KUALA LUMPUR (Oct 8): Dagang NeXchange Bhd (KL:DNEX) has reached a global settlement with its Chinese partner Tethystronics Technologies Co Ltd (TTCL) over disputes involving semiconductor foundry SilTerra Malaysia Sdn Bhd, paving the way for a RM100 million investment in DNeX’s semiconductor holding company. 

Under the settlement, TTCL’s wholly-owned unit Mimastronics Technologies Co Ltd (Mimas) will subscribe for 5,000 redeemable convertible preference shares (RCPS) in DNeX Semiconductor Sdn Bhd (DSSB) at RM20,000 each. 

DSSB, currently wholly-owned by DNeX, holds a 60% stake in SilTerra, while Mimas holds the remaining 40%. If the RCPS are fully converted, Mimas would hold approximately 33.33% of DSSB’s enlarged ordinary share capital.

The settlement ends the legal and arbitration proceedings involving the proposed investment in DSSB alongside disagreements over appointments to SilTerra’s board.

“With the shareholder matter now resolved, DNeX can focus on supporting SilTerra to capture the opportunities ahead and ultimately unlock greater value from our investment in the company,” DNeX interim officer-in-charge, group chief operating officer and group chief financial officer Vinie Chong Pui Ling said in a statement.

“The board is of the view that the global settlement is in the best interests of the company as it brings finality, on an amicable basis, to the multi-forum legal and arbitration proceedings amongst the shareholders of SilTerra, allowing all parties to move forward constructively,” DNeX separately said in a Bursa Malaysia filing.

The RM100 million proceeds may be used to strengthen SilTerra’s financial position and support expansion, including investments in capacity, technology and capabilities to pursue opportunities in silicon photonics, it said.

The RCPS subscription replaces an earlier proposal for Mimas to subscribe for irredeemable convertible preference shares in DSSB under an agreement dated Jan 21, 2022.

The new subscription is subject to obtaining a no-objection letter, approval or confirmation that no approval is required from the Ministry of Investment, Trade and Industry (Miti) and/or the Malaysian Investment Development Authority, according to DNeX.

The preference shares would be convertible into new DSSB ordinary shares only if DSSB elects not to redeem them after the relevant anniversary dates.

The settlement follows a dispute that began in 2022 over whether regulatory approval from the government was required for Mimas’ proposed RM100 million investment in DSSB.

DNeX and its Chinese partner had agreed in March 2021 to acquire SilTerra from Khazanah Nasional Bhd for RM273 million in cash, with DNeX taking 60% and the partner acquiring the balance. DNeX completed its acquisition in July that year.

The partners also committed to inject at least RM200 million into SilTerra. As part of the funding arrangements, they subsequently pursued the proposed RM100 million irredeemable convertible preference share subscription in DSSB by Mimas.

However, DNeX said a Miti clarification dated Feb 28, 2022 indicated that prior approval was required for the investment. It argued that proceeding without approval could put SilTerra’s manufacturing licence and operations at risk. Mimas in turn maintained that approval was unnecessary and that the subscription and shareholders’ agreements were valid and enforceable.

On Nov 17, 2022, DSSB commenced arbitration against Mimas, seeking a determination that the agreements were void.

A separate dispute later arose over DSSB’s appointment of additional directors to SilTerra’s board through members’ written resolutions, with TTCL initiating arbitration against DSSB and SilTerra in December 2022, alleging that the appointments breached their agreed board structure. TTCL also sought court injunctions.

In January 2023, the parties recorded a consent order that discharged an interim injunction and allowed SilTerra’s board to continue handling business matters, while preserving its composition as the disputed November 2022 case was still on-going at that time.

On Feb 12, 2025, the board-related arbitration was awarded in TTCL’s favour. The separate arbitration concerning Mimas’ proposed investment was still ongoing at that point.

DSSB subsequently applied to the High Court on March 27, 2025 to set aside the award and stay its enforcement, a move announced the following day. TTCL, in turn, sought court recognition and registration of the award. DNeX’s subsequent Bursa filing showed that hearings were postponed while the parties pursued settlement discussions.

DNeX shares closed 1.5 sen or 2.94% higher at 52 sen on Thursday, giving the group a market capitalisation of RM1.87 billion. The stock has risen nearly 70% year to date.

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