Trasy Gold deal is still on, says Chan
Despite police probe into former parent firm, dealmaker says it is too late to quit
Dealmaker Charles Chan Kwok-keung has no plans back out of his purchase of a controlling stake in GEM-listed Trasy Gold Ex, despite the ongoing criminal investigation into its principal client and former parent firm, RNA Holdings.
'It's too late to chicken out now,' Mr Chan told the South China Morning Post yesterday. 'My company has already paid the money.'
Main board-listed ITC Corp, controlled by Mr Chan, bought 50.07 per cent of the firm that provides software for metal traders, from an RNA creditor in March for $8 million, or 0.575 cent a share, and issued a general offer for the remaining shares.
RNA, a gold-refining and trading firm, has been implicated in fraudulent investment schemes totalling $1.5 billion and involving 150 mainland gold and jewellery shops, between February and April 2001.
Meanwhile, Trasy Gold executive director Keith Chan Kee-chee said yesterday police had seized documents from the company as part of the investigation into RNA, without specifying when or from where the documents were taken.
His comments followed a company announcement on Thursday night that said: 'There is no investigation into the company and no documents of the company were taken away.'
Charles Chan conceded that problems might lie ahead for Trasy Gold, which was spun off from RNA in 2000 and still maintains deep links with its parent.
'Should I have known that its former parent would be a subject of police investigation, I would definitely not have bought it, no matter how cheap the price,' he said.
ITC bought Trasy at a 55.8 per cent discount to its shares' last trading price of 1.3 cents - before they were suspended from trading on June 10, 2003. The purchase price represented a 73.9 per cent discount to the company's net asset value.
'It seemed to me it was a simple investment with manageable risk,' said Mr Chan.
'I purchased the company purely because it was so cheap. Only about $16 million is needed to purchase all shares of the company, which has an asset value of $67.65 million.
'What can you buy at such a price nowadays?'
Trasy posted a loss last year of $962,000 on sales - most of which came from RNA - of $1.92 million. It had cash and bank balances of $2,918 at the end of last year, and only four workers.
Police on Wednesday arrested RNA chairman Raymond Chan Fat-chu, his younger brother and deputy chairman Alexander Chan Fat-leung, and seven others. The nine were released on bail the following day.
Speaking after the annual general meeting of Trasy Gold yesterday, Keith Chan said that the investigation into RNA did not affect Trasy's operations.
Charles Chan also said the RNA investigation had nothing to do with him, and denied acting on behalf of friend Li Ka-shing, chairman of Cheung Kong (Holdings), which holds RNA convertible bonds equivalent to 26.22 per cent of the company.
'I know nothing about the police investigation and I have never been approached by the police,' he said.
'I know Raymond Chan and his brother, but we are not really friends.
'I was not approached by them, but by a broker who told me that a financial company wanted to sell Trasy Gold shares it held as collateral.'
Speculation the investigation could widen to include Trasy Gold and Charles Chan has nonetheless led investors to offload shares in companies he controls. Paul Y-ITC Construction shares shed 6.06 per cent over the last week to close at $2.325 apiece yesterday, while ITC Corp's share price tumbled 10.38 per cent to 69 cents.
Like Trasy Gold, RNA has been suspended from trading since June 2003. The exchange has threatened to de-list RNA if it fails to submit a viable business plan by September 3. The same warning has not been issued to Trasy Gold.
Charles Chan said after the general offer is completed this month, he would reconstitute Trasy Gold's board, which has only two directors, and then sell most of the company's assets.
'It is my intention to inject new businesses into the firm and to apply to the stock exchange for a resumption of trading,' he said.
'The exchange may view it as a new listing entity, but I think it would not be difficult to meet with the GEM listing entry requirement, which is lower than the main board.'
Charles Chan said he would bring a new management team to Trasy and would dismiss Keith Chan as executive director.
The veteran asset shuffler announced last month that he and his 22.48 per cent-owned multimedia electronics maker Ruili Holdings would buy a combined 51 per cent stake in Galaxy Satellite from TVB for $350 million.