News analysis

No takeover offer for UIC, but deal goes beyond that

Move cements Wee family's hold over UIC, and majority control is not difficult due to rule quirk

At first glance, the decision by UOB's Wee family to shift as many of its shares in United Industrial Corp (UIC) as possible to their flagship property firm UOL without triggering a takeover offer does not seem like a big deal.

But this deal goes beyond that.

By getting the Securities Industry Council (SIC), which administers the Takeover Code, to bless its share swap with Haw Par Corp, UOL has basically cemented the Wee family's control over UIC.

UOL said in its filing to the Singapore Exchange yesterday that it had got a whitewash waiver from the SIC, which means that as long as most shareholders agree, UOL will not have to make a general offer for UIC so long as the shares it buys from concert parties like Haw Par do not move its total stake beyond 49 per cent.

With this hurdle out of the way, majority control is not difficult.

Owing to a quirk in the Takeover Code known as the "creeper rule", after the share swap is done, UOL and Wee family entities can go back to the open market to buy shares without triggering a mandatory general offer - as long as the purchases are no more than 1 per cent of UIC's share capital every six months.

Once UOL crosses the 50 per cent threshold, the creeper rule governing mandatory takeovers does not apply and UOL can accumulate more shares as it pleases.

So even if UOL is keeping its ownership of UIC at 48.9 per cent for now, UOL has basically sunk its anchor as UIC's majority shareholder.

But while majority control is one thing, privatisation is a separate question.

No deal has been struck between the Wee family and Philippine tycoon John Gokongwei Jr, who owns 37 per cent of UIC and is its deputy chairman. Wee family head Wee Cho Yaw is UIC's chairman.

Back in 2009, when Dr Wee was obliged to make an offer for UIC on crossing into 30 per cent territory, Dr Gokongwei did not budge and the bid failed. He looks unlikely to budge still.

To be sure, though, even UIC's independent financial adviser at the time had deemed Dr Wee's offer price "not fair" to shareholders.

Rather, Dr Wee's bid seemed more like an attempt to get as much of the now $4.6 billion property group on the cheap from institutional investors wanting an exit during the financial crisis, as well as those who sold in the open market.

Dr Gokongwei's own offer for UIC back in 2005 was hardly mouth-watering either.

There is plenty of room to go for the two tycoons before they see eye to eye. Until then, punters waiting to earn that buyout premium will just have to keep waiting.

A version of this article appeared in the print edition of The Straits Times on June 24, 2017, with the headline 'No takeover offer, but deal goes beyond that'. Print Edition | Subscribe