By Stephanie Jacob
What do Maxis Communications Bhd, IOI Properties, Astro All Asia Networks plc and Seven Convenience have in common? All the companies have been listed, delisted and then relisted (some more than once) by their majority shareholders in the span of five years.
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To be exact, Maxis was delisted from the bourse in 2007, and then relisted in 2009. Another of tycoon Ananda Krishnan’s businesses, Astro was taken off Bursa in 2010, and brought back in 2012.
Ananda Krishnan
In 2007, Ananda Krishnan and several other Maxis shareholders issued a general offer of RM15.60 per share – with the aim of subsequently delisting the telecommunications company from the bourse.
The offer price was a 20% premium to the market and at the time seen as being generous. However as will become a trend in this series, minority shareholders were unimpressed by the valuation which they felt was cheap. Nonetheless enough minorities accepted the offer. Maxis left the bourse, and wiped out about 3% of the Bursa Malaysia’s capitalisation on its way out.
But it was what happened after the telco went off the market, which raised the most ire. Shortly after the privatisation exercise, Ananda sold a 25% stake in Maxis to Saudi Telecom at RM16.40. Minorities were understandably angry that Ananda could sell a block of shares so quickly after acquiring them and at a profit from what they were offered.
What did Maxis’ management know prior to delisting?
The speed at which the sale went through led to questions on how much the majorities knew when conducting the privatisation, and whether it was akin to insider trading. The telco refuted this saying that the privatisation had been necessary to go forward with expansion plans in India and other foreign markets.
Minorities however would have wondered why Saudi Telecom’s proposal could not have been put to them for their consideration.
In November 2009, at the encouragement of Prime Minister Najib Abdul Razak, Maxis (without its foreign businesses) relisted on the bourse.
7-Eleven: The thrice listed group
Vincent Tan
Then there is Vincent Tan’s 7-Eleven Malaysia Holdings Bhd, which is the third variant of a listed vehicle holding the 7-Eleven convenience stores. In 2007, Seven Convenience, as the vehicle was then known, was delisted from the bourse.
Three years later, the 7-Eleven convenience store business was relisted, together with Berjaya’s Singer business under the the Berjaya Retail vehicle. However less than a year later, Tan delisted the vehicle citing a lack of public interest and trading liquidity.
The move shocked the market, given that the group had not even waited for a full year before exiting the market, with many investment analysts highlighting that it is commonly accepted that it takes about four quarters for the market to be convinced of a stock’s value.
But Tan was not done checking in and out of the bourse, and in 2013 tried to relist the 7-Eleven convenience stores again. This time however it appears that the Securities Commission (SC) was not convinced, and the listing fell through.
As the SC has a policy of not commenting on particular listings or corporate exercises, it was hard to gauge exactly why the listing did not materialise. However popular speculation was that the SC rejected it because it could not justify its valuations. (Both the SC and Bursa Malaysia declined to come on record for the purpose of this series)
But Tan was not deterred. The initial public offering (IPO) was reworked and in May 2014, 7-Eleven Malaysia Holdings Bhd again listed on Bursa Malaysia.
IOI delisting and relisting of IOI Property
IOI Property Group also made a comeback this year, relisting after exiting the market in 2009. Its return to the bourse was a matter of contention, with many saying that the investors of the original IOI Properties probably got a raw deal.
In a commentary written shortly after IOI Property Group listed in January, KiniBiz outlined why there was some merit to that accusation.
In April 2009, IOI Corp offered shareholders RM2.60 per share in a voluntary take-over exercise. Controversially this was only 0.66 times the net tangible assets (NTA) valuation of IOI Properties.
A year prior to the offer in April 2008, IOI Properties was trading just below the RM6 mark. Only two months before that, IOI Properties had conducted a share split and rights issue exercise. Shareholders had been offered one rights share for every four existing IOI Properties shares — at an issue price of RM5.50.
Shareholders would likely have seen it as a good deal back then because just in January 2008, IOI Properties had announced an exciting joint venture into the Singapore property market.
However at that same time, IOI Properties’ share price was on a downward slide due to weak quarterly earnings. It eventually hit a seven-year low at end-2008 which resulted in the cheap valuation of RM2.60 per share.
According to IOI Properties’ 2008 annual report, IOI Corp held 72.01% of shares in IOI Properties back then and with a 98.66% stake just prior to IOIPG’s return to Bursa Malaysia today, that implies that about 25% of IOI Properties’ shares were sold back to IOI Corp during the 2009 delisting exercise.
When news of IOI Properties’ return to the stock market surfaced, a fund manager voiced his disappointment at having to sell out of IOI Properties in 2009. “We considered the privatisation price of 0.66 times to its net tangible asset as greatly undervalued. We hope that this will not happen again,” said Aberdeen Asset Management Sdn Bhd managing director Gerald Ambrose last year.
But even if shareholders were unhappy in 2009, what options were available to them? Technically they could have remained shareholders in the unlisted entity, but without knowing what the future held at that point, many would have likely felt they had no choice but to accept. Furthermore, there was no way to know if they would get anything from their unquoted shares given that dividends would have only been issued at the board’s discretion.
Basically this meant that shareholders had a very limited exit strategy available to them in 2009 — sell or be stuck in an unlisted entity. It is a scenario that minorities often face in privatisations. However when a variant of the entity is listed again so quickly; the question that arises is whether that is fair?
Long-term investors will surely wonder why the subsequent success seen by the new IOI Property Group could not have been achieved through the then-listed IOI Properties while staying on the market.
Tomorrow: Malaysia Airlines and the power of the majority
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