KUALA LUMPUR (Aug 20): South Malaysia Industries Bhd (KL:SMI) on Tuesday received a takeover offer worth more than RM47 million from a group of major shareholders.
The shareholders — Francis Leong and two subsidiaries of Techbase Industries Bhd (KL:TECHBASE) — are offering 45 sen per share to acquire the rest of the shares not already owned by them, according to an exchange filing. They currently control more than half of the issued shares in SMI.
The offer price represents a premium of 11% to SMI’s closing price of 40.5 sen on Monday. SMI surged 12% to 45.5 sen on Tuesday before trading in its shares was suspended.
The offer comes after Leong, through his private vehicle Target 1 Sdn Bhd, signed an agreement with Techbase’ Honsin Apparel Sdn Bhd and HiQ Media (Malaysia) Sdn Bhd, formalising their cooperation to jointly exercise their voting rights and obtain control in the management of SMI and its subsidiaries.
Leong, who is also executive director of property developer Hong Seng Consolidated Bhd (KL:HONGSENG), has been racking up large chunks of SMI shares since May 2024 through Target 1 via the open market and direct business transactions.
Leong gains majority control
He has since emerged as the largest shareholder in SMI with a 30.67% stake. Honsin has been a shareholder in SMI since September 2022 with a 16.86% stake, while HiQ has held shares in SMI since February 2023 with a 2.52% stake.
Together, they now control 50.5% of SMI, triggering the mandatory takeover offer under Malaysian takeover rules and capital market laws.
However, the offerors led by Leong intend to maintain the listing status of SMI on the Main Market of Bursa Malaysia.
Honsin and HiQ are looking forward to working with Target 1 “to achieve their common objective by improving the operational efficiency” of SMI and enhance the value of shareholders, Techbase said in a separate exchange filing.
“The parties shall fully cooperate with each other, providing necessary assistance and sharing relevant information for the purpose” of the mandatory general offer,” Techbase said. They will also collectively nominate one representative director of SMI, the company added.
Past attempts on SMI
Honsin has made several attempts in the past to wrest control of SMI’s board. In March this year, Honsin expressed intention to appoint Hong Zheng Hong and Tan Eng Gooi as directors during the company's annual general meeting.
SMI blocked the tabling of the resolutions under a rule stipulating that no nominee of an offeror or persons acting in concert shall be appointed to the board, nor may an offeror and persons acting in concert exercise voting shares or voting rights, until an offer document has been dispatched.
Last year, Honsin sought to remove SMI’s board of directors through an extraordinary general meeting, which did not materialise as both parties were subsequently embroiled in a series of legal battles.
Separately, SMI in March filed for a judicial review against the Securities Commission Malaysia to compel the regulator to make a decision with regards to its complaint of an alleged breach of the Capital Markets and Services Act 2007 by Honsin and HiQ, as well as other parties acting in concert with them.
In the complaint dated March 23, 2023, SMI alleged that Honsin and the PACs had taken control of over 33% of the company's shareholdings without making a mandatory takeover offer.
Another substantial shareholder in SMI, Mah Sau Cheong, last month sued Techbase and YB Ventures Bhd (KL:YB), as well as their subsidiaries, over alleged share manipulation at SMI. Apart from Techbase and YB Ventures, Mah also sued SMI separately.