GERMAN-OWNED construction firm B+B Asia looks set to be privatised by its owner Bilfinger+Berger Group, but shareholder approval thresholds brought in during 1993 could floor the deal. The privatisation target has had something of a torrid time as a listed entity on the exchange. As British-owned Beazer Asia, the company, found itself at the wrong end of stock exchange inquiries in July 1991 regarding sudden share price falls after a briefing was given to analysts. It turned out the analysts were told of possible compensation requiring a provision of an estimated $20 million, due a consortium led by Cheung Kong, for the delay in the demolition and the making ready of the Ap Lei Chau site in Aberdeen. Beazer Asia's parent found itself in interesting times back in Britain in one of the worst property and construction slumps there since World War II. So the company was sold for $466.71 million to the current owner in a deal leading to a general offer to shareholders amounting to $9 in cash in September that year. Then earlier this year the stock suffered another slump. The company issued a profit warning indicating heavy losses had been sustained in airport linked construction projects. The losses resulted from a viaduct project in which the company had a 12.5 per cent interest. New design features were apparently critical in obtaining the project in the early stages ahead of construction. Losses on this contract came to $645 million of which the group was hit with $80.6 million. The group loss reported for the 12 months ending December 31, 1994, was $187 million. B+B Asia points out had it not been for intensive support from its parent, the potential losses for the group for the period could have been as high as $429 million. So the company's shares slumped and the parent issued notice to privatise the company by way of a scheme of arrangement. Privatisations are not common on the stock exchange. They have been known to fail. It took a number of tries by Hutchison Whampoa to privatise Cavendish International and for Chinese Estates to undertake a similar type of transaction in absorbing the shares of Evergo Holdings. More recently, Wharf failed in its bid to privatise Harbour Centre. The Wharf bid failed because not enough of a majority of shareholders was achieved. Under the rules, a 90 per cent 'yes' vote is needed. In B+B Asia, shareholders are being offered $2.20 in cash, a 29.7 per cent discount to the adjusted net asset value per share based on the audited consolidated balance sheet of the group as at December 331, 1994. Anglo Chinese, advisers to the minority shareholders, is telling shareholders to accept the offer given the uncertain outlook for earnings and dividends along with the group's financial condition and the recent share price performance of the group. Shareholders are due to vote on the proposal at an extraordinary shareholders' meeting on May 5. What is needed is a 'yes' vote from minority shareholders voting in person representing at least 90 per cent in value of the scheme shares held by the shareholders. This is an extremely difficult feat to achieve and managed to floor the Wharf plan to take Harbour Centre off the market. The chances of getting 90 per cent of the value to vote at all appears to be a major task in itself given the number of sleeper shareholders that might exist. Peregrine, the advisers to the company owners, and Anglo Chinese point out that this onerous 90 per cent threshold is imposed under the Securities and Futures Commission Takeovers Code. Yet section 166 of the Companies Ordinance requires the approval of the scheme by a majority in number representing only 75 per cent in the value of the minority shareholders present and voting at the special meeting. The chances of not getting a 90 per cent yes vote from the minority shareholders appears high. A failure to obtain such a vote, by a close margin, will fire the debate about whether or not a 75 per cent vote is sufficient. Indeed, the 90 per cent threshold logistically makes privatisation under the takeover code, rule 2.10, almost impossible and leaves groups having to sell companies off to interested third parties instead.