Minority shareholders, disgruntled at what they regarded as a cheapskate offer for their stock, shot down an $183 million buyout of local IT retailer Challenger at a dramatic meeting yesterday.
The investors, representing 11.4 per cent of voters present, rejected the offer price of 56 cents a share.
Because the level of opposition was above 10 per cent, it was enough to stymie the buyout despite 88.6 per cent of those present and voting at the extraordinary general meeting (EGM) backing it.
The remarkable outcome - one rarely seen in corporate Singapore - means the exit offer will lapse and the offerors will not be able to make another bid for 12 months.
Challenger chief executive Loo Leong Thye, who was part of the buyout team, said after yesterday's vote that he respected the shareholders' decision and appreciated support for the company.
Mr James Hay, director of fund manager Pangolin Investment Management - which has long argued against the buyout - said he was delighted at the outcome.
Number of voters present at the extraordinary general meeting.
Percentage of voters who backed the offer price of 56 cents a share.
He believes his firm made a difference, in part because it rallied minority shareholders to reject the deal. "The offer was way too low, and it just kind of upset people," he said after the EGM at Challenger TecHub in Ubi Link that was attended by about 70 shareholders.
"In the case of most shareholders, they felt there was nothing left on the table for them."
Lawyer Robson Lee of Gibson Dunn, whose expertise is in mergers and acquisitions, said the result shows minority shareholders are now better informed about their right to reject an exit offer, adding that those looking to delist should be aware that this group "cannot be browbeaten into accepting a delisting exit offer that is not perceived to be fair and reasonable".
Shareholders who opposed the buyout were quick to put their point across at the meeting.
Mr Hay of Singapore-based Pangolin, which holds 2.94 per cent of Challenger, told the gathering: "This is far too cheap to be selling an excellent company, which we will be shareholders in for a long time."
Pangolin believes the fair value of the shares should be at least $1.15, contending that Challenger holds too much cash on its balance sheet.
Another investor, who identified himself only as K.C., said he first invested in the firm when Mr Loo was a young man. "I never sold my shares and am happy to hold it for my children... I look at (Mr Loo) as my partner."
To get the best value, Mr K.C. suggested that Challenger consider selling the company on the international market.
Challenger chief financial officer Tan Wee Ko replied that this was not a situation where the business, or part of it, was being sold to another company. He added that some minority shareholders supported the deal, despite others saying the price was not right.
Another shareholder, Mr Chua G.H., 46, said he was hoping the company would not be delisted, and urged it to be more "proactive" and try to maximise the use of its cash.
The path to yesterday's showdown was a contentious one.
Challenger announced on March 20 that it intended to delist, with Digileap Capital - a partnership between Mr Loo and his family and Dymon Asia Private Equity - making a cash offer of 56 cents a share. This valued the company at $183 million.
Mr Ng Leong Hai and four members of the Loo family, including Mr Loo, hold 78.64 per cent of the shares and backed the delisting.
But investors, including Pangolin, questioned whether the exit offer was "fair and reasonable", as assessed by independent financial adviser Deloitte & Touche Corporate Finance.
Despite shareholder pressure, Challenger said in its delisting circular that Digileap Capital would stick to its offer price, a stance that appeared to galvanise some investors into opposing the deal.
Mr Loo put a positive spin on yesterday's outcome. "I am heartened that many shareholders do not want to see us go and would like to remain invested in Challenger," he said.
"While the retail business environment is challenging, we will continue to do our best and grow the company."