SGX orders Vard to hold new EGM

Singapore

THE minority shareholders of Vard Holdings achieved a breakthrough on Thursday when Singapore Exchange Regulation (SGX RegCo) ordered the shipbuilder to hold another extraordinary general meeting (EGM) to get their approval on its delisting plan.

The regulator said it had reviewed the company's EGM submissions, and noted certain inaccuracies in the financial evaluation of the exit offer presented by the independent financial adviser's letter.

Italy's Fincantieri, which already has more than 80 per cent stake in Vard, has made an exit offer to buy the remaining shares that it does not already own at 25 Singapore cents apiece. This, its second bid, is one Singapore cent more than its initial offer in 2016. On April 30, 2018, it had sought shareholders' approval to its delisting proposal at an EGM, which ended with the results to the delisting resolution disputed and retail investors unhappy over the errors in the circular to shareholders.

In its letter to Vard's independent directors, CIMB, stated that the historical price to net asset value (P/NAV) for Sembcorp Marine was 1.2 times, when it should have been 1.7 times.

"The inaccuracy in Sembcorp Marine's historical P/NAV multiple has a consequential effect on the mean P/NAV multiple of the comparable companies stated in the IFA letter. The correct multiple (for the mean P/NAV) should be 1.2 times instead of 1.1 times as erroneously stated," SGX RegCo said.

It also noted that these figures were part of the information that shareholders took into consideration to make an informed decision on the proposed voluntary delisting. The inaccuracies have resulted in the exit offer, at a P/NAV multiple of 0.9 times, appearing closer to the mean P/NAV multiple of the comparable companies than it actually is.

Given the inaccuracies, the regulator's nod to the proposed delisting remains conditional. Vard must submit an updated draft delisting circular. This must include an updated IFA letter with the inaccuracies corrected and reflecting the current developments of the company. It must also issue an updated independent directors' recommendation to shareholders, and convene the new EGM based on the updated circular.

Vard said the exit offer will be extended to 5.30pm on July 20, 2018, from 5.30pm on May 14, 2018, or later date(s). The exit offer will be open for acceptances by shareholders for at least 14 days after it is declared unconditional.

Shareholders who have accepted the offer will be given the choice whether or not they want to retract their acceptance. Those who want to withdraw their acceptance must give written notice to Fincantieri. CPFIS investors and Supplementary Retirement Scheme investors who wish to reject the offer should check with the agent banks or depository agents.

Vard has prepared an indicative timetable in which it expects to receive regulatory clearance for its updated delisting circular on June 11. The updated circular is expected to be despatched on June 21 and the EGM will be held on July 6.

Stefanie Yuen Thio, joint managing partner at TSMP Law Corp, said if Fincantieri does not change its vote at the new EGM, the company is likely to be delisted. "That said, this new EGM would give minority shareholders a second chance to air their views and, given the complaints about how the first EGM was carried out, to perhaps try to seek a different outcome."

NUS Business School Associate Professor Lawrence Loh, who is also a director at the Centre for Governance, Institutions and Organisations, said what SGX RegCo is doing is unprecedented.

"It reflects the increasing trend by the regulator to be more interventionist when something is amiss, and willing to take on company-specific action. This more direct approach in regulating companies is much preferred than spraying across the horizon, without actually targeting or hitting anyone specific."

As for a jaded minority shareholder of Vard, S Nallakaruppan, he hoped Fincantieri will do what is right to promote goodwill among long suffering retail investors.

"The offer is far too low. With the strong recovery of oil prices to a 4-year high and with several contracts won recently, Vard should command a much higher valuation."

Back in 2013, Vard's chief executive officer Roy Reite had rejected Fincantieri's offer at S$1.22 a share as inadequate, and recommended that shareholders hold on for a better price.

On Thursday, Vard revealed it suffered a net loss of 38 million Norwegian krone for the first quarter ended March 31, 2018, compared to a net loss of 27 million Norwegian krone a year ago. This is despite a 29 per cent rise in revenue to 2.3 billion Norwegian krone, due to the increased activity, especially at its Romanian yards. Its cash and cash equivalent stood at 632 million Norwegian krone, compared to 908 million Norwegian krone previously. Vard's aggregate order value at the end of the quarter was 25.1 billion Norwegian krone, and the order book comprised 46 vessels. The company said it was "well positioned in the growing expedition cruise vessel market".

READ MORE: Rare victory for minority shareholders at Varda