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Business as usual for ICP as concerns raised about operations, business model do not impact management
WE refer to the article "Datapulse's penchant for odd bedfellows comes to fore again" by Anita Gabriel (BT, Sept 4 2018). The article makes certain references to ICP Ltd, together with its subsidiaries (the "ICP Group") and we would like to respond to it.
Business model of the ICP Group
The article draws reference to ICP's strategy to expand into hotel investment and now going back to its previous strategy of being asset-light. The two strategies are not mutually exclusive. The long-term strategy of the ICP Group to expand its hotel investment and management business under the Travelodge brand would continue under a relatively asset-light approach.
Management of conflict of interest
Listed companies can and do transact with interested persons. Chapter 9 of the Catalist Rules sets out the provisions to regulate such transactions. There are additional safeguards from Independent Directors, regulators (SGX and Catalist Sponsors) and ultimately shareholders who have the final say (in instances which require specific shareholders' approval). The article raised serious concerns about the result of a proposed related-party transaction. We do not think that the proposed transaction should be quickly pre-judged to be to the disadvantage of other shareholders, especially when major terms have not yet been agreed upon between the parties.
It should also be pointed out that at the time of the signing of the letter of intent, the transaction did not involve related parties. Subsequent to the rather acrimonious EGM of Datapulse Technology Limited, ICP, after considering its business plans, submitted a proposal to the board of Datapulse to consider the purchase of a hotel ICP owns in Kuala Lumpur as an acquisition that would be agreeable to the two major shareholders of Datapulse. With this, we had hoped that the dispute between these two major shareholders would come to an end for the benefit of the shareholders. The board of Datapulse and the two major shareholders considered this suggestion favourably and discussions carried out over several weeks culminated in the signing of a non-binding letter of intent (LOI) on July 16. Subsequently, Aw Cheok Huat (ICP's chairman and controlling shareholder) advised the board of ICP that he had separately entered into an agreement with a major shareholder for the acquisition of a 10 per cent stake in Datapulse, and he recused himself from all involvement in the transaction.
ICP acquired the Travelodge trademark rights in 2014 and began building its hospitality business thereafter. Losses are never welcome, but, in the case of a startup in such a diverse geographical region, unavoidable. Significant operating expenses, in particular staff cost, need to be incurred to set up the infrastructure. We had to build up a good integrated hospitality operating system and concurrently commence the marketing and development of the Travelodge brand in the region. The result is the current higher revenue contribution from the hospitality division with an increase from S$0.2 million in the year ended June 30, 2017 to S$1.4 million in the year ended June 30, 2018. The ICP Group currently has seven management and franchise contracts and is in the process of securing additional contracts in 2018.
Departure of financial controllers
The reasons for the departure of the financial controllers are disclosed in the respective announcements. There were no unresolved differences in opinion on material matters between them and the board of ICP.
Investment in Tiaro Coal
As disclosed in the annual report of ICP for the year ended June 30, 2015, Tiaro Coal Limited had been embroiled in several disputes with its former controlling shareholder - Hudson Resources Limited and its related companies. As a consequence, shareholders' support was suspended and Tiaro was placed into voluntary administration by its board of directors on Mar 31, 2015 and consequently commenced liquidation proceedings on Dec 10 that same year. ICP had considered the affairs of Tiaro and has adopted the conservative approach to provide full impairment on its investment in Tiaro.
Following their appointment, the liquidators conducted investigations into the past affairs of Tiaro. Based on their investigations, the liquidators have identified possible claims against various parties including Hudson Resources and have since commenced litigation proceedings against Hudson Resources and certain directors/past directors of Tiaro (does not include any of the directors of ICP).
Claim filed by Hudson Resources
AceA Resources Pte Ltd believes there is no merit to the claims filed by Hudson Resources at all. This view is supported by AceA Resources Pte Ltd's legal advisers. We believe this action arose directly from Hudson Resources itself being sued by the liquidators of Tiaro for a substantial sum.
(Editor's note : On Sept 10, ICP announced that both parties - seller and Datapulse - have mutually agreed to terminate the LOI as due diligence on the proposed acquisition was not completed by the stipulated deadline.)