Sanjuro pushes for Hwa Hong directors to take a stand on their shareholdings

SANJURO United wants Hwa Hong’s current directors who own shares in the property group to take a stand earlier about whether they will accept an offer Sanjuro has made for the company.

“The minority shareholders who put their trust in the directors, and their stated intention not to tender their shares, should have sufficient time to reconsider if these directors change their minds and tender their shares,” Gerald Chiu, director of Sanjuro United and managing partner of Dymon Asia Private Equity told The Business Times.

Sanjuro is a consortium that has made a mandatory conditional offer for Hwa Hong, with the intention of privatising the company. The parties behind Sanjuro include Hwa Hong ’s former group managing director Ong Choo Eng and his son Ong Eng Yaw, as well as Dymon Asia Private Equity.

Hwa Hong’s board comprises 5 directors, 4 of them members of the Ong family. These current Ong directors are related to Ong Choo Eng, but are not part of the offering consortium.

A report in Lianhe Zaobao in May noted an intergenerational dispute among the members of the Ong family controlling Hwa Hong. Members of the family had faced off in court in 2003 and 2007.

The current Ong directors together with their immediate family members own 29.3 per cent of Hwa Hong, according to the offer circular dated Jun 14.

In the circular, the Ong directors, following the recommendation of the independent financial adviser, Provenance Capital, had recommended shareholders accept the offer. But they also said they do not intend to accept the offer themselves, as they remained focused on determining whether shareholder value can be maximised through a separate exercise.

After Sanjuro made its offer, Hwa Hong had appointed Evercore Asia as a financial adviser to, among other things, solicit other potential offers.

The Ong directors reserved their rights to review their position on whether to accept Sanjuro’s offer if a superior offer did not emerge.

On Jul 4, the Ong directors announced that they “are increasingly of the view that maximising shareholder value may be best achieved outside the timeline and constraints imposed by a general offer”.

While they reiterated their intention not to accept Sanjuro’s offer, they continued to reserve their rights to review that position.

The Securities Industry Council on Jul 7 imposed a Jul 25 deadline for competing offerors to make a firm offer for Hwa Hong or confirm they do not intend to make an offer.

Chiu believes it would be best if the current Ong directors also state their firm intentions in good time.

“The worst case scenario for minorities would be if the directors change their minds at the last minute, and retail investors do not have enough time to react,” he said.

As of Jul 5, the number of shares owned, controlled or agreed to be acquired by the offeror and its concert parties, as well as valid acceptances of the offer, amounted to 38.2 per cent of the total number of shares.

The offer closes on Aug 1, 5.30pm, with no further extension. It is conditional on the offeror and its concert parties having more than 50 per cent of the total number of shares at the close of the offer.

Should the Ong directors and their immediate family members accept Sanjuro’s offer, the offer would turn unconditional.

Evercore receives a success fee should Sanjuro’s offer or any other competing offer be declared unconditional as to acceptances. If the Sanjuro offer of S$0.40 per share turns unconditional, Hwa Hong would need to pay success fees of between S$4.2 million to S$8.4 million to Evercore.

Ong Eng Yaw, director of Sanjuro United and former acting group managing director of Hwa Hong, said: “Shareholders may want to see this offer as a clean break and an opportunity for them to exit. We are giving them a solid offer of cash at a value that’s fair and reasonable.