Application to Withdraw the Conditional Voluntary Take-Over Offer for TA Global Berhad by TA Enterprise Berhad
2 June 2020 | Kuala Lumpur

Background of the Offeror and Offeree

1.

The offeror, TA Enterprise Berhad (TAE), was incorporated on 13 March 1990 and was listed on the Main Board of Bursa Malaysia Securities Berhad (formerly known as Kuala Lumpur Stock Exchange) (Bursa Securities) on 23 November 1990. TAE is principally engaged in investment holding and the provision of management services to its subsidiaries. Its subsidiaries are principally involved in, amongst others, broking and financial services, investment holding, credit and lending, property investment, property development and hotel operations. Datuk Tiah Thee Kian (Datuk TTK) is the major shareholder of TAE holding 41.92%1 in TAE.

2. The offeree, TA Global Berhad (TAG), was incorporated on 8 August 2008 and was listed on the Main Market of Bursa Securities on 23 November 2009. TAG is principally engaged in investment holding company and the provision of management services to its subsidiaries. Its subsidiaries are principally involved in, amongst others, property development, property investment, hotel operations, credit and lending as well as investment holding, general construction, trading of building material and others. TAG is held by TAE (60.17%) and by persons acting in concert with TAE2 (15.34%)1.

The Offer

3.

On 12 February 2020, TAE announced the proposed acquisition of up to 2,119,389,362 ordinary shares in TAG, representing up to 39.83% equity interest in TAG for a consideration of RM0.28 per share, which shall be satisfied by way of either cash or share exchange with new ordinary shares to be issued by TAE (Offer). As stated in the notice of take-over offer (Notice), the Offer is not conditional upon any minimum level of acceptances as TAE and its persons acting in concert already held more than 50% in TAG. However, the Offer is conditional upon the following:

  (i)

Approval of Bursa Securities for the listing of and quotation on the Main Market of Bursa Securities for the following:

    (a) The new ordinary shares in TAE to be issued under the share exchange option; and
    (b) The new ordinary shares in TAE to be subscribed by Datuk TTK to fund the cash option under the Offer (Proposed Subscription); and;
  (ii) Approval of the Offer and the Proposed Subscription by the shareholders of TAE at an extraordinary general meeting (EGM) to be convened.
4. It was observed that TAG shares experienced a surge in price and volume following the announcement of the Offer by TAE on 12 February 2020.
Potential Mandatory Offer in TAE
5. Given that the collective shareholdings of Datuk TTK and persons acting in concert with him in TAE are currently above 33% but below 50%, Datuk TTK's acceptance of the Offer via the share exchange option and subscription of shares under the Proposed Subscription may result in Datuk TTK incurring a mandatory offer obligation in TAE.
Subsequent Announcements in relation to the Offer
6. On 17 February 2020, TAE and TAG made an application to the Securities Commission (SC) seeking an extension of time (EOT) in respect of the despatch of the offer document (OD) and the submission of the draft independent advice circular (IAC). On 24 February 2020, it was announced that the SC had granted the following EOT -
  (i) to dispatch the OD within 2 market days from Bursa Securities' clearance of TAE's circular to its shareholders (TAE Circular), or SC's notification that it has no further comments on the OD, whichever is later. However, such EOT shall not exceed 90 days from the date of the Notice, being 12 May 2020; and
  (ii) to submit the draft IAC to the SC for comment within 1 market day from Bursa Securities' clearance of the TAE Circular, or SC's notification that it has no further comments on the OD, whichever is later. However, such EOT shall not exceed 86 days from the date of Notice, being 8 May 2020.
7. On 2 April 2020, TAE announced that the SC had approved its application seeking the consent of the SC pursuant to paragraph 19.03 of the Rules on Take-overs, Mergers and Compulsory Acquisitions (Rules), for TAE and persons acting in concert with it to purchase TAG shares from the open market during the offer period.
8. On 10 April 2020, TAE also announced that the additional listing application in relation to the Offer and Proposed Subscription has been submitted to Bursa Securities.
Withdrawal of Offer
9.

The SC received an application dated 6 May 2020 from TA Securities Holdings Berhad, on behalf of the board of directors (Board) of TAE, seeking the SC's written consent for TAE to withdraw its voluntary take-over offer in relation to TAG pursuant to Paragraph 9.11 of the Rules. The withdrawal of the Offer was after taking into consideration, amongst others, the adverse impact of the COVID-19 pandemic to the financial performance of TAG and its subsidiaries (TAG Group) in the financial year ending 31 December 2020 following the temporary suspension of operations of several hotels of TAG Group in the months of March 2020 and April 2020 as announced by TAG on 13 April 2020. The Board of TAE was of the view that the ripple effects of COVID-19 pandemic were still unfolding and the full impact of this pandemic could only be determined after the situation stabilises. Pursuant thereto, the Board of TAE held the view that the withdrawal of the Offer would be in the best interests of TAE, shareholders of TAE and holders of the TAG shares subject to the Offer based on the prevailing situation and had submitted an application to the SC pursuant to paragraph 9.11 of the Rules.

On the same day, TAE announced the withdrawal of the Offer, subject to SC's consent.

The SC's decision
10. In considering this application, SC took cognisance of the principles behind the Malaysian Code on Take-overs and Mergers 2016 (Code) which was primarily designed to ensure that shareholders are treated fairly, given the opportunity to decide on the merits of a take-over and are afforded equal treatment by an offeror. Thus, both the Code and the Rules seek to provide an orderly framework within which take-overs and mergers are conducted.
11. General Principle 3 of the Code, in particular, states that an acquirer who proposes to make an acquisition which may lead to an obligation to make a take-over offer, or is an offeror, shall ensure that he is able to implement the offer in full.
12. Consistent with the SC's general mandate of establishing and preserving the integrity of the market, the take-over regulations stipulate conditions to facilitate the greatest certainty practicable for such transactions and that offers take place in an efficient, competitive and informed market. Accordingly, any announcement of a firm offer should be made only after careful and responsible consideration as once the announcement on the offer is made, the market in the shares of the relevant company is likely to be, at least to some extent, supported by the offer price.
13. In this regard, the conduct of the applicant and the surrounding circumstances and events are relevant:
  (i) During the offer period up to the date of the announcement on the proposed withdrawal of the Offer, a total of 253.2 million TAG shares were traded with closing prices ranging from RM0.19 to RM0.265 while a total of 57.5 million TAE shares were traded with closing prices ranging from RM0.335 and RM0.625. Shareholders in both TAE and TAG and the investing public may have taken the necessary positions in those shares after the Offer was announced. Hence, TAE's decision to withdraw the Offer almost three (3) months later may have significant implications on their investments;
  (ii) The announcements made by TAE on 2 April and 10 April 2020 would have led the market to believe that TAE has the intention to proceed with the proposals even when the Movement Control Order (MCO) was already imposed. The MCO was first announced on 16 March 2020 and was implemented on 18 March 2020;
  (iii) It would be reasonable to expect that when an announcement of a firm intention to make a take-over offer is made pursuant to paragraph 9.10 of the Rules, the offeror shall accept the risk of a change in circumstances in the intervening period, including any material adverse change in the offeree's financial position. Further, it is noted that other than the two (2) conditions stated in paragraph 3 above, there are no other conditions attached to the Offer; and
  (iv) TAG is helmed by Datuk TTK (the major and controlling shareholder of TAE) at the Board level and managed by a person acting in concert with TAE for the Offer. Further, all other Board members of TAE also sit on the Board of TAG. As the Offer was announced at a time when COVID-19 was already known, TAE and its Board should have taken into consideration the risks before making the announcement since they would be in a position to evaluate the prospects of TAG's business.
14. Having thoroughly considered the justifications for the application, the conduct of the applicant and the surrounding events and circumstances, the SC had on 1 June 2020 decided to decline giving its consent to TAE to withdraw the Offer.
15. The Boards of both TAE and TAG in their entirety are deemed interested in the Offer and hence, would have to abstain from any deliberation, recommendation and/or voting in relation to the Offer. In TAE's announcement, the Board of TAE provided its view that the withdrawal of the Offer is in the best interests of TAE, shareholders of TAE and holders of the TAG shares subject to the Offer. The SC's decision will allow non-interested shareholders of TAE and TAG to decide on the desired course of action (i.e. with regard to the TAE shareholders, on whether to vote for or against the proposals at TAE's EGM, and with regard to the TAG shareholders, on whether to accept or reject the Offer should the Offer proceed).
   
This ruling is published pursuant to section 152A of the Securities Commission Malaysia Act 1993.

1
Shareholdings as at 30 April 2020.
2
For the purpose of the Offer, the persons acting in concert with TAE are Datuk TTK, Datin Tan Kuay Fong, Kimmy Khoo Poh Kim, Tiah Joo Kim, Tiah Ee Laine, Tiah Sook Lin, Dato’ Tiah Thee Seng, Ong Khay Soon and Tiah Thee Ngiam.
3
Paragraph 9.11 states that where there has been an announcement of an intention to make a take-over offer under subparagraphs 9.10(1) the offeror shall not withdraw the take-over offer without the prior written consent of the SC.
SECURITIES COMMISSION MALAYSIA

Disclaimer:
The information contained within this publication is made available by the SC to educate and instil a general understanding of the regulation of take-overs. It is not to provide specific legal advice. Such information should not be treated as a comprehensive collection of all documentation relating to the relevant take-overs provisions being assessed. As such, parties must not treat this publication as a substitute for seeking qualified advice concerning specific scenarios. In cases of doubt, parties should consult an adviser listed in the Approved List under the Principal Adviser Guidelines or the SC to ensure compliance with take-overs regulations. The SC will not be held liable for the use or reliance of any opinion, finding or information in this publication.
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