Resolution C proposes a one-for-one bonus issue for all shareholders. If resolutions B and C are approved, shareholders will receive bonus ordinary shares unless they elect to receive bonus class-C non-voting shares, on a one-for-one basis for each share.
Bonus ordinary shares are identical to GEH’s existing shares and will count towards meeting the free float requirement, whereas bonus class-C non-voting shares (being preference shares) will not count towards the free float. OCBC has agreed only to accept bonus class-C non-voting shares to facilitate the resumption of trading. OCBC intends to vote all its shares in favour of both resolutions B and C.
“We made two requests to OCBC; for delisting, we needed OCBC to make an exit offer that was fair and reasonable. The second request is for OCBC to be willing to dilute its voting rights to allow GEH to resume trading. OCBC is willing to support the company on both these approvals,” says Ronnie Tan, group CFO, GEH.
“For resolution B, which requires If at least 75% of independent shareholders voting at the EGM on July 8 approve the resolution, Great Eastern Holdings will be delisted. For resolution A to succeed, 75% of those present and voting will need to approve the resolution. 75% approval where everyone can vote, OCBC has indicated its intention to support resolutions B and C. OCBC, through our request, is willing to dilute its voting rights if the minority shareholders vote not to delist,” Tan adds.
Minority shareholders
A total of 800 minority shareholders hold a total of 29.6 million shares. The Wong family collectively owns 7.56 million shares, representing 25.5% of the voting-eligible shares. The family includes Wong Hong Sun, his wife and son, his brother and his cousins Svasti Daniel and Svasti Penny.
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Sungei Bagan Rubber Company (Malaya), which is listed on the Kuala Lumpur Stock Exchange Bursa Malaysia, holds 4.76 million shares. This company may be required to vote in favour of resolution A, given that the IFA has opined that the offer is fair and reasonable.
Nyalas, which is not listed, and controlled by Lee Thor Seng and his sons Justin and Colin, owns four million shares. Nyalas has remained tight-lipped about its voting intentions. Lee is married to the Wongs’ Aunt Peggy, and his sons, Justin and Colin, are cousins of the Wong family.
Earlier this year, Palliser, a fund that owns around 1.5 million shares in GEH, wrote to the GEH board, asking for a fair and reasonable exit offer, which it values at $38.61 based on an estimated embedded value (EV). The EV, based on GEH’s 2024 annual report, is around $38.
Palliser also suggested that GEH undertake a selective capital reduction as part of the delisting process. During the media briefing on June 6, Tan said: “I see some of our minority shareholders on social media have the assumption that the company can go ahead and do the selective capital reduction on our own, without any support from OCBC. That is definitely, absolutely wrong. I would need OCBC’s support for a selective capital reduction, and OCBC may not agree.”
He adds: “We want to get the shares out of this non-compliant situation with the Singapore Exchange, so it’s either to delist or to resume trading. The selective capital reduction has a consequential, unintended consequence, in that by using our own capital to pay for it, we will reduce our capital position. We will reduce our solvency ratio. And you may say, Great Eastern can afford it. The fact is, our capital position will be reduced. Our solvency position will go down.”
Palliser’s position is that GEH has excess capital to the tune of more than $2 billion, and could have well afforded to pay the minority shareholders. “We did consider seriously whether or not to put selective capital reduction as one of the options, but we voted against it. We believe that the exit offer from OCBC is a better decision for the company,” says Tan.
In the 2024 Allianz-Income transaction, where Income shareholders were to be offered over $40 per share, Allianz proposed a $1.85 billion capital extraction over three years. This mirrored the mechanism of a selective capital reduction, whereby the company — in this case, the acquirer, Allianz — reduces the insurer’s capital, arguably to recoup the funds paid to Income’s shareholders. The proposal failed to gain approval from the Ministry of Culture, Community and Youth, rightly so, as it oversees NTUC. NTUC Enterprise is the majority shareholder of Income. The proposed capital extraction would have severely weakened Income’s financial position, reducing shareholders’ equity to below $1 billion.
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In the case of GEH, the negative associations of capital extraction and selective capital reduction could have echoed in the minds of investors.
The Edge Singapore understands that Palliser’s preference is to have an exit offer of $38.61 per share, but it is ok with a re-float. Another prominent shareholder, Chew Sutat — a columnist for The Edge Singapore — stated in this week’s column, Chew On This: Bad Bromance, that he will be voting in favour of resolution A. Whatever the outcome, even if GEH is re-floated, OCBC can still propose privatisation and delisting when the class-C preference shares are due for conversion in five years.
If GEH returns to trading on the terminals, some market watchers may well breathe a sigh of relief, given the brisk pace of delistings this year.
