“SMI receives RM47 million takeover offer from key shareholders, including Francis Leong and Techbase subsidiaries, triggering a mandatory offer under Malaysian laws.”
Kuala Lumpur, 21th Aug 2024, 11.48pm – On Tuesday, South Malaysia Industries Bhd received a takeover bid exceeding RM47 million from a group of key shareholders.
The shareholders — Francis Leong and two subsidiaries of Techbase Industries Bhd (KL) — have proposed acquiring the remaining shares they don’t already own at 45 sen per share, as stated in an exchange filing. They currently hold over half of SMI’s issued shares.
The offer price is 11% higher than SMI’s closing price of 40.5 sen on Monday. SMI’s shares surged 12% to 45.5 sen on Tuesday before trading was suspended.
The offer follows an agreement signed by Francis Leong, through his private company Target 1 Sdn Bhd, with Techbase’s Honsin Apparel Sdn Bhd and HiQ Media (Malaysia) Sdn Bhd. This agreement formalizes their collaboration to jointly exercise voting rights and gain control over the management of SMI and its subsidiaries.
Leong, who also serves as the executive director of property developer Hong Seng Consolidated Bhd (KL), has been steadily acquiring significant amounts of SMI shares since May 2024 through Target 1 via open market purchases and direct business transactions.
Leong has since become the largest shareholder in SMI, holding a 30.67% stake. Honsin has been a shareholder since September 2022 with a 16.86% stake, while HiQ acquired a 2.52% stake in February 2023.
Collectively, they now hold 50.5% of SMI, which has triggered a mandatory takeover offer under Malaysian takeover regulations and capital market laws.
Despite this, the offerors, led by Leong, plan to retain SMI’s listing on the Main Market of Bursa Malaysia.
In a separate statement, Techbase noted that Honsin and HiQ are eager to collaborate with Target 1 to “achieve their common goal by improving SMI’s operational efficiency” and increasing shareholder value.
“Both parties will fully cooperate, providing necessary assistance and sharing relevant information for the mandatory general offer,” Techbase stated. Additionally, they plan to jointly nominate one representative director for SMI.
Honsin has previously attempted to gain control of SMI’s board. In March this year, Honsin sought to appoint Hong Zheng Hong and Tan Eng Gooi as directors during the company’s annual general meeting.
However, SMI blocked these resolutions, citing a rule that prohibits the appointment of any nominee from an offeror or persons acting in concert to the board, as well as the exercise of voting shares or rights, until an offer document has been dispatched.
Last year, Honsin tried to remove SMI’s board of directors through an extraordinary general meeting, but this effort was derailed as both parties became entangled in a series of legal disputes.
In March, SMI filed for a judicial review against the Securities Commission Malaysia, seeking to compel the regulator to address its complaint about an alleged violation of the Capital Markets and Services Act 2007 by Honsin, HiQ, and other associated parties.
In its March 23, 2023 complaint, SMI claimed that Honsin and the parties acting in concert with them had gained control of more than 33% of the company’s shares without making a mandatory takeover offer.
Additionally, last month, another significant SMI shareholder, Mah Sau Cheong, filed a lawsuit against Techbase, YB Ventures Bhd, and their subsidiaries, accusing them of manipulating SMI’s shares.
Mah also sued SMI, alleging that the company had engaged in share manipulation.
