SINGAPORE - A battle royale is brewing at Ong family-controlled property player Hwa Hong Corporation, with Mr Ong Choo Eng and his son Ong Eng Yaw getting together with other investors and private equity funds to launch a takeover bid for the company.
The battle pits the senior Ong, 78, and his son against the families of his five brothers who co-founded the company.
The offer, at 37 cents per share, exceeds the closing price of the share over the past nine years and is nearly 30 per cent above the net asset value of the stock.
All this comes after the company was recently queried by the regulators following the resignation of its independent chairman, Mr Mak Lye Mun.
Mr Ong Choo Eng (the third brother among the six), his son Eng Yaw and their partners in the offer - Roswell Assets, Dymon Asia Private Equity and Crystalic Star Global - via a consortium known as Sanjuro United, have already accumulated 24.3 per cent of Hwa Hong shares.
Given that the company’s free float is 34.6 per cent, they need to accumulate just over 24 per cent more to take it private and delist the company.
Mr Mak, a seasoned banker and the former chief executive of CIMB Bank Singapore, abruptly resigned on May 4 citing a “disagreement with certain board members on the selection and appointment process of two new independent directors”.
The company currently has no independent directors but appointed two family members, Eng Loke and Eng Kiong, to its board just after Mr Mak left.
The events triggered a notice of compliance by watchdog Singapore Exchange Regulation (SGX RegCo).
SGX RegCo noted that Hwa Hong is also required to appoint independent professionals to undertake an independent review of the terms of reference of the nominating committee and the company’s internal controls, processes and practices relating to the board nomination process. This includes the selection and appointment of potential candidates, and to make recommendations on improvements.
In addition, the company must consult the appointed independent reviewer on the proposed appointment of new directors, including any of the potential candidates, prior to the completion of the review and implementation of all recommendations, SGX RegCo added.
The six founding Ong brothers - the oldest of whom, Mr Ong Mui Eng, is 87 years old - and their families control between 4.3 per cent and 16.2 per cent of the company. City Developments has a 5.1 per cent stake.
The offerors believe that given the generous offer price, they will be able to accumulate enough shares to take control and privatise the company. They cited corporate governnance issues and strategy, among various reasons, as motivations for their takeover move.
Mr Ong Eng Yaw said the current state of affairs of the company is highly unsatisfactory.
“The company’s recent changes in management may lead to uncertainty in executing any strategy,” he noted. “For minority shareholders who do not wish to be subject to the risk of uncertainty in the direction and strategy of the company, the offer will provide an attractive opportunity to immediately crystalise their investment at the offer price.”
He stressed that the offer price exceeds all previous closing prices of the shares in the nine-year period and stands at a premium of about 29.8 per cent over the company’s net asset value per share as at end-December 2021, without incurring brokerage and other trading costs.
Mr Gerald Chiu, director of Dymon Asia Private Equity, said the offer will allow the offerors to “take a more active role in managing the challenges the company faces amidst the uncertain operating environment”.
Meanwhile, Roswell Assets director Seow Voon Ping said recent events at the board have raised questions about the corporate governance and the board’s ability to navigate the company through the current volatile market.
Shares of Hwa Hong closed at 29 cents last Thursday (May 12), before it called for a trading halt the day after.