Nico Steel yet to address questions over plans to delist without an exit offer: Sias

AHEAD of an extraordinary general meeting (EGM) on Friday (Jun 30) for shareholders to vote on Nico Steel’s proposal to delist without an exit offer, the Securities Investors Association (Singapore), or Sias, said that it has “yet to receive a reply” to questions raised on behalf of shareholders.

In a letter to the chairman and board of Nico Steel on Thursday, Sias president and chief executive David Gerald said that the investor rights advocate had been approached by “some concerned shareholders”.

On Jun 23, Sias sent questions to Nico Steel about their annual report.

Among other things, Sias asked about efforts that Nico Steel’s independent directors (IDs) took to prepare the company to make an exit offer, after receiving the notification of delisting by the Singapore Exchange (SGX).

Sias asked if the IDs had considered a sale and leaseback of the group’s Loyang property, to monetise its assets and put the company “in a position to make an exit offer which would not significantly and adversely affect the company’s operations”.

Nico Steel’s board had disclosed that the group’s net tangible assets stood at US$16.7 million as at November 2021 and US$16.1 million as at February 2023, noted Sias.

It added that the group was in a net cash position, with cash and cash equivalents of as high as US$5 million in February 2019.

Given that a voluntary winding-up resolution is an option available to shareholders, Sias also asked whether the IDs had considered putting that resolution to a vote at the EGM.

“Shareholders have the right to ask and understand the actions taken by the board and the company regarding the provision of an exit offer,” Gerald said in the letter. “It is crucial to know why such measures were not pursued, leading to the proposed delisting without an exit offer.”

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He pointed out that “about 1,400 shareholders will be negatively affected”.

Gerald noted: “Sias and your shareholders hope that the board and the management will address these questions during the EGM and subsequently publish their responses on SGXNet for the benefit of all shareholders.”

Nico Steel responded to the questions from Sias in a bourse filing late on Thursday night.

The company said that while it has statutory reserves, this amount would not be sufficient to make a fair and reasonable exit offer.

It added that its cash and cash equivalents position are not to be confused with distributable reserves, which are legally available for making a distribution.

With reference to the suggested sale and leaseback of its Loyang property, Nico Steel said the sale of any key operating asset of the company would “significantly and adversely affect the company’s operational and financial position and would materially prejudice its going concern status”.

The board added that the IDs did not consider a voluntary winding-up resolution as “the group is a bona fide going concern”.

“The IDs have stated that they are of the opinion that the proposal to delist without an exit offer ‘is in the best interests of the company and its shareholders (including minority shareholders)’,” Nico Steel said.

It added that the group is “finally realising some of the expected results” from its “new business strategy”.

The group in 2017 embarked on its new business strategy, which included refocusing on its core competencies of advanced metallurgical technology and capability as a total-solutions provider.