Hwa Hong directors plan strategic review in expectation of offer lapse

SHAREHOLDING directors of Hwa Hong Corporation : H19 0% “are increasingly of the view that maximising shareholder value would be best achieved outside the timeline and constraints imposed by the general offer” made by Sanjuro United at S$0.40 per Hwa Hong share, said the company on Monday (Jul 4).

This comes ahead of the offer’s closing deadline on Jul 6.

On Tuesday (Jul 5) evening, Sanjuro said that it and persons acting in concert have received approximately 30 per cent of Hwa Hong’s shares through market acquisitions. With the additional shares, a mandatory general offer has been triggered.

Sanjuro added that there would be no revision to the final offer price and final closing date even if another competing offer is made. The offer will lapse if Sanjuro and its concert parties do not hold more than 50 per cent of Hwa Hong’s shares when it closes at 5.30 pm on Aug 1.

“The offeror remains of the view that the final offer price of S$0.40 per offer share represents a compelling and attractive exit opportunity for shareholders, to realise their entire investment in cash at an attractive price and a compelling premium amid an uncertain economic environment, low trading liquidity and ongoing market volatility,” Sanjuro said.

Another 29.3 per cent of the company is collectively held by Hwa Hong’s directors Ong Eng Loke, Ong Eng Hui David, Ong Eng Keong and Ong Mui Eng - known as the current Ong directors - as well as their immediate family members.

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Hwa Hong emphasised that the views of the current Ong directors expressed in the Jul 4 announcement are not shared by non-independent and non-executive director Huang Yuan Chiang, who was previously involved in a board dispute over the appointment of a financial advisor as well as a statement to the media.

In the latest update, Hwa Hong reiterated the Ong directors’ intention of not accepting the offer as they remain focused on determining whether shareholder value can be maximised through an exercise conducted through its exclusive financial adviser, Evercore Asia.

Announced earlier in May this year, the exercise would include soliciting other potential offers and evaluating any offers that may emerge.

Highlighting that a deadline for a competing general offer to be announced would normally be on Jul 23, Hwa Hong said the current Ong directors plan to undertake a comprehensive strategic review of the company should Sanjuro’s offer be unsuccessful.

They also intend to “engage a leading accounting firm” to conduct an in-depth review of the company’s past operational practices and governance processes, among others.

“With the benefit of the review by the accounting firm, the current Ong directors intend to implement such recommendations as appropriate and disclose such recommendations to potential bidders in the context of the strategic review and exercise,” said the company.

It added that the current Ong directors intend to commence these reviews “expeditiously and efficiently, with a view to completing the exercise to maximise shareholder value in the near term”.

Offeror Sanjuro is the bid vehicle of a consortium formed by shareholders of the company that collectively hold around 20 per cent of its shares.

It comprises Ely Investments, wholly-owned by former Hwa Hong group managing director Ong Choo Eng and his family, and Ergonomix, which is wholly-owned by Dymon Asia Private Equity (South-east Asia) Fund II. Other members of the consortium include Roswell Assets and Crystalic Star Global.

Sanjuro’s privatisation offer for Hwa Hong was first launched in May 2022 at S$0.37 per share. The offer price was later raised to S$0.40 apiece in June.

Shares of Hwa Hong ended Tuesday unchanged at S$0.40, prior to Sanjuro’s announcement.