business of Dutech, redeploy the fixed assets of the company, or discontinue the employment of any of the existing employees.

However, TSI Metals retains the flexibility at any time to consider any options which may be in the interest of Dutech, said UOBKH.