This article first appeared in The Edge Malaysia Weekly on April 8, 2019 - April 14, 2019
THOSE familiar with the never-ending saga between Can-One Bhd and Kian Joo Can Factory Bhd would know that schoolteacher turned savvy entrepreneur, Yeoh Jin Hoe, is a persistent and patient man. On the other hand, his long-standing rival, Datuk See Teow Chuan, is a stubborn man not easily swayed or influenced by others.
In Yeoh’s latest attempt to privatise Kian Joo — the aluminium can maker founded by the See family patriarch See Bon Tay — for RM917.2 million, a familiar nemesis stands in his way again.
The Employees’ Provident Fund (EPF), which was the second largest shareholder in Kian Joo with a 10.13% stake, accepted Can-One’s mandatory general offer (MGO) of RM3.10 per share last month. At press time, Can One controls 83.92% equity interest in Kian Joo, breaching the public shareholding spread requirement.
The current listing requirements provide that a listed issuer must ensure that at least 25% of its total listed shares, excluding treasury shares, are held by the public.
That essentially means that Kian Joo could actually be delisted if Yeoh, the single largest shareholder of Can-One with a 27.4% stake, wants it to be.
But will he? Yeoh has always aspired to form an integrated packaging firm by merging Can-One and Kian Joo. But it is also an open secret that the media-shy, seasoned businessman intends to flush out the See family members.
According to the Capital Markets and Services Act, if an offer achieves an acceptance level of more than 90%, the offeror may compulsorily acquire all the remaining shares. In the case of Kian Joo, it is estimated that Yeoh’s Can-One needs to get hold of about 93% equity interest in order to trigger a compulsory acquisition.
Simply put, if Teow Chuan does not accept the offer, a full privatisation will not materialise. And this is what happens when an unstoppable force meets an immovable object.
Teow Chuan, son of Bon Tay, has yet to take up the offer. Although Teow Chuan last Tuesday divested 13,000 shares on the open market, he remains a substantial shareholder in Kian Joo with an 8.97% stake.
Now, will Yeoh take a “half-friendly” measure to have a discussion with Teow Chuan? Will Can-One raise the offer price and ask him nicely to exit Kian Joo?
Ideally, this would be a win-win situation, which most minority shareholders of Kian Joo would want to see. That is because Yeoh would have to extend the revised offer to those who have accepted the existing offer.
But will Yeoh take the harder approach to delist Kian Joo even before hitting the 90% threshold? This could be a lose-lose situation for him if Teow Chuan stays on.
Will they sit down and talk?
A source close to the See family points out that Yeoh is currently struggling to get to the 90% threshold, as Teow Chuan and his associates have yet to accept the offer.
“Yeoh expects Teow Chuan to sell but he is a very, very stubborn man. Both of them are not on good terms. I doubt Yeoh will raise the offer price because if he does that, he must top up those he had already paid, and that would be silly, wouldn’t it?” he says.
A corporate observer concurs. “I think Can-One will try to delist Kian Joo, even if they don’t hit the 90% compulsory acquisition threshold. Yeoh might bet on the See brothers being unwilling to own shares in a non-listed firm. I am not sure if their relationship is cordial enough to sit down and talk. But if they do, someone has to extend the olive branch first,” he tells The Edge.
A minority shareholder, who is one of the top 30 shareholders of Kian Joo, also acknowledges that, from Yeoh’s perspective, it makes better sense to complete a full privatisation exercise. “I guess the offer price of RM3.10 per share is fair under the current market conditions. I am happy to accept the offer. I do not know the See brothers well. I cannot tell what they are thinking.”
Kian Joo’s 2017 annual report shows that as at Feb 28 last year, Datuk Anthony See Teow Guan had a 1.56% stake while See Chin Lam owned 0.68%, See Sew Chew held 0.47% and See Teow Koon had 0.46%.
In other words, including Teow Chuan’s 8.97% stake, the See family still collectively owned at least 12.14% equity interest in Kian Joo.
Higher offer price?
“Teow Chuan has slightly less than a 9% stake now. It is time for Yeoh to talk to him. Without his acceptance, Yeoh will not be able to do a compulsory acquisition. I am hoping for a higher offer price of RM3.30, or UOB KayHian’s fair value of RM3.35,” says another minority shareholder.
In its independent advice circular to Kian Joo’s shareholders, UOB Kay Hian Securities said it is of the view that the MGO to acquire Kian Joo is “not fair” but “reasonable”.
According to UOB Kay Hian, the offer was deemed not fair as the offer price represents a 25 sen or 7.46% discount to the estimated fair value of RM3.35 per Kian Joo share.
Last Wednesday, Can-One had, for the second time, extended the deadline for its MGO from April 8 to April 30.
“I think chances are high that Yeoh will raise the price, but first, he needs to see how much more Can-One will have to fork out. But if he does not want to make a revised offer, he might still delist the company just to frustrate the minorities who refuse his current offer,” says an industry observer. “If we recall how Can-One acquired its bigger rival Kian Joo some 10 years ago, we could see how patient Yeoh is. I do not think he will be generous enough to make a revised offer.”
To recap, Can-One first surfaced as a substantial shareholder in Kian Joo with a 32.9% stake in January 2012. Following the dispute over the disposal of the See family’s stake in Kian Joo in 1995, KPMG Corporate Services Sdn Bhd had in 2009 stepped in to sell the block of shares — eventually to Can-One — in 2012.
In early 2012, the See family still had three board seats in Kian Joo. But after being taken over by Can-One, Teow Chuan retired in June 2012, Teow Koon failed to get re-elected to the board in April 2014, while Teow Guan also failed to get re-elected in April 2015.
Now, if Kian Joo is on its way to be delisted, the minorities who refuse Yeoh’s offer would own shares in a non-listed company.
“If I were Yeoh, why the rush to raise the price? He has been waiting for this opportunity for so many years, why not wait for another two to three years? If he delists the company now, he could make a fresh offer to those who rejected him this round, maybe a lower price even, to punish them,” says another source.
“Don’t get me wrong, I do not think Yeoh is a mean person. In fact, I admire his skills and perseverance,” he adds.
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