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United Engineers
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gregtan123
Supreme |
17-Nov-2019 19:56
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[Without Prejudice] I am a minority shareholder of United Engineers. My family members are also minority shareholder of United Engineers. We have been shareholders since 2017. In this letter, I would like to highlight some of my concerns with the Corporate Governance of United Engineers since 2017 as well as possible regulatory issues with respect to the latest takeover attempt. I am also contemplating seeking legal advice and escalating this matter further through a legal suit via the company as allowed by the provisions of Section 216 of the Companies Act. In this open letter, I will chart out all the many instances from the perspective of Minority Shareholders where there seems to be a lack of transparency in the actions of the board and/or may not have acted in the interest of shareholders. Collectively, over a 2-3 years period, the actions of the UE board and current majority shareholders Yanlord may constitute a claim for Minority Oppression under Section 216 of the Companies Act. 2019: Takeover Offer Issue Query 1/Incident 1: Takeover Offer (25 October 2019) and Sale of Treasury Shares (5 July 2019) I refer to the announcement on 5 July 2019 about the sale of 21,712,000 stock units representing 3.14% of the shareholding of United Engineers by United Engineer&rsquo s subsidiary WBL corporation to independently sourced and placed 3rd Parties. I am not going to repeat Oxley&rsquo s and other minority shareholders issue or anger that the price of SGD 2.58 negotiated was NOT the best value from a shareholders&rsquo perspective given: (a) Presence of Oxley willingness to pay (clear indication prior) as well as purchasing shares above 2.60 from the Open Market repeatedly prior to the sale, (b) Trading Share Price was 2.61 SGD on 5 July as of closing, (c) Shareholder Rejection of Yanlord, Perennial offer of 2.60 SGD (2 years ago) and (d) NAV of being SGD 3.12 (as of 30 June 2019). This low-price share sale (even if it is to an alleged independent party) is the 1st Example of actions which may constitute minority oppression. [&ldquo First example of possible minority oppression&rdquo ] But the above is NOT the reason or the point of Query 1 though, I merely wanted to set out clearly that action may constitute a possible act of minority oppression. Instead, my true purpose of Query 1 is to ask:
This question is important, and I believe the Minority Shareholders of UE have a right to know. Let me explain the reasons for such a view. Given the Proximity between the Block Sale of 3.14% and the Announcement of Yanlord&rsquo s takeover offer, there could be a potential PERCEIVED conflict of interest. Given that Yanlord wants 50% majority control and it only has 35.37% (after buying Perennial&rsquo s stake), the UE board (controlled by Yanlord) by selling 3 months prior to an &ldquo independent party&rdquo and who in turn 3 months down the road, sold the very same 3.14% to Yanlord contributing to Yanlord&rsquo s goal of getting majority control of United Engineer. To put in layman&rsquo s terms, I will sell to a 3rd party first and then buy it back 3 months later so I can get the 50% threshold I need to have majority control. The independent party would also have a conflict of interest because in a matter of 3 months, they stand to gain 0.12 SGD x 21,712,000 (making a profit of around 2.605 million) even assuming no inducement was made. From UE/WBL shareholder&rsquo s perspective, this represents LESSER Profits of 2.605 million. Can the UE Board explain this decision and clarify whether the 3rd Party has indeed sold the stake to Yanlord? [Worsening the &ldquo First example of possible minority oppression&rdquo .] This question is NOT just a question that interests me or other minority shareholders. In fact, a similar question was asked by writer Don Low of aspire.shareinvestor.com on August 2019 when he said: &ldquo Also leaving retail and minority investors feeling high and dry was UE&rsquo s decision to go on a separate placement of its entire block of treasury shares at a price of $2.58 per share. In 2017, minority shareholders had voted against the YPI&rsquo s offer price of $2.60 per share, leading to the takeover offer to lapse. Following which, YPI cannot increase its stake in UE by more than one percent every six months, unless it embarks on another general offer. The latest episode thus left investors wondering if the move was YPI&rsquo s strategy to accumulate an increased stake in UE via a third party who could end up being acting in concert hence the secrecy. Regardless, it also dented confidence in the current UE board. Looking at the public forum of Sharejunction, most forumers seem to show some distaste for the sale.&rdquo SGX needs to query this and a public statement by the United Engineers Board is crucial is dispelling the concerns of minority shareholders. Overall, from an external and minority shareholder perspective, it appears as though Yanlord and UE board know that their low offer (repeating a 2017 rejected offer) was NEVER going to allow them to get their Objective of Majority Control, it is hard not to feel from a minority perspective this may be part of some plan to help Yanlord achieve their objective and circumvent listing rules. Query 2/Incident 2: Takeover Offer (crossing 50% and becoming unconditional as of 15 Nov) and the Impact on Chained WBL Offer From the Latest Announcement, it seems that the Offeror will NOT be buying United Engineer&rsquo s stake in WBL Corporation given that now United Engineers is seen as a Concert Party (indirect subsidiary of Yanlord) of the Offeror. I would like to ask the following questions:
Side Sub Issue: Valuation of United Engineers and WBL Stakes I believe SGX has already rightly queried Perennial Real Estate Holdings on how it had arrived at the valuation for the UEL and WBL stakes whose response was no valuation was done. See Business Times Article (5 Nov 2019): https://www.businesstimes.com.sg/companies-markets/no-valuation-done-in-disposal-of-uel-and-wbl-shares-perennial It is disconcerting to say the least that no valuation was done for such an important share sale. But that is a question for the Perennial Board to answer and shareholders to ask. My point is more of how there&rsquo s another Potential Perceived Conflict of Interest or rather a Perceived perception that the Offeror is trying to avoid making a Fair Value Offer for United Engineers and circumventing a proper Take Over Offer as by the Listing Rules. This is similar conflict of interest point that started from 2017 used by OCBC and Yanlord/Perennial [see below] In sum, the Conflict of Interest lies here: Because Perennial has both stakes in United Engineers and WBL Corporation, it is not beyond the realm of possibility or rather it is a possible perception from the minority shareholders&rsquo point of view from the outside that: Yanlord and Perennial has agreement to accept a lower price for United Engineer, if Yanlord offers Perennial a Higher Price with respects to their WBL Stake. Note, I said perceived perception or feeling, I make NO claim that this was what actually happened. The benefit to both Yanlord and Perennial is clear. Yanlord gets to get United Engineers on a cheap whilst Perennial gains of 2.59 &ndash 2.07 (paid price of WBL) from their WBL stake. The fact of Perennial&rsquo s claim that no valuation was done only further heightens suspicions. At the end of the day, the people whose interest are harmed and left hung out to dry are the Minority Shareholders of United Engineers who are left to accept low-ball offers and offers which were already rejected by UE minority shareholders in 2017. This also seems to be a Possible Circumvention of SGX Takeover and Listing Rules. SGX mandates that when someone makes an offer which will result in them having more than a 30% stake in a listed company, they are required to make a Mandatory Offer. However, the loophole comes in such an instance when Yanlord in 2019 and Yanlord/Perennial/OCBC in 2017 negotiated a share sale of a price lower than the prevailing market value and WAY lower than the NAV, whilst offering a premium on a side deal for another shares. Can SGX look into possibly closing this loophole? The above action may be seen as a 2nd Example of Minority Oppression. [&ldquo 2nd Example of Possible Minority Oppression&rdquo ] Query 3/Incident 3: Takeover Offer Document and DBS claim of &ldquo 0.9X NAV&rdquo
In your offer document released by DBS, it was stated: &ldquo The P/NAV implied by the Ordinary Share Offer Price is 0.9x, which is in line with the average P/NAV of 0.9x for selected transactions involving Singapore-listed property developers.&rdquo AND &ldquo Based on UEL' s reported net asset value as at 30 June 2019 and total number of issued UEL Ordinary Shares of 637,520,399&rdquo At this point, Yanlord&rsquo s Offer was 2.60 SGD for United Engineers. For DBS claim in their Offer Document to be true and factually accurate, it means UE&rsquo s 0.9X NAV is 2.60 SGD. This implies that as of 30 June 2019, United Engineers P/NAV or NAV was an estimate of 2.89. However, here&rsquo s a quick on the ACTUAL NAV based on United Engineer&rsquo s own Financial Report actually disproves DBS&rsquo s claim in the offer document (as a reason to convince shareholders to sell their shares).
Further, even at Yanlord&rsquo s/DBS&rsquo s best-case scenario using their new SGD 2.70 price, their claim of the Offer being 0.9x NAV is still not true because this would be UE&rsquo s NAV to be just SGD 3.00. Hence, I am proposing to DBS and Yanlord to explain how they arrive their SGD 2.89 NAV valuation of United Engineers as of 30 June 2019. If DBS or Yanlord is UNABLE to do so, DBS and Yanlord must issue a Clarification Statement about their Offer Document because their claim to Minority Shareholders is that what we are doing is in lined with market practice with the effect of trying to sway their decision into selling their shares. In the alternative, DBS and Yanlord can revise their offers to be as follows: either (i) SGD 2.898 (which is 0.9x of SGD 3.22) or (ii) SGD 2.835 (which is 0.9x of SGD 3.15). Assuming this is a mischaracterization by DBS, this may constitute a &ldquo 3rd Possible Example of Minority Oppression&rdquo in that a misstatement is trying to induce minority shareholders to sell their shares for a lower price, causing them to act against their own legitimate interest. 2018: Denial of Minority Shareholder Board Seat and UE Purchase of Yanlord&rsquo s WBL Stake Query 4/Incident 4: Despite Oxley&rsquo s substantial stake, industry experience and connections the UE board has repeatedly denied Oxley a seat on the board. In fact, Mr Ching and Mr Low application for a seat on the board of UE is also widely supported by other shareholders both at the shareholder meetings and online. Further, during the same meeting, Oxley indicated very clearly as reported by the news outlets: " And let' s say you' re afraid some people won' t subscribe, Oxley will underwrite the whole issue. We hope that board members can consult us. We are more than willing to work with management to make sure that the company keeps growing," Mr Low said to applause.&rdquo This taken in light of what happened in early mid 2019 on the sale of treasury shares of UE for the price of SGD 2.58 lends to the possible interpretation that the UE board may not have acted in the interest of UE and the company. Oxley has repeatedly said it would consider making a good offer for UE share. The Board through their respective and repeated meetings with Oxley should be fully cognizant of Oxley&rsquo s desire and will. In light of this, to under-sell a stake without even consulting Oxley, and with the same stock being sold for an additional SGD 0.12 higher just 3 months later, it lends to the impression that the UE Board may not have acted in the interest of shareholders.
Whilst denial of a Board Seat alone is not sufficient to constitute minority oppression, case law suggests that collective actions by the Board and Majority shareholders with regards to minority shareholders interest may constitute a case of Minority Oppression such as denying minority shareholders a chance to participate in the management of the company. This may represent the 4th possible act of minority oppression. Query 5/Incident 5: Oxley blocks UE&rsquo s purchase of WBL shares from Yanlord (The Business Times article dated February 24, 2018) To say the least, the decision by the UE board to make UE buy Yanlord&rsquo s stake in WBL was highly unpopular amongst the minority shareholders who had already felt short-changed from what happened in 2017 (see below). Yanlord through their control of UE&rsquo s board proposed that UE bought their stake in WBL (which they had bought together with their UE take from OCBC, GEH). Had the UE board been successful, the UE shareholders would again be left hung out to dry by their own board. I am going to explain clearly the ONLY possible interpretation of their entire 2017 saga. OCBC, GEH wanted to their sell BOTH their UE and WBL stakes at the same time. The SGX rule mandates that selling their UE stake would trigger a takeover offer for UE, whilst by the chained listing rule, a chained offer will have to be made for the WBL stake. Yanlord/Perennial/Heng Yue clearly ONLY wanted Majority Control of UE but did NOT want the WBL stake for various possible reasons. So what unfolded from the perspective of the minority shareholders was this [please note I am saying perception, I make NO claim that this was what actually happened]: OCBC, GEH agreed that if Yanlord/Perennial/Heng Yue purchases my WBL stake at a good price, we can accept a lower price for our stake in UE. Then Yanlord/Perennial/Heng Yue who seems to only want the UE stake without buying the WBL stake (skirting around the chained listed rule), will then through their control of the UE board make UE purchase their WBL stake which they just bought from OCBC. In sum, OCBC and GEH gets what they want: sale of both their UE and WBL stake. Yanlord/Perennial/Heng Yue gets UE on a cheap whilst asking UE to purchase their unwanted WBL stake. UE minority shareholders will end up with (a) a low ball offer for UE, (b) losing majority control of the board to Yanlord, (c) force to use UE&rsquo s assets and momey to buy an unwanted WBL stake. Thankfully for UE&rsquo s minority shareholders, Oxley helped to block such an act. This act may constitute the 5th Possible act of Minority Oppression. 2017: Governance Issue surrounding 1st failed takeover attempt Query 7/Incident 7: Governance Issue as stated by reporter Goh Eng Yeow on 28 October 2019 (I am quoting him in full because I think he summarizes part of the potential conflict of interest issues well) &ldquo But, here, the situation gets a little tricky: With this takeover offer on WBL, OCBC, GE and the Lees will be able to offload their WBL stakes to the buyer. But in order to reduce his cash outlay, the buyer may want UE to undertake that it will not accept the takeover offer to sell its 67.5 per cent stake in WBL. This raises governance concerns. For the UE' s board of directors to give such an undertaking on behalf of the company, it must satisfy itself that the shareholders are better off if UE does not cash out of WBL. But some UE shareholders may be reluctant to accept the offer made by the buyer for their UE shares. They may also prefer to hold on to the UE shares in the hope of collecting any special dividend payout, which the company would be in the position to make if it sells out of its WBL stake. There is also the awkward question as to why UE should lock itself up with an undertaking not to sell its WBL stake, when other WBL shareholders can keep their options open as to what to do with their shares. Then there is the regulatory aspect to consider. The Securities Industry Council, which administers the takeover code, may want the UE board to give a written confirmation that the company has not received any form of " inducements" for undertaking that it would not be selling its 67.5 per cent stake in WBL to the buyer. Suffice to say, the various issues that may arise are likely to put the UE board between a rock and a hard place.&rdquo
As a minority shareholder, the entire action of the UE Board and majority shareholders seem to be one of continual steamrolling of the concerns, questions and interests of minority shareholders. It seems as though SGX&rsquo s Takeover rules and chain listing rules are constantly being waived or circumvented to suit the needs for the majority shareholder and UE&rsquo s board. I am sure whatever that has been done was within rules and regulations because the UE board and Yanlord must have taken legal advice over all such transactions. The above act may constitute the 6th possible act of minority oppression. Whilst this independent act itself may not constitute minority oppression, the acts in totality may lead a strong claim of minority oppression. My final question for SGX is:
Query 8/Incident 8: Declining Dividend since Yanlord took over (reporter Don Low, 11 September 2019) Note that case law suggests that it is possible that &ldquo No or inadequate dividends deliberate payment of low dividends by those in control of a company who obtained directors&rsquo fees or remuneration may amount to unfairly prejudicial conduct.&rdquo Writer Don Low stated that: &ldquo We also highlighted our observation of UE&rsquo s quickly declining dividends over the past few years. In 2016 when OCBC was still the major shareholder, investors were rewarded first and final dividend of 5 cents per share and a special dividend of 7 cents per share. However, when YPI took over in 2017, dividend was slashed to 4 cents and 3 cents in 2018. Disregarding the special dividend in 2016, minority shareholders that bought UE as dividend stock would have seen their dividend income slip by 40 percent in merely 2 years. Granted, the US-China trade war and a myriad of other factors may have impacted the local property sector and UE&rsquo s performance lately. But viewing how the corporate developments unfolded, one might not be able to confidently say that UE&rsquo s board was acting in full interest for its stakeholders.&rdquo Given how UE has dramatically dropped dividends since Yanlord got control of the United Engineer&rsquo s board, this could be seen as another act in the collective claim of minority oppression. This is the 7th and final possible act of minority oppression by the majority shareholders and the UE&rsquo s board. My Final Question for the UE board is given the stellar 3rd Quarter results:
Thank you. Yours sincerely, A Concerned Shareholder
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n2e9w0
Member |
17-Nov-2019 12:26
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Thumb up. Nowadays quite a few cases.. think Chip Eng Seng is another example .. so sad..
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gregtan123
Supreme |
16-Nov-2019 18:48
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Mr Ching is the HERO of all Minority Investors. He said in 2018 to the UE Board, Yanlord and Perennial:
" If the company needs any money, we think that we should look at gearing up rather than doing a share placement so that it is not dilutive to shareholders," Mr Low said. He also suggested that UE do a rights issue instead of a placement, if it wished to stay conservative. " And let' s say you' re afraid some people won' t subscribe, Oxley will underwrite the whole issue. We hope that board members can consult us. We are more than willing to work with management to make sure that the company keeps growing," Mr Low said to applause. |
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gregtan123
Supreme |
16-Nov-2019 16:35
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Hi everyone, I will be writing in to SGX, SIAS, UE Board, Oxley Board, DBS, Teo Ser Luck (PAP Independent Director) on UE' s board actions from 2017 till today. Collectively, I believe their actions constitute a Minority Oppression Claim by minority shareholders under S216 of the Companies Act. I am considering hiring a lawyer or actually do it myself (I used to be a lawyer at the Big 4) to sue them. I don' t have much shareholdings but I cannot accept how the ENTIRE group of them have been acting. Note I chose my words very carefully in case there' s a defamation claim by them. Overall, I am disappointed by the entire UE board. | ||||||||
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gregtan123
Supreme |
16-Nov-2019 09:06
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" In July, UE took market watchers by surprise when it placed out all 21.7 million of its treasury shares - equivalent to a 3.41 per cent stake in the conglomerate - for S$2.58 apiece, which was the prevailing market price at the time. Oxley chief Ching Chiat Kwong then questioned if UE had fetched the best price possible in the block sale and expressed dismay that Oxley had not been sounded out as a potential buyer.
UE later clarified that the treasury shares were sold to independent unrelated third parties that were independently sourced and selected by UOB Kay Hian." https://www.businesstimes.com.sg/companies-markets/eyes-on-oxley-as-yanlord-raises-ue-cash-offer Writing to SGX, could it be possible they sell this 3.14% to the unrelated 3rd party with the understanding they will sell back to Yanlord when they takeover? UE needs to confirm if the 3rd party has sold its stake. It seems they may have acted in a conflict of interest. |
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gregtan123
Supreme |
16-Nov-2019 08:08
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I actually have another theory haha. I think Oxley May have sold them 9% to make them go over 50%. Once they go over 50%, YL must buy UE&rsquo s 69% of WBL shares for 2.54 (last time ocbc sold it for 2.07). So if YL buys UE&rsquo s WBL stake we would increase by another 47 cents profits. This many not be entirely a bad thing. |
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gregtan123
Supreme |
16-Nov-2019 00:15
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Yanlord has announced they bought 9.4% from Open Market over 59 million shares at 2.70 taking their shareholding to 51.46%. Have not announced who the seller is. Even if its NOT Oxley, I think Oxley close to selling alos, cause Yanlord majority stake. |
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gregtan123
Supreme |
15-Nov-2019 17:05
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Yes game OVER. I think Oxley throw in towel.
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peppergal_87
Member |
15-Nov-2019 16:46
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25+ million shares sold at $2.70. Game over 😢 | ||||||||
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gregtan123
Supreme |
15-Nov-2019 15:31
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you have the option not to sell lol. It will still be listed. there' s no chance they cross 50% unless Oxley folds. And yes I saw the annoucement. Btw DBS and Yanlord is cheap until you send back acceptance, you have to Put Stamp yourself. 30 cents they also dont want give u. it shows.
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peppergal_87
Member |
15-Nov-2019 15:14
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Unless our white knight appears, Yanlord already said $2.70 as final price. Announcement indicated another notification will be sent. May be better to wait till the last day then decide. Sell too early and may miss the boat | ||||||||
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gregtan123
Supreme |
15-Nov-2019 13:47
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UE today strong. Now 2.72. Buy queue at 2.71 is 2,992,900 vs Sell Queue 2,148,600. Lai la Yanlord up price 2.72 |
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gregtan123
Supreme |
15-Nov-2019 13:16
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Nah depends who is buyer. Chinese buyer very sincere (note Yanlord is China based, NOT CHINESE). You go look at CWT (by China' s HNA), AVIC (by CMIH) all their takeover min 30% over last traded price. I called quite a number of takeovers so I know. So far my only LOSS making takeover (paper loss) is this DAMN United Engineer. Also if you follow the Ocbc family, ever since the old man passed on, his next generation are selling all their stake for cheap. F& N saga. Very sad, outstanding man but useless next generation. | ||||||||
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john_ric
Supreme |
15-Nov-2019 11:21
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nowadays share acquistions are like property en bloc. Dirt cheap price. | ||||||||
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tth1311
Member |
14-Nov-2019 20:35
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buy $2.70, how to accept $2.60 offer | ||||||||
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gregtan123
Supreme |
14-Nov-2019 19:37
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Their offer is it send wrongly? State 2.60 when revision change to 2.70? Anyway both offers are rejected by me. but just shows you how bad they are. | ||||||||
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gregtan123
Supreme |
14-Nov-2019 14:09
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Having other business ideas is NOT mutually exclusive from rippibng minority shareholders. if you follow the entire UE saga from 2.5 years back or do a quick Google, you would know how over the 2.5 years their actions as a concerted 3 party have not been the most above aboard.
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Nirmala1949
Member |
14-Nov-2019 13:55
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These people all have run out of business ideas. They only have these ideas to rip off minority shareholders??? | ||||||||
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gregtan123
Supreme |
14-Nov-2019 13:42
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who' s ur bf? Anyway not only Oxley interested la. KKR etc also. Yanlord probably won' t get over 50% unless they convince Oxley. If Oxley folds at 2.70 then different story. We need to pray Mr Ching and Mr Low of Oxley protect minority interest. Yanlord, Perennial, OCBC all will have bad karma, trying to rip off everyday investors every 2 years.
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peppergal_87
Member |
14-Nov-2019 07:51
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My boyfriend says only coffee brewing. Don't think Oxley can pay so much for UE and WBL. Maybe buy below 30% and see how? | ||||||||
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