Dukang Distillers Holdings Ltd - MANAGEMENT REPLY: Has Synear Food's former CEO triggered the mandatory open offer?

29/12/2013 – Dukang Distillers Holdings Ltd now has new controlling shareholders.

On December 6, Mr Gao Feng – the former executive chairman of Dukang Distillers – sold a 29.5% stake of Dukang Distillers to Treasure Winner Holdings Ltd for S$111.7 mln, and the remaining 14.34% stake to Kaifeng Tian Feng Mills for S$54.3 mln.

Investor Central had first reported on the deal September 19 in our story titled "Who is behind purchase of 43% stake?".

In that article, we asked whether the new controlling shareholders have triggered the open offer.

Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.

Question

1. Are Treasure Winner and Kaifeng Tian Feng Mills acting in concert?

Looking at the announcements now, it seems Treasure Winner Holdings Ltd and Kaifeng Tian Feng Mills are acting in concert.

Here's how:

The key names are Mr Wang Peng and Mr Yang Qingwei.

Treasure Winner Holdings Ltd is wholly-owned by Mr Wang Peng, the deputy executive chairman and CEO of formerly SGX-listed Synear Food Holdings Ltd.

Synear Holdings Ltd delisted from the SGX on December 3.

Kaifeng Tian Feng Mills is 80%-owned by Zhengzhou Yingbao Enterprise Management Consulting Co Ltd and the remaining 20% stake is owned by Dou Wu.

Further, Zhengzhou Yingbao Enterprise Management Consulting Co Ltd is 60%-owned by Wang Weiqing and the remaining 40% stake belongs to Yang Qingwei.

According to page 15 of Synear Food Holdings Ltd's delisting circular on August 12, 2013, Yang Qingwei owned a 1.42% stake in Synear Food.

Yang Qingwei was one of those shareholders who didn't accept the exit offer but still voted in favour of delisting Synear Food Holdings Ltd.

Just to put things in context, Fortune Domain Ltd made an exit offer of 18.60 Singapore cents for every Synear Food's share.

Fortune Domain Ltd was 66.37%-owned by Synear's Executive Chairman Li Wei, and 25.39% by CEO and Deputy Executive Chairman Wang Peng.

Fu Qiang, a cousin of Mr Li Wei, owned the remaining 8.24% stake in Fortune Domain Ltd.

Together, Li Wei, Wang Peng and Fu Qiang are the promoters of Synear Food Holdings Ltd.

Later, in response to SGX queries on November 18, Fortune Domain Ltd declared that Yang Qingwei has been a shareholder of Synear Food Holdings Ltd since 2008.

Moreover, Yang Qingwei had had a business partnership with Li Wei before Synear Food was incorporated and listed in 2006.

Yang Qingwei didn't accept the exit offer of 18.60 cents as he wanted to stay invested in Synear Food Holdings Ltd after delisting.

Obviously, one would want to stay invested in an unlisted company only when s/he shares a very healthy relationship with the promoters.

Therefore, it wouldn't be an exaggeration to deduce that Yang Qingwei and Wang Peng share a long business relationship.

Coming back to Dukang Distillers, Wang Peng has acquired a 29.5% stake whereas Yang Qingwei is deemed to be interested in the 14.34% stake acquired by Kaifeng Tian.

According to the Singapore code of takeovers and mergers, a mandatory open offer is to be made if any person, or persons acting in concert, acquires more than a 30% stake in a company.

Wang Peng and Yang Qingwei have acquired about 44% stake in Dukang Distillers.

Therefore:

Question

2. Will the new controlling shareholders have to announce a general offer?

Given their apparent history and relationship, Wang Peng and Yang Qingwei appear to be acting in concert.

The minority shareholders of Dukang Distillers might insist on an open offer due to such a significant change of control and ownership of the company.

Therefore, will the new controlling shareholders have to announce an open offer?

Do they still have a choice?

Management ReplyThe management had cleared with the SGX that Treasure Winner and Kaifeng Tian Feng Mills are not concerted parties and therefore will not announce a general offer.

Total number of questions in the full story: 4

We thank the management for the replies.

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