Wednesday, 16 May 2012

SEGi: minorities are most welcomed to stay along, really?

Interview in The Star with Nicholas Bloy, managing partner of Navis:

"While minority shareholders of SEG International Bhd (SEGi) will eventually determine whether the company remains listed or gets privatised, Navis Capital Investment Ltd, the party intending to privatise SEGi, isn't too concerned about the final outcome of its bid.

“The outcome of the general offer does not matter to us, as I'm sure we are going to do very well in the next five years regardless of whether the company is public listed or privately held,” said Navis managing partner Nicholas Bloy after SEGi AGM.

On April 25, Navis, together with SEGi group managing director Datuk Seri Clement Hii (who is a party acting in concert with Navis) made a mandatory general offer (MGO) to privatise SEGi at RM1.74 per share and RM1.214 per outstanding warrant.

Bloy said the MGO was a technical matter of securities law, and Navis was obliged to make the offer to the rest of the shareholders.

“We are embarking on a more extensive phase of SEGi, which would incur more costs, and we might see some losses before profits and might even have short-term compression in earnings.

“If minorities are concerned about short-term profitability, they should sell. However, if they are looking at the long term like in five years, they should stay,” he said.

Bloy said he was not an advocate for a single solution for all shareholders as it depended on their own sensitivities and personal circumstances.

“For those who want to accept the offer, we have the liquidity to pay them. However, those who want to go along the ride must keep their eyes wide open and recognise the change in the company's strategic direction and possibly the short-term financial performance of the group.

“If they are aware of these changes, they are most welcomed to stay along,” he said."

Nice and friendly words regarding this General Offer. But the harsh reality seems to be rather different. In the announcement to Bursa Malaysia the following text can be found:

"Does not intent to maintain the listing status" puts a lot of pressure on minorities.

And how can one combine "they are most welcomed to stay" with "compulsory acquire any remaining shares"?

These statements seem to contradict each other.

Again, this is a case of the "infamous" General Offer with "Delisting Threat", so often used in Malaysia, against which minorities hardly have any chance at all to fight.

MSWG had recently questioned the fairness of the offer price, with MWSG chief executive officer Rita Benoy Bushon saying the price should not be less than RM2 as there is a lot of growth potential in the education sector and in SEGi.

SEGi had also released its quarterly results, which saw a 12% higher net profit of RM21.8mil for the first quarter ended March 31 compared with the previous corresponding period.

Revenue rose to RM77.8mil from RM68.47mil previously.


  1. These wave of takeover events suggest small investors with a portfolio less than 100m can hardly make any money in KLSE.

  2. I am less negative, I think smaller pleayers can make decent money if they do their homework. However, I don't like at all:

    - General Offers with delisting threat
    - Related Party Transactions
    - Insider Trading
    - IPO's that have very disappointing results from the word "GO"

    Enforcement simply has to increase a lot.

  3. A rather disturbing quote from TheStar here what Navis Capital managing partner Nicholas Bloy said

    “We are going to grow the company. It is going to be more capital intensive as we will take on more debt.

    “We are simply offering a choice to investors. Sell now with the liquidity or stick around. But do not expect the same dividend profile as we will take on more leverage,” he was quoted as saying.

    Does this sound like he is threatening (sorry cant find a more polite word) existing shareholders that he will change the dividends profile and make the company take on more debt (more risk?)... gosh, it feels hard to be in the shareholders shoes now...

  4. Yes, I agree, I also don't like it at all, and I have read these kind of words many times when a GO is done with "delisting threat". Authorities really should look into these kind of situations, it is long overdue.

  5. when it comes to GO, we must first understand why General Offers exist.

    when a new majority shareholder emerged within a company, with controlling powers, it can be well understood that changes may present, in many ways, which may include changes in the company's strategies and long term plans

    there is no right or wrong in changing how a company choose to leverage (i.e. taking more or less debt etc) because the current controlling owners have their own agenda in creating value for the company.

    GO provides an avenue for the existing(albeit minorities) shareholders to choose whether they want to exit at a "fair price" if they disfavour the new substantial majority shareholder's plans or to stay with the company if they are positive and receptive towards the new management

    so the question really is whether the GO price is fair and justifiable. When it comes to setting a GO price, perhaps the authorities should impose a price-to-earnings ratio peg to other players within the same industry, just like how they do it for IPOs