Saturday, 27 August 2011

PMI: a sad story for Minority Shareholders

The Star:

"Pan Malaysian Industries Bhd (PMI) yesterday told Bursa Malaysia that it had received an unconditional takeover offer from a consortium of three companies at a cash offer price of 4.5 sen for each offer share."

"If PMI could not comply with the shareholding spread requirement as a result of acceptances received under the takeover offer, the consortium said they would delist PMI."

The "infamous" GO (General Offer) with "delisting threat" against which Minority Investors hardly have any chance to fight unless they don't mind ending up with shares in an unlisted company (and even then their shares could be Mandatory Acquired). The price is only 4.5 sen, that sounds like a bloody shame, the share traded routinely higher than that, even in 2011:

This is one company that has been a nightmare for its Minority Investors:

In the past 10 years several right issues which equal to negative dividend payments (from the investors to the company, if people don't subscribe they get further diluted at a low price). It booked routinely losses but due to the tight control through its Majority Shareholder it could not change its management, hoping for a new team to restructure the company.

This company has been involved with the delisting of Metrojaya, another really bad case of Corporate Governance, as was pointed out by Ze Moola:

A sad state of affairs and as usual it is the Minority Shareholders who take the brunt.


  1. What option the minority have to fence off this takeover?

  2. Ah, that is very simple: do nothing! Minorities still control a large amount of shares, if they hold on to 25% by not accepting the horrific low offer, they have a chance. This will signal to the majority shareholder that he has to come up with a better offer. So my advice is to simply throw away the offer document, don't even bother to read it.

  3. Minority Shareholders control about 44% of the shares, rather far away from the dreaded 25% (the minimal shareholding spread). The rights offer in 2009 had only 31% applying (rest was oversubscribed by the Majority Shareholder), aparently they had enough of it. If they do the same now, the company might stay listed and there might be another offer on the table, a better one.

    Another option: Fight! File a complaint to SC and copy to MSWG.

    "provide fair and equal treatment to all share-
    holders, in particular the minority shareholders"

    SC doesnt like to enforce this rule, but the rule is there not for nothing. Ask yourself the question: "are the minority shareholders treated fairly?".

  4. Will the privatisation of PMI triggered the privatisation of MUI since they both share the common shareholder? Look at the Leong Hup Holding Berhad case whereby Teo Seng and Emivest, both subsidiary/associate of Leong Hup was affected by the privatisation of Leong Hup. Your take? H2O

  5. Back of the envelope calculation, PMI will cost 28m to privatize, MUIB 330 million, both at current price.

    I am not privy to the amount of assets/cash of the majority shareholder, but the second one might be too big for the moment.

  6. The cappping criteria of 2% specified in the Take-over Code said who own a shareholding more than 33% but less than 50% within 6 months shall trigger MGO if they have acquired 2% in that period. Since the major shareholder/ Offeror own about 30% in MUI and will be owning another 19% which will be inherited from PMI after the completion of privatisation, all these point to a possible MGO of MUI.

    Guess SC has to follow up the case...

  7. Hi, interesting, you might indeed be right. I remember in some cases they can ask for exemption from the SC so that they don't have to make a MGO, no idea when that is exactly granted. There should be transparency regarding that issue.

  8. Agreed. There are just too many leeway for SC to act in/out/around/up/down the Code... Transparency is an issue with SC. Maybe SC is bound to be secretive just like those peers in the West, in particular, the United States. But on the other hand, investors also have to bear certain responsibilities, do their part and highlight/complain to SC. Just too many of them choose to be the silent majority. Sigh... H2O

  9. Agree.

    SC is often in the position of a judge, but a judge has to write his/her judgement, and then you get case law:

    "In law, case law is the set of reported judicial decisions of selected appellate courts and other courts of first instance which make new interpretations of the law and, therefore, can be cited as precedents in a process known as stare decisis. "

    That was exactly what Claire Barnes was also aiming at with her recommendation regarding the Blueprint: less rules, more case law.

    But for that to work we need transparency. SC is hiding too much behind their confidentiality clause.