Minority shareholders block Challenger exit offer, delisting with 11.4% 'no' vote

Challenger announced on March 20 that it intended to delist with Digileap Capital, making a cash offer of 56 cents a share.
Challenger announced on March 20 that it intended to delist with Digileap Capital, making a cash offer of 56 cents a share.PHOTO: ST FILE

SINGAPORE - Minority shareholders of homegrown IT retailer Challenger Technologies have successfully challenged a $183 million exit offer at an extraordinary general meeting on Thursday (June 27), despite some 88.6 per cent of those present and voting supporting the buyout.

About 11.4 per cent of voters present rejected the offer price of 56 cents a share, which some earlier said was too low.

With the delisting not approved by shareholders, the exit offer will lapse and the offeror and its concert parties will not be able to make another offer for the shares for 12 months from the date of this lapse.

At the EGM on Thursday in Ubi Link, shareholders including Singapore-based fund manager Pangolin Investment Management, which has a 2.94 per cent stake in Challenger, questioned if the exit offer was indeed "fair and reasonable" as its independent financial adviser Deloitte & Touche Corporate Finance had assessed.

Challenger announced on March 20 that it intended to delist, with Digileap Capital - a partnership between Challenger chief executive Loo Leong Thye and his family and Dymon Asia Private Equity - making a cash offer of 56 cents a share. This means the company is valued at $183 million.

Mr Ng Leong Hai and four members of the Loo family, including Mr Loo, hold 78.64 per cent of shares and back the delisting, which has to be approved by 75 per cent of the shareholders present and voting, and not opposed by 10 per cent or more.

Despite pressure from minority shareholders previously, Challenger said in its delisting circular that Digileap Capital would stick to its offer price, and revealed that Pangolin had previously expressed a desire to cash out at a lower amount. Pangolin denies it made any formal offer.

Pangolin director James Hay, whose firm believes the fair value of the shares should be at least $1.15, said: "This is far too cheap to be selling an excellent company which we will be shareholders in for a long time."

 

Another shareholder questioned during the meeting whether shareholders were indeed getting the highest value for their shares. He suggested that Challenger look into this issue, perhaps considering selling the company in the international market, if the exit offer this time was rejected.

Mr Hay added that he was delighted at the outcome and said he believes his company "made a difference", in part because it rallied minority shareholders who agreed with its view. It had gathered support from those holding 9.8 per cent of the company's shares in the months leading up to the vote.

But this was not without obstacles, he said, noting that while the company register is supposed to be available to shareholders, he was not able to obtain it despite making a request. He said: "I'm sure that's not the intention of the law, so maybe the authorities need to be looking at that. Had we been able to contact all shareholders, we probably could have got more (votes)."

Another shareholder at the meeting, Mr Chua G.H, 46, who is a private investor, said he was hoping the company would not be delisted.

Looking ahead, he said: "I would like the company to be more proactive in the future and try to maximise the usage of its cash... It has more than $60 million in cash which it claims is being used for working capital. I hope it can maybe return some excess cash to shareholders, if there is not much immediate use for it."

Asked about the outcome of the vote, Challenger’s chief executive, Mr Loo, said: “I respect the decision made by Challenger shareholders and appreciate everyone’s support of the company in our journey to where we are today.”

He added: “I am also heartened that many shareholders do not want to see us go and would like to remain invested in Challenger as a listed vehicle. While the retail business environment is challenging, we will continue to do our best and grow the company.”