South Malaysia Industries uncooperative in facilitating EGM, alleges acquirer Target 1

Wednesday 18 Dec 2024

KUALA LUMPUR (Dec 17): Target 1 Sdn Bhd alleged that South Malaysia Industries Bhd (KL:SMI) is not cooperating to facilitate the extraordinary general meeting (EGM) scheduled for Jan 9, 2025, and the unconditional mandatory takeover offer for SMI.

Target 1 — one of the parties seeking to take SMI private — said it has requested SMI's record of depositors, for the intention of dispatching the notice of EGM to SMI’s shareholders.

“As of today, SMI has yet to provide the required information, and it is unlikely that SMI will furnish its ROD (record of depositors) to Target 1 to facilitate the despatch of the offer document and the implementation of the offer, as well as the dispatch of the notice of EGM to members of SMI,” Target 1 said.

Despite this, Target 1 said it remains committed to ensuring that the EGM proceeds as planned and will take all necessary steps in accordance with the law.

It also said it is dedicated to upholding the rights of all shareholders and maintaining transparency throughout this process.

Target 1 is controlled by Francis Leong Seng Wui, who emerged as the SMI's largest shareholder with a 30.67% stake after acquiring shares on the open market (15.52%) and via off-market trades (15.15%) in the months of May and June this year.

Leong is executive director of both Hong Seng Consolidated Bhd (KL:HONGSENG) and Revenue Group Bhd (KL:REVENUE).

The EGM, called by Velocity Capital Sdn Bhd on behalf of Target 1, was to appoint six new directors, including former Perak police chief Datuk Mior Faridalathrash Wahid.

However, SMI said the notice of the EGM has not yet been circulated to shareholders, thus no EGM will be convened until such a notice is issued.

On Nov 22, Velocity also filed a lawsuit which, among others, sought to restrain SMI and its directors from taking any steps to disrupt the EGM, and to prohibit appointment of new board members until the conclusion of the EGM.

In response, SMI has also initiated legal action of its own, to halt the EGM.

Specifically, SMI has initiated legal proceedings against Velocity and three other parties — Target 1, TA Securities Holdings Bhd and Agmo Digital Solutions Sdn Bhd — to block any steps towards convening the EGM, pending a review by the Securities Commission Malaysia (SC).

SMI is also seeking to prevent the defendants from accessing the company’s record of depositors or general record of depositors related to the EGM.

On Nov 29, SMI had also slammed Target 1 for placing an advertisement for the purported EGM to appoint new directors in the New Straits Times on Nov 26, as "misleading the public and shareholders", citing requirements under the Companies Act 2016 and the company's constitution.

Target 1's Leong and two subsidiaries of Techbase Industries Bhd (KL:TECHBASE) are leading a group holding 50.05% stake in SMI to take over the remaining shares in the company at 45 sen apiece or RM47 million.

The offer comes after Target 1 signed an agreement with Techbase’s Honsin Apparel Sdn Bhd and HiQ Media (Malaysia) Sdn Bhd, to jointly exercise their voting rights and obtain control in the management of SMI and its subsidiaries.

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.

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 its 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 EGM, 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 SC 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 persons acting in concert had taken control of over 33% of the company's shareholdings without making a mandatory takeover offer.

In July, another substantial shareholder in SMI, Mah Sau Cheong, 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.

At the time of writing, shares of SMI were up 0.5 sen at 40 sen on Tuesday, giving it a market capitalisation of RM83.98 million.

Edited ByAdam Aziz

Text Size