SMI's substantial shareholder seeks court order to freeze takeover offer, director appointments

Wednesday 18 Dec 2024

KUALA LUMPUR (Dec 17): A substantial shareholder of South Malaysia Industries Bhd (KL:SMI), Mah Sau Cheong, has initiated legal action to bar SMI from proceeding with the takeover offer it received from a group of shareholders who control more than half of SMI's issued shares, until the disposal of his complaint against the company with the Securities Commission of Malaysia (SC).

Mah, who holds a 7.65% stake in SMI, also wants to prevent the company from holding an extraordinary general meeting on Jan 9 for the appointment of new directors until his complaint to the SC has been dealt with.

The suit, filed at the Johor Bahru High Court, named eight defendants, including SMI and the offeror, Target 1 Sdn Bhd, as well as Target 1's sole shareholder Francis Leong Seng Wui.

The other five defendants named were: Techbase Industries Bhd's (KL:TECHBASE) wholly-owned Honsin Apparel Sdn Bhd and 51.91%-owned HiQ Media (M) Sdn Bhd, Techbase's largest shareholder Datuk Au Yee Boon, and Velocity Capital Bhd's (KL:VELOCITY) wholly-owned money lending arm, Velocity Partner Sdn Bhd. Techbase was formerly known as Prolexus Bhd.

Target 1 is SMI's largest shareholder with a 30.67% stake, while Honsin owns a 16.86% stake and HiQ Media a 2.52% stake. Leong is executive director of both Hong Seng Consolidated Bhd (KL:HONGSENG) and Revenue Group Bhd (KL:REVENUE).

Back on Aug 20, Target 1, Honsin and HiQ Media — who control an aggregate 50.05% stake in SMI — inked a collaboration agreement to jointly exercise their voting rights and obtain control of SMI's management and its subsidiaries, triggering the mandatory takeover offer at 45 sen per share.

A week later, Mah filed for an interim injunction to restrain the offerors from proceeding with the takeover offer until the disposal of his suit against SMI, Techbase and YB Ventures Bhd (KL:YB) over the alleged manipulation of SMI shares, which he had filed in early July.

SMI, who has yet to dispatch the offer document to its shareholders, said on Sept 2 that its board of directors had been advised not to take any action with regards to the unconditional mandatory takeover offer as it might "disrespect or circumvent" any order to be made by the court.

Subsequently on Nov 22, Velocity Capital, on behalf of Target 1, called for an EGM to appoint six new directors, namely: former Perak police chief Datuk Mior Faridalathrash Wahid, She Pei Sze, Lee Keng Fatt, Datuk Sok One Esen, Ho Pui Hold and Leong Weng Loong. Velocity also filed a lawsuit to restrain SMI and its directors from taking any step to disrupt the EGM, and to prohibit the appointment of new board members until the conclusion of the EGM.

In response, SMI said the notice of the EGM had not yet been circulated to shareholders, thus no EGM would be convened until such a notice was issued. It also countersued Velocity Capital to halt the EGM.

At the same time, SMI's board of directors had sent a request to the SC for a "review of its decision to grant consent" for the appointment of the six new non-independent directors, prior to the posting of the document on Target 1's takeover of SMI.

This is because under listing rules, except with the consent of the SC, no nominee of an offeror or persons acting in concert with it can be appointed to the board of the offeree — nor can they exercise voting shares or voting rights — until the offer document or the whitewash circular has been dispatched to shareholders.

In the latest development, Mah is seeking an interim injunction from the court to block both the EGM and the takeover offer, pending the disposal of his complaint lodged with the SC. He is also seeking an injunction to restrain the parties from proposing or passing any resolution to remove or appoint directors to SMI's board during this period.

SMI owns Menara SMI, a 15-storey office tower situated along Lorong P Ramlee here. The group also owns and operates 2,230 car park bays in Kelana Square and 1,227 car park bays in Zenith Corporate park in Kelana Jaya.

SMI shares ended half a sen or 1.27% higher at 40 sen on Tuesday, valuing the group at RM83.98 million.

Edited ByTan Choe Choe

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