KUALA LUMPUR (June 11): APM Automotive Holdings Bhd (KL:APM) shareholders rejected two proposed mandates for recurrent related party transactions (RRPTs) worth over RM265 million with Tan Chong Motor Holdings Bhd (KL:TCHONG), as well as with Warisan TC Holdings Bhd (KL:WARISAN) and their subsidiaries, at Wednesday's (June 10) annual general meeting (AGM).

According to filings with Bursa Malaysia, the RRPTs with Tan Chong Motor totalling some RM97.5 million included the sale of parts and components valued at RM60 million by APM's subsidiaries to Tan Chong Motor's entities, as well as the provision of rental of office and factory premises at Kawasan Perusahaan Seri Kembangan in Selangor valued at RM3 million.

The RRPT proposal also included expenses for insurance products acquired through the Tan Chong Motor group for RM10 million, and purchase of goods and services for RM20 million.

The RRPTs with the Warisan TC group were substantially larger at RM167.7 million, with the sale of parts and components totalling RM160 million between APM's subsidiaries and Warisan TC's entities, plus rental transactions, and purchase and renting of heavy equipment.

However, the Tan Chong Motor-related RRPTs fell through after receiving 75.19% of voted shares against them at Wednesday's shareholders meeting, while Warisan TC-related RRPTs saw 75.22% opposition. 

However, Ordinary Resolution 9 for the RM5.4 million transactions with Tan Chong International Ltd (TCIL) and its subsidiaries was accepted, with 81.58% of the voted shares in favour. 

The transactions under this resolution include the sale of parts and components supply to the TCIL group for RM5 million, as well as the provision of engineering, design and development services.

According to a circular to shareholders, APM said the rationale for the RRPTs included long-term benefit to the APM group.

It said the related parties represent an existing market with reliable payment terms for the APM group’s products and provide a good source for certain components purchased by the APM group.

"Sales to related parties also contribute to overall higher sales for the APM group, thus increasing trading volume, higher production efficiency and better bargaining power when negotiating with the vendors. This is consistent with the APM group’s objectives of brand building and maintaining a competitive edge," it added.

APM further said the RRPTs were carried out in a manner similar to other business activities that the APM group conducts with parties other than the related parties. 

"The RRPTs are in the ordinary course of business and undertaken at arm’s length, on normal commercial terms of the APM group which are not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders." 

Meanwhile, it said the board of directors (save for interested directors) similarly opined that the RRPTs are undertaken in the best interest of the APM group. 

The interested directors have abstained and will continue to abstain from deliberation and voting in respect of the relevant RRPTs involving their interests, it added.

The interested related parties for these transactions include Datuk Tan Heng Chew, Datuk Tan Eng Hwa, Nicholas Tan Chye Seng, and Tan Chong Consolidated Sdn Bhd (TCC). 

The parties have interests in both APM and Tan Chong Motor, with TCC holding a major stake of 37.54% in APM and 40.49% in Tan Chong Motor.