SGX hits DLF with notice of compliance linked to SPA that triggered mandatory offer

SINGAPORE (Sept 26): Engineering firm DLF Holdings has been hit with a notice of compliance (NOC) from the Singapore Exchange Regulation (SGX RegCo) related to a sale and purchase agreement (SPA) signed on Sept 20 that led to a takeover offer for the group.

In the NOC filing on Thursday evening, SGX RegCo has ordered DLF to disclose its responses to its queries on Sept 23 which included the rationale and intention behind the Sept 20 SPA.

Under the Sept 20 agreement, QRC, a consultancy solely owned by Enomoto Hiroyuki, had acquired a 57.16% stake in the company for $5.6 million, or 8.09 cents per share. This consisted of 45 million shares from DLF's former chief executive Wong Ming Kwong (main image) and 24.2 million shares from founder Fan Chee Seng.

The acquisition triggered a 8.1-cent mandatory takeover offer by QRC. QRC's offer price represented a steep 54.5% discount from DLF's volume-weighted average price (VWAP) of 17.8 cents for the month up to Sept 5, and a smaller 29.6% discount and 4.71% discounts to the one-year and six-month VWAPs respectively.

In its Sept 23 queries, SGX RegCo wanted DLF to explain why both Wong and Fan had entered into the SPA with QRC to sell their shares at 8.09 cents as this constituted “important information for shareholders in deciding whether to accept the offer”.

The regulator also wanted full disclosure on other developments in the group, in particular, its changes to the board and key management as well as the termination of a key project after its initial public offering (IPO) in July last year.

See: Shares in M&E contractor DLF tank on debut

In its Thursday NOC, SGX RegCo now wants DLF’s independent directors (IDs) to scrutinise the bases taken into consideration by the independent financial advisors (IFAs) in arriving at an opinion on the offer. The IDs must then set out in the offeree circular to be despatched to shareholders, “detailed justifications and bases in arriving at their recommendation to shareholders”.

SGX RegCo also wants DLF to engage offeror QRC to state its business plans and future direction for DLF and to disclose these in the offeree circular to shareholders, in view that QRC wants to maintain the listing status of the company following the offer.

SGX RegCo says under Catalist Rule 305(4), failure by DLF to comply with requirements in the NOC will be seen as a contravention of listing rules, adding it reserves the right to pursue disciplinary action against the company and relevant persons for breaches of the rules, inclusive of the failure to comply with the requirements imposed.

Shares in DLF had closed at 18.5 cents on Thursday prior to the announcement.