By Doreenn Leong
THE latest petition by Lysaght Galvanized Steel Bhd’s former managing director Liew Hoi Foo highlights the rights of minorities and their hope of an exit opportunity after many years of a shareholder tussle.
On Dec 12, WTWT Sdn Bhd, Liew’s private vehicle, filed a petition in the Kuala Lumpur High Court to wind up Lysaght (M) Sdn Bhd (LMSB), the single largest shareholder of Lysaght with a 55.14% stake.
LMSB is in turn 51.63% owned by Chew Bros (M) Sdn Bhd, in which CKH and LIK Family Sdn Bhd hold a 74.2% stake.
In other words, LMSB is Lysaght’s immediate holding company, Chew Bros is its intermediate holding company and CKH and LIK Family its ultimate holding company.
A filing with the Companies Commission of Malaysia shows that CKH and LIK Family is equally owned by Annie Chew Meu Jong – the eldest daughter of the late Chew Kar Heing – her mother Lim Lee Kuan, her daughter Deborah Ho Mun Sook and her uncle Chew Kar Hoo.
Meanwhile, Liew, who is Annie’s brother-in-law, has a 17.1% stake in LMSB through WTWT. He also holds a 15.46% direct stake in Lysaght through Ingli Sdn Bhd. He was Lysaght’s managing director from 2004 to 2016 and is married to Annie’s sister Mary Chew Mee Lee.
It was reported that Liew and Annie have been in a shareholder tussle for the past six years following the death of patriarch Chew Kar Heing in February 2014, at the age of 81.
Apparently, Annie’s objection to Lysaght’s proposal for a share split, bonus issue and free warrants in May 2014 led to the family friction. The proposal was eventually scrapped.
More important, it was alleged that Annie had misled the public when she said in 2016 that her position as managing director of Chew Bros did not deem her to hold an interest in LMSB. As such, there was no need for the company to undertake a mandatory general offer (MGO).
But at that time, on the surface, there seemed to be an element that an MGO had been triggered.
Let’s examine the sequence of events. Chew Bros raised its stake in LMSB to 51.63% from 40% in March 2015. Since LMSB is Lysaght’s immediate holding company, did this mean that Chew Bros had control over Lysaght and therefore ought to make an MGO for the listed company’s shares?
Observers said that was an obvious case of MGO but the regulators did not think so. An announcement said: “The Securities Commission (SC), after having examined the facts and circumstances surrounding the acquisition, has determined that no further action is required.”
This has raised questions as to what were the “and circumstances” that led the SC to come to such a conclusion. Why didn’t the SC make a clear ruling on the discrepancy? It is learnt that the company too didn’t even reply to shareholders following queries at the AGM.
Essentially, the Chew family’s investment vehicle would have been obliged to make an MGO for Lysaght, pursuant to Practice Note 9 (PN9) of the Malaysian Code on Take-Overs and Mergers 2010 under “acquisition of a company through an upstream entity”.
According to paragraph 4.1 of PN9, a mandatory offer applies to a person who intends to obtain or has obtained control in an upstream entity, which holds more than 33% of the voting shares of a downstream company, and the upstream entity has a significant degree of influence in the downstream company.
Paragraph 4.2 of PN9 states that the upstream entity is deemed to have a significant degree of influence in the downstream company when the acquisition of the upstream entity to which the Code does not apply is a means to acquire control in the downstream company to which the Code applies.
In this case, LMSB and Lysaght could be deemed as the above-mentioned “upstream entity” and “downstream company” respectively. Furthermore, Lysaght constitutes more than 50% of the assets, sales or earnings of LMSB, which met another criteria set in paragraph 4.2 of PN9.
In the following year, on March 30, 2016, Lysaght announced that Annie had ceased to be a substantial shareholder of the company.
According to the announcement on Bursa Malaysia, a grant of probate was obtained on July 10, 2015. Kar Heing’s shares went to his estate.
“At the time of review of the draft audited accounts of Lysaght for the year ended Dec 31, 2015 by the board, she (Annie) realised that her position as managing director of Chew Bros does not deem her to hold interest in LMSB,” it said.
As such, isn’t it misleading that she was no longer a substantial shareholder of Lysaght?
The minority shareholders could have gotten a good price of more than RM5 then compared to RM2.60 now if there had been an MGO.
Perhaps, now the new top management at the SC would deem it timely to re-examine the case and determine if its earlier decision should be reviewed in the interest of minority shareholders.
And finally, why did the company change the venue for its AGM to Ipoh in the last three years, resulting in poorer attendance? – Jan 16, 2020
