SFC rejects Seapower's bid to advise on Success takeover

THE Securities and Futures Commission (SFC) has rejected an appeal by Mr Francis Yuen's Seapower Corporate Finance to act as the independent financial adviser to shareholders in the takeover of Success Holdings.

Mr Yuen is chairman of Seapower Corporate Finance and was chief executive of the stock exchange, a post he held for three years until October 1991.

The SFC panel on takeovers and mergers said it was not suitable for Seapower to act as the independent financial adviser to minority shareholders in the takeover of Success Holdings by Walsin because of Mr Yuen's relationship with Mr Francis Leung, managing director of Peregrine Capital.

Peregrine Capital is the financial adviser to Walsin.

Because Mr Yuen and Mr Leung are both directors of Tien Fung Investments, a company holding 19.8 per cent of Seapower International Holdings, the SFC panel felt Seapower was not a suitable choice to act as independent adviser in the Walsin transaction.

Tien Fung Investment is 49 per cent owned by Peregrine Group and 51 per cent by Mr Yuen.

An SFC statement issued yesterday said: ''The panel has decided that Seapower Corporate Finance (SCFL) is not appropriate to be the independent financial adviser to the minority shareholders of Success.

''While the panel's decision is in no way based on any doubts regarding SCFL's competence or conduct, in the panel's view the minority shareholders of Success could reasonably perceive a lack of independence on the part of SCFL.'' The appeal concerns a transaction where Walsin Hongkong Corp has conditionally agreed to buy ITC Chevy Investments, which owns 64 million shares in Success Holdings.

Walsin already has an interest in 24 per cent of the takeover target and would hold an aggregate 64.2 per cent of the company on buying ITC Chevy, thereby triggering a general offer.

Seapower had been appointed the independent financial adviser to the minority shareholders.

The SFC takeover and mergers executive handled the case ahead of the panel hearing and decided that Seapower could not be regarded as suitable to give independent advice to the minority shareholders of Success.

''For its part, SCFL vigorously denied that any of the relationships quoted by the executive affected its independence and it challenged the executive's interpretation,'' the SFC statement said.

The panel said: ''Practitioners should consult the executive before accepting any appointment if there is any possibility of a doubt about their independence which might arise.

''Practitioners should also bring to the attention of the executive all information which may be relevant to the issue of independence in order that the executive can make a fully informed decision.'' In another ruling, the SFC panel rejected Internationale Nederlanden Capital Markets Hongkong (ING) as an independent financial adviser to Pacpo minority investors on China Strategic's offer for their shares.

In the same transaction, the panel ruled on the appropriate price that should be paid by China Strategic in the complex deal.

China Strategic is planning to buy a company called Red Hill from Pacific Concord.

Red Hill owns the controlling share interest in Hongkong Building and Loan Agency, which in turn owns the controlling interest in Pacpo, thus triggering general offers.

The panel decided a fair price per share to be paid for the shares in Hongkong Building and Loan Agency was $20.43.