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SIAS urges Vard directors to explain independence, and Fincantieri to up delisting offer

THE Securities Investors Association (Singapore), the investor advocacy group also known as Sias, has asked the directors of Vard Holdings to explain their independence in the spirit of the governance rules, and called on parent company Fincantieri to better its delisting offer.

In a press statement on Tuesday, Sias noted that minority shareholders have questioned the independence of the firm's directors with regard to a delisting offer from majority shareholder Fincantieri. Sias specifically highlighted the role of Roy Reite, who is the executive director and chief executive of Vard, and who is also an independent director. Vard's independent directors have recommended that shareholders accept Fincantieri's offer.

"While the company has cited the recommendations do not contravene the Singapore Code on Takeovers and Mergers, Sias is of the view that greater transparency, accountability and disclosure is required," Sias said.  As such, Sias called on each director to state whether the director is independent, and explain why "according to the spirit of the law and not the letter".

The advocacy group also noted that many minority shareholders are sitting on shares purchased above the offer price, and that Fincantieri should up its offer to shareholders - failing which they may not accept the delisting offer.

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"In the interest of moving from this deadlock with minority shareholders, coupled with the costs of maintaining Vard’s listing, Sias calls on Fincantieri to better the offer so that it will be a win-win situation for all stakeholders," Sias said. 

In light of the many issues raised by minority shareholders regarding Vard's delisting proposal, Sias has called on the company to engage shareholders, and welcomes the Singapore Exchange Regulation's (SGX RegCo) decision to require Vard to convene another extraordinary general meeting (EGM) to correct the irregularities in its delisting circular. 

BT earlier reported that Italy's Fincantieri, which already has more than 80 per cent stake in Vard, has made an exit offer to buy the remaining shares 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, Vard 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 response, the shipbuilding and repairing company said that an error in its independent financial adviser’s (IFA) report would not have changed the adviser’s opinion.

It added that the calculation error by CIMB Bank in the valuation multiples of the comparable companies table (such as Sembcorp Marine’s historical price to net asset value multiple) "does not have a material impact" on CIMB’s overall assessment, and that CIMB had maintained its opinion that the exit offer price was "not fair but reasonable". 

This is because even with a correction, the price-to-net asset value (P/NAV) multiple implied in the exit offer price continued to be well within the range of P/NAV multiples of the comparable companies.

However, in a regulatory announcement, the SGX mentioned that the exit offer was at a P/NAV multiple of 0.9 times, while the correct P/NAV of comparable companies should have been 1.2 times instead of the erroneous 1.1 times. The error resulted in the exit offer appearing closer to the mean multiple than it actually is, the SGX said.

"This historic action by SGX Regco highlights the importance of protecting minority interests... While the company and its advisers highlight that the impact of the inaccurate independent financial adviser’s (IFA’s) report would not change their recommendation, due process must be adhered to, and the interests of minority shareholders cannot be dismissed," Sias said. 

Sias also noted that SGX RegCo has required an updated IFA letter, and called on the IFA to take into account the firm's latest developments.

According to Sias, many minority shareholders have also expressed their unhappiness as they believe that the earlier IFA recommendation on the offer as "not fair but reasonable" is inaccurate, as an offer that is "not fair" cannot be "reasonable". 

The advocacy group added that since the IFA's view is deemed as not being fair, shareholders will have the right to reject the offer.

Shareholders who wished to be advised of any upcoming discussions can register their interest at admin@sias.org.sg with their contact details and particulars, Sias said. 

As at 3.02pm on Tuesday, shares in Vard Holdings were trading unchanged at S$0.25 apiece.