Sias calls for Gear minority shareholders to ‘vote wisely’ at EGM; says IFA justifications subjective

IN its latest salvo over coal producer Golden Energy and Resources’ (Gear) privatisation deal, the Securities Investors Association (Singapore), or Sias, doubled down on its call for the company’s minority shareholders to reject the proposed voluntary delisting.

Sias, in its letter signed by president and chief executive David Gerald on Monday (Jun 5), reminded shareholders that it is of “utmost importance” that they pre-register for the online extraordinary general meeting (EGM) by 10 am on Jun 6. 

Registration is necessary to ensure that they are able to vote on the two critical resolutions – namely a distribution in specie of Gem shares, and the delisting of Gear, he said.

He added: “It is crucial to note that the distribution resolution and the delisting resolution are inter-conditional. If either of these resolutions is not approved at the EGM, none of the proposed resolutions will be carried out.”

The letter came a few days after W Capital, the independent financial advisor (IFA) in Gear’s exit offer, hit back at Sias’ criticisms of its opinion, by defending its approach to valuing the shares of Golden Energy Mines (Gems) and its valuation methodologies for the exit offer.

Gerald on Monday said Sias was exhibiting professional scepticism in publishing its criticisms, reiterating that it agrees with the IFA that “we can agree to disagree”.

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“We agree, as we stated earlier, with the IFA that no single method of valuation will be met with universal acceptance,” he added.

He also said that while W Capital may consider their reasoning to be clear-cut, Sias’ feedback is that the IFA’s justifications are “subjective and may not be as convincing as they perceive them to be”. 

For example, while Geo Energy Resources was included because it is “broadly comparable to Gear”, Gerald said Sias can likewise point out that Geo Energy is an Indonesia pure-play with thermal coal assets while Stanmore is a significant metallurgical coal player. 

“These differences raise questions about the true comparability between the two companies,” he said. 

Gerald continued: “Also, how else can shareholders understand that the IFA ‘considered the mid-point value of the (sum-of-the-parts) valuation of Gear of S$1.072 for the maximum value of the shares’? 

“Also, as a sense check, what is the EV/TTM Ebitda (enterprise value to earnings before interest, taxes, depreciation and amortisation over the previous 12 months) of Gems, and what is that of Gear?”

Gerald, meanwhile, acknowledged that there are more appropriate channels to address concerns around the fact that IFA opinion has historically been a one-way street, with minority shareholders having no say in the choice of the IFA and the IFA opinion.

Nevertheless, with the EGM coming up in a few days, Sias is calling on minority shareholders to “review the EGM circular and vote wisely at the EGM”, he said. 

With a skew of going-private offers hitting the market, Sias stands by its view that the IFA process can be and should be improved, he reiterated. 

“More can clearly be done to protect the investing public when it comes to takeovers-cum-delistings,” he said. 

“At the end of the day, minority shareholders will make the decision to follow or reject the IFA’s opinion and the recommendations of the non-conflicted directors.”

Gear shares closed flat at S$0.94 on Monday.