Going gets tough for private aspirations
TAKING a company private in Hong Kong has never been so tough. In the past year, seven companies have attempted to leave the public realm, and three either failed or are ensnared in talks with minority shareholders.
Four companies - Hopewell Holdings' Consolidated Electric Power Asia, Kong Wah Holdings, the Noble Group, and Eu Yan Sang - got out with no problems. Behind their parents' decision to pull them out of the market were either financial difficulties, languishing share prices, or, in Cepa's case, a plan to sell a unit.
There have also been a few failures, most recently Peregrine Investments Holdings in its bid for Kwong Sang Hong International this month, and, before that, Yaohan International Holdings' bid to make Yaohan Hong Kong a wholly owned subsidiary faced the axe. San Miguel Brewery's bid to go private, meanwhile, is languishing five months after it was announced.
The schemes have failed or stalled for failing to meet the 90 per cent shareholder-approval rule. Since a change in the takeover and merger code in April 1993, a company must have the backing of 90 per cent of its minority shareholders before it can go private.
A few weeks ago, Peregrine, which said it wanted to buy up Kwong Sang Hong because the property company's shares were trading at a discount to underlying asset value, came very close - 87.5 per cent of voters present at a special meeting voted in favour of a takeover.
Peregrine, which by law has to wait a year before making another bid, plans to lobby the Securities and Futures Commission (SFC) for a change to the 90 per cent rule.
'I think there is a groundswell of opinion favouring a change of rules,' Alan Mercer, managing director, legal, said. 'For one thing, 90 per cent is a very high threshold, since many companies have a large list of shareholders who never respond to correspondence and never collect dividends. So 90 per cent of a small group of voters is very high.' In Kwong Sang Hong's case, Mr Mercer said, 40 per cent of the company's shareholders voted and a single shareholder - an individual not a fund - easily blocked the bid, citing unsatisfactory terms. Peregrine had offered 200 of its shares plus $1,700 in cash for every 1,000 Kwong Sang Hong shares.