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Jade fiasco gives point to takeover code tune-up [2011] 11 Oct_BT

Title: Source: Author: Jade fiasco gives point to takeover code tune-up Business Times Siow Li Sen

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Latest SIC update follows discussions with investment bankers, M&A lawyers (SINGAPORE) The Securities Industry Council (SIC) is reviewing the Singapore Code on Take-overs and Mergers to improve disclosure and prevent a repeat of the Jade Technologies scandal that left minority shareholders in the lurch when the takeover failed. One of the proposals is to explicitly require disclosure by the offeror on whether his holdings have been used as collateral or lent out. In early 2008, when businessman Anthony Soh launched the takeover of Jade, he misrepresented about having sufficient financial resources and about the extent of his ownership in the firm. Practitioners welcome the latest review, voicing relief that the proposed changes are not earth-shattering. But some say that the review does not go far enough in other areas such as shortening the takeover process, nor does it look into insider trading during an acquisition. In a statement yesterday, the SIC said that it identified areas of the takeover code that need to be refined or updated after discussions with investment bankers and lawyers active in merger and acquisition transactions. Among the key proposals is to 'explicitly require disclosure of the holdings of offeree company shares of the offeror which have been charged as security, borrowed or lent'. Another proposal pertains to associates, to 'lower the threshold for disclosure of dealings during an offer period by holders of sizable stakes in the offeree company from 10 per cent to 5 per cent'. In the Jade scandal, Mr Soh did not disclose that he had a share lending agreement with an Australian brokerage that subsequently went bust. Millions of Jade shares lent to the brokerage, Opes Prime, were seized by its creditors after it failed and he was forced to withdraw the offer because of his diminished holdings.

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One of the creditors was Merrill Lynch, which seized more than 200 million Jade shares to enforce its claim on Opes as a creditor. Merrill said that it had notified the company, fulfilling its duty as a substantial shareholder. But the SIC said that as an 'associate' of the takeover, it should also have informed the council and the public. Some of the proposals will codify existing practices, including clarifying how the code applies to real estate investment trusts and business trusts. Another change will give a class exemption or simplify the whitewash waiver process for company buybacks. 'Most companies would seek a mandate to buy back shares so that they have the flexibility to do so should the need arise,' the SIC said. As a result, applications for exemptions abound, particularly during the periods that companies typically hold their annual general meetings, it added. Lawyers said that the latest review of the code mainly clarifies current practices. 'Most of the suggested amendments either codifies, clarifies and/or streamlines the current practice and do not drastically change how one would approach a takeover,' said Andrew Ang, Wong Partnership partner and deputy head of mergers and acquisitions practice. But a corporate governance specialist said that more could be done. 'I welcome the proposed changes as they improve clarity on important areas, take into account market developments, and raise the bar on intermediaries such as advisers, managers, trustees and trustee-managers in terms of conflict of interests and sanctions,' said Mak Yuen Teen of NUS Business School. 'I am very concerned about possible insider trading around mergers and acquisitions and hope the regulators will also closely scrutinise price and volume movements around such transactions and take strong action if there is evidence of insider trading.' Introduced in 1974, the Singapore Code on Take-overs and Mergers was last revised in 2007. Copyright 2010 Singapore Press Holdings Ltd. All rights reserved.

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11-Oct-11