Minorities block Challenger's delisting; exit offer will lapse

Singapore

THE voluntary delisting of consumer electronics retailer, Challenger Technologies, failed to go through on Thursday, as some 11.36 per cent of shareholders present at the extraordinary general meeting (EGM) voted against the resolution.

Challenger shares ended flat at S$0.545 after its trading halt was lifted, just a shade above the offer price of S$0.54 after subtracting the FY2018 final dividend of S$0.02 per share .

This is the second lapsed privatisation deal this week, after the buyout offer for mainboard-listed Indofood Agri Resources fell through on Wednesday due to insufficient acceptances.

There has not been a voluntary delisting deal that was successfully blocked by minorities in recent history. Regulations currently allow holders of more than 10 per cent present and voting to veto a voluntary delisting deal.

At the 45-minute EGM attended by about 70 shareholders, minorities, led by James Hay, director at Pangolin Investment Management, continued to bemoan the too-low offer price at the question-and-answer session before putting the resolution to the vote.

They erupted into applause when the announcement was made that the deal had fallen through. With the delisting now rejected by shareholders, the exit offer will lapse, and the offeror and its concert parties will not be able to make another offer for the shares in the next 12 months.

In a statement after the EGM, Challenger's CEO and founder Loo Leong Thye said: "I respect the decision made by Challenger shareholders and appreciate everyone's support of the company in our journey to where we are today. I am also heartened that many shareholders do not want to see us go and would like to remain invested in Challenger as a listed vehicle. While the retail business environment is challenging, we will continue to do our best and grow the company."

Speaking to media after the meeting, Mr Hay said that he was "delighted" with the outcome, both for Pangolin and individual retail shareholders.

He said that Pangolin has been involved in similar shareholder activism before, and recently also successfully fought for a higher offer price from the Wen family in the privatisation of Selangor Properties Bhd in Malaysia.

For Challenger's case, for weeks leading up to the EGM, the company had published its research on its website and asked shareholders to contact the company if they were planning to vote against. The combined shareholding approached 10 per cent "within a couple of weeks", including Pangolin's stake of 2.94 per cent.

Asked what he hopes Challenger will do with the episode now behind it, he said: "Mr Loo should probably, I would hope, stop talking to Dymon (Asia) and just work through all of us."

Dymon Asia Private Equity owns 30 per cent of the offeror, Digileap Capital, while the Loo family owns the remaining 70 per cent.

Mr Hay also brushed off Mr Loo's comments two weeks before the EGM saying that Pangolin had earlier made two unsolicited offers to sell its stake to the majority shareholder.

He said that Pangolin is a fund manager, answerable to its own shareholders, but so far has remained committed to investing in the company, having stayed an investor for the past nine years.

He added that Mr Loo should be happy with the outcome too. "Because actually people are saying we want to remain shareholders in your company, Mr Loo," he said, adding that it is also a vote of confidence in Mr Loo and his executive team.

In an e-mail to minority shareholders, however, he noted that the company's independent directors, who represent the interests of the minorities and had recommended accepting the "too-low" offer based on the independent financial adviser's report, have "lost credibility".

A shareholder, who only wanted to known as Watson, said: "Well, it's not the ideal outcome. Because I always believe in a win-win situation. Now you have Digileap who wants to privatise. They've lost and we've won . . . A win-lose outcome is never the best outcome. But a lot of us are long-term shareholders. I've been in the company for a few years, and it's a good management, we like them, so I guess it's bittersweet.

"All we were asking for is a fairer offer, not a sky-high offer, so the fact that there was no negotiation at all was a strange one."