No end to hairy fights at Datapulse

HAIRSPRAY should be a cutesy musical about a pleasantly plump Baltimore teenager coming of age in the 1960s - not at the heart of a feud at a mainboard-listed disk drive maker.

But a row has been brewing at Datapulse Technology since last November, when co-founder Ng Cheow Chye sold his stake to the unrelated Ng Siew Hong at a premium.

Longtime directors stepped down. A new board was appointed, including two men later revealed to be acquaintances of Ms Ng Siew Hong.

And Datapulse embarked on the acquisition of a company involved in the making of "hair care, cosmetics and other homecare chemical products".

This deal has earned the ire of another set of Ngs, no relation: the family of the other Datapulse co-founder, Ng Khim Guan. Their investment vehicle and Mr Ng's daughter, Ng Bie Tjin, have launched a bid to oust most of the new board and stop the proposed personal care product diversification.

The latest salvo in the civil war came last week - a month after the Ngs' requisition notice for an extraordinary general meeting (EGM) to put the matter to a shareholder vote.

Datapulse had afterwards announced an EGM of its own, for shareholders to consider and approve the diversification.

But, with Ms Ng Bie Tjin breathing down its neck, the company said late on Jan 26 that it reserves its right on whether to deem the requisition notice valid. This is based on Datapulse's claim that the Ngs held fewer shares than they said they did when the notice was sent out.

A corporate governance veteran, who has been watching events play out, called the move "basically a stalling tactic", as the smaller amount would still put the Ngs above the threshold needed to call for an EGM.

Two key themes have cropped up, even as the back-and-forth exchanges via the Singapore Exchange website give the peanut gallery gossip fodder.

First, boardroom blood sport is hardly unheard of. But with the turmoil engulfing Datapulse, there are signs that sharks smell blood in the water. An open letter questioning the competence of the board has already been posted online, signed by private fund manager Ascapia Capital.

Ascapia is no stranger to throwing down the gauntlet with such notes. It did so in 2015, when it called on Pacific Century Regional Developments to give minority shareholders a "truly fair price" in the event of a delisting. So the latest missive may point to Ascapia being keen on scooping up shares in Datapulse. And if it garnered enough of a stake, the Ng-and-Ng feud could turn three-cornered.

Due diligence issue

The second issue at play would be the circumstances surrounding the Wayco deal so hotly contested by Ms Ng Bie Tjin.

Way Company, which sold Wayco Manufacturing (M) to Datapulse, is also Wayco's main customer.

The Singapore Exchange has asked what due diligence Datapulse did before the acquisition. And the reply was a real eyebrow-raiser.

"The company did not conduct extensive due diligence on the target company," the board said on Dec 28.

It added that this is because the new Datapulse chief executive is familiar with the business, from his time on the payroll of Way Company.

To be sure, Datapulse has said that it will get shareholders to vote on its proposed diversification.

Such a move should be par for the course. For example, precision manufacturer Allied Tech said just last week that it would seek shareholder approval for its move to buy a majority stake in an online ticket platform, while BreadTalk Group had to explain to the bourse operator why it need not get approval for an investment in China's healthcare real estate market.

But set aside any concern over whether a maker of optical disk drives can call it quits, sell its manufacturing site, and turn to hairspray overseas. Many companies have fingers in a variety of pies.

And the S$3.5 million price tag for Wayco may well pale in comparison with the S$53.5 million sale of Datapulse's Tai Seng headquarters.

But the decision to forego "extensive due diligence" is still not lightly made. Singapore Post learnt this the hard way when legal counsel WongPartnership last year flagged inadequate due diligence in the national postman's purchase of TradeGlobal.

Every time Datapulse answers questions in Singapore Exchange filings, more questions seem to crop up - such as why it has only just commissioned a strategic review of the Wayco deal.

The ongoing company tussle is a reminder that the optics can get ugly - and fast - when a board makes decisions sans shareholders and, by its own admission, sans due diligence.

All may be fair in love and war - or, at the very least, legal. But, as the adage goes: "Caesar's wife must be above suspicion."