E&O shareholder Wan Azmi says no agreement to exercise voting shares according to Sime Darby’s interest

PETALING JAYA: Sime Darby Bhd and Eastern and Oriental Bhd (E&O) continue to make the news as both their share prices moved again in opposite directions on speculation that the former will launch a general offer (GO) for the latter's shares.

Sime Darby declined by 30 sen, seeing about RM1.8bil of its market capitalisation wiped out, while there was active trading in E&O shares, which ended the day 2 sen up.

The Securities Commission, which is looking into whether Sime Darby would be required to conduct a GO for the rest of the shares in E&O after buying a 30% block in the latter (at a 60% premium to market), has yet to make a decision on the matter.

Meanwhile, major shareholder and part seller of the 30% block of E&O shares Tan Sri Wan Azmi Wan Hamzah told StarBiz that there was absolutely no agreement or understanding between himself and Sime Darby on how he would exercise his voting rights on the remaining E&O shares he owned.

“There is absolutely no agreement to submit to Sime Darby's wishes in the future what a preposterous thought,” he said in an interview at his office.

“If any resolutions come up to vote I will act as I have always acted, support it if it's good for the company and oppose it if it's bad,” he said.

While the Takeover Code states that a mandatory general offer (MGO) is only triggered by a 33% or more change in shareholding, there are other instances in which an MGO can be required by the regulator.

According to Para 6.2 of Practice Note 9 of the Takeover Code 2010, the SC has the right to consider all surrounding circumstances to deem if control has been passed to a new party, including the premium to market that was paid for those shares.

Wan Azmi also confirmed that Sime Darby's purchase of the 30% block of shares from himself, Datuk Terry Tham (the managing director of E&O) and GK Goh Holdings Ltd of Singapore had been completed, with full payment made and the shares crossed.

Wan Azmi said he had owned E&O shares since 2006 which is part of his portfolio of public equity investments. Having been an active corporate player in the 1990s, he seemed to have vanished from the limelight in the aftermath of the 1997-98 Asian financial crisis. He also has stakes in UK-listed PureCircle Ltd, Kazakhstan-based Steppe Cement Ltd and is reportedly involved in mining activities, including gold. He also owns the Rohas Perkasa building in Kuala Lumpur, which houses his small but tastefully-decorated and art-filled office of Halfmoon Bay Capital Ltd, where this interview took place.

Sime Darby's share price ended the day at RM7.70 after reaching a new 52-week low of RM7.65 during the day. Along with E&O, both stocks were among the most actively-traded counters on Bursa Malaysia.

An MGO will cost Sime Darby an additional RM1.8bil to acquire the remaining 70% of E&O, on top of the RM761mil cash it has paid for the 30% stake.

An analyst said the market was pricing in the possibility of Sime Darby having to do the GO even before it was required to do so.

“Sime Darby is now trading at its lowest valuation range of close to 12 times price-to-earnings ratio. Even if there is an MGO, the worst case is that it will forgo its one-year capital expenditure,” he said.

The group's plantation and industrial divisions should be able to maintain the group's financial performance, he added.

An analyst with a foreign bank-backed research house pointed out that even if an MGO was needed, Sime Darby had the money to do the deal.

“The acquisition is just such a small component compared with the group's overall operations,” she said.

However, both analysts said they weren't advising their clients to buy into Sime Darby on its weakness, considering the uncertainty with regard to its obligation to do a GO for E&O.