KUALA LUMPUR (May 31): Star Media Group Bhd shareholders have voted to reject its proposal to sell properties, consisting of two units of factory and warehouse in Shah Alam, to Matang Bhd for RM33 million in a share and cash deal.
In Star Media’s virtual extraordinary general meeting (EGM) on Wednesday morning (May 31), 46% of shareholders who were present in the meeting holding 81.7% of voting shares rejected the resolution, while 53% of present shareholders holding 18.3% voted in support. The Malaysian Chinese Association (MCA), which holds 43.23% of Star Media, did not vote, being an interested party due to shareholdings in both companies.
In total, 93 shareholders holding 49.71 million shares rejected the motion in the EGM, while 109 shareholders holding 11.11 million shares supported the proposal.
The deal would have seen Matang satisfying RM28.9 million of the purchase consideration via issuance of 357 million new Matang shares at 8.09 sen apiece to Star Media.
This will see Star Media having a cross-holding of 13% in Matang. For the remaining purchase consideration, Star Media will receive a cash payment of RM4.12 million from the plantation group.
Tan Sri Tong Kooi Ong — a beneficial owner of a 5.4% stake in Star Media held personally and via The Edge Communications Sdn Bhd — voted against the deal. He had argued that the related party transaction (rpt) was value destructive and questioned some aspecfs of it. He had also asked if it was right that the MCA Wanita chief Wong You Fong is designated an independent director of Star Media, as MCA is the controlling shareholder. Wong had voted in favour of the rpt with Matang at the Star board level. (See: Tong's Portfolio: Star Media Group: An unreasonable, value-destructive related-party transaction with Matang)
The deal is deemed a related party transaction as MCA owns 43.23% of Star Media, and a 17.15% stake in Matang.
At the noon market break, Matang shares traded unchanged at 8.05 sen, while Star Media shares had fallen half a sen or 1.19% to 41.5 sen.
Aside from a land asset, the deal includes the sale of the two semi-detached buildings to Matang, which will be developed by Star Media at an estimated cost of RM14.8 million.
Star Media previously said the land and building disposals will see it booking a net pro forma gain of RM15.6 million, or approximately two sen per share in profit.
The land, where construction works began just this month, is located within the Star Business Hub, an industrial development project in Bukit Jelutong, Shah Alam.
During the virtual EGM earlier, Star Media independent non-executive chairman Tan Sri Chor Chee Heung reiterated that the proposal to build the properties before selling it to Matang provides “an accessible platform for diversification initiatives”.
Star Media ventured into property development at the start of this year, and the taking up of a 13% stake in Matang will give it exposure to the plantation sector.
“At the end of the day, we still feel that by developing the land, it will bring Star Media more benefits, as the group will derive higher profits than merely disposing of the land to create long-term shareholder value,” Chor said.
Potential synergy between Star Media and Matang, says CEO
Meanwhile, Star Media group chief executive officer Alex Yeow suggested potential synergy between the two companies, when asked how Matang would benefit from Star Media taking up a stake in the company.
“On the corporate level, MCA has a controlling stake in Matang. So combining MCA and Star Media [stakes], the synergy as in alignment of any corporate decision will be simpler, because we do share a common shareholder. That will help decision-making.
“Star Media has significantly larger back office management resources, such as shared services, finance and legal and so on, which could complement Matang.
“With or without a controlling stake in Matang, I see potential synergy of cost savings if the two independent companies were to work together. We can definitely help to enhance value.
“Both companies hold a lot of cash. Matang has over RM100 million, while Star has over RM300 million. Collectively, we can have action in the market with this financial strength. If there is synergy, and it is approved by the board and shareholders [of both companies], there is a necessity to do so,” Yeow said.
We are not MCA nominees, says Chor
During the virtual EGM, Chor also assured shareholders that he and independent director Wong You Fong, who was appointed in 2017, are not nominees of MCA.
He was addressing questions on the composition of the Star Media board, which has four independent directors and two non-independent directors. Wong is the MCA Wanita chief, a role she took up at the end of last year. Chor added that he is just an ordinary member of MCA, having retired from key posts in the political party since 2013. He was previously a vice-president of MCA.
“I would like to assure our shareholders that when we are all appointed to the board, the fiduciary duty of the directors of the company is always at the forefront of our minds when making decisions,” Chor said.
“Madam Wong is neither a nominee nor the representative of the company’s majority shareholder MCA. Based on the yearly assessment conducted by the nomination committee of the company and Madam Wong’s written declaration, she is deemed independent and has been acting in the best interest of the company,” Chor added.
The Edge and its owner, Tong Kooi Ong, is a substantial shareholder of Star Media, after buying a 5.42% stake in the group in April.