SINGAPORE Exchange Regulation (SGX RegCo) has issued a directive on Tuesday (Sep 26) for the delisting of Boustead Projects, as the issuer has not ensured that at least 10 per cent of the total number of issued shares are held by the public.

In its notice of compliance, the frontline regulator also directed Boustead Projects and/or Boustead Singapore to make an exit offer to the shareholders that is “fair and reasonable”, with the proposal to be provided within one month from Tuesday.

Boustead Singapore in February announced a voluntary unconditional general offer to privatise its real estate unit, Boustead Projects.

The initial offer price was S$0.90 per share, and this was subsequently raised to S$0.95 per share on Feb 22.

The independent financial adviser (IFA), PrimePartners Corporate Finance, opined that the offer was “not fair but reasonable”.

In its report, the IFA noted that the final offer price of S$0.95 was not within its final estimated valuation range of between S$1.17 and S$1.38.

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The premia implied by the final offer price over the company’s historical volume-weighted average price was also lower than the mean and median premia of precedent privatisation transactions. 

At the close of the offer, Boustead Singapore and its concert parties owned or controlled an aggregate of 299.2 million shares, representing approximately 95.5 per cent of the total number of shares in the company.

As less than 10 per cent of Boustead Project shares were held by the public, the counter was suspended in March.

Boustead Singapore had disclosed previously that it would not be able to avail itself to the powers of compulsory acquisition under the Companies Act.

Under section 215(1) of the Companies Act, an offeror who acquires at least 90 per cent of the total number of shares (other than those already held by the offeror, its related corporations or nominees), would be entitled to exercise the right to compulsorily acquire all the shares from shareholders who have not accepted the offer.

The offer for Boustead Projects did not extend to 19.28 per cent of the shares that were held through nominees by chairman and chief executive of Boustead Singapore, Wong Fong Fui.

SGX RegCo said in March that Boustead Projects must restore its free float after its shares are suspended at the close of the takeover offer by its parent company. Otherwise, Boustead Projects would be directed to delist and provide an exit offer which is deemed fair and reasonable by an IFA.

Under listing rules, exit offers in conjunction with voluntary delistings must not only be reasonable, but also fair. An offer is deemed fair if the price offered is equal to or greater than the value of the securities.

Boustead Projects was granted two extensions to explore options to comply with listing rules, but did not restore its free float by the Sep 26 deadline, leading to the notice of compliance and delisting.

David Gerald, president and chief executive of the Securities Investors Association (Singapore), said the association supports SGX RegCo’s actions. “Some six months have elapsed, and there has been no response from the Boustead companies,” he noted.

Corporate governance advocate Prof Mak Yuen Teen from NUS Business School noted that SGX RegCo could sanction companies and directors that fail to comply with listing rules to make a fair and reasonable offer.

“There are plenty of companies that delisted without a mandatory exit offer – often companies that are in very different situations from Boustead Projects as they were mostly companies that have imploded,” he said. “I’ve not seen SGX taking any action for failing to make a reasonable exit offer so I guess issuers may think SGX is more bark than bite here.”

Shares of Boustead Singapore rose 1.2 per cent on Tuesday to S$0.865, before the announcement. Boustead Projects last traded at S$0.955 in March.