Date: January 10, 2017
China New Town Development is the next dual listed S-Chip, currently listed on both Singapore Exchange (SGX) and the Stock Exchange of Hong Kong (SEHK), to seek delisting from SGX. Since 2013, there has been a total of 3 such companies (with dual listings on SGX and SEHK) to delist from SGX. The delisting is not a privatisation exercise and the company intends to maintain its primary listing on the Main Board of the SEHK and has made arrangement for the shares to be transferred from Singapore to Hong Kong for trading. The rationale is that a single listing helps to consolidate the trading of shares, broaden shareholder base, enhance the attractiveness of the company as an investment target. Further, SEHK is also geographically more aligned with the company’s PRC-based business operations and core business competencies, and provide savings in compliance costs and management resources for compliance with the listing rules and regulations of only one exchange which also reduces constraints in operational flexibility.
The Offer
The company is proposing to make a cash exit offer of S$0.07 per share to all shareholders by way of a selective share buyback. Shareholders who do not wish to trade on SEHK can tender all or some of their shares to the company at S$0.07 per share. Alternatively, shareholders can hold on to their shares and they would be able to trade their shares in Hong Kong, through their brokers here. Currently, the shares are trading at approximately 13% premium in Hong Kong as compared to Singapore.
Is the offer fair?
The IFA deems the terms of the selective share buyback as fair and reasonable and not prejudicial to the interests of the independent shareholders, and has advised the independent board committee to recommend to the independent shareholders to vote in favour of the delisting. Nevertheless, the passing of the delisting resolution requires more than 75% of shares held by independent shareholders present and voting, on a poll, either in person or by proxy at the EGM and not voted against by 10% or more. In this instance, the majority shareholders who hold 69.3% shareholding in aggregate are not allowed to vote. Thus, only independent shareholders in both Singapore and Hong Kong are allowed to vote on this ensuring that rights of independent shareholders are preserved.
In a recent dialogue session conducted by SIAS with the company and independent shareholders in Singapore, we saw many shareholders voicing concerns regarding the cost of depositing their shares with local brokers and trading their shares in Hong Kong. Whilst SIAS understands that most local brokers charge a custody fee but after checking, some brokers provide fee waivers, hence shareholders should consult their brokers on the fee matters as each broker may have different fees and account waivers.
What should shareholders do?
In this instance, only independent shareholders are eligible to vote and they should make their decisions at the EGM on 17th January 2017, or by proxy, on the motion to delist from SGX. They should give the IFA’s recommendation their serious consideration. Independent shareholders also need to indicate if they want to participate in the selective share buyback; however, they need not to participate if they prefer to hold their shares for a longer term, are confident and optimistic about the company and its prospects following the delisting, and ready to hold shares listed on SEHK and in such case they would then receive the share scripts following the delisting.
Shareholders should vote rationally, understanding the rationale for the delisting from SGX and the fundamentals of the company, the business strategy moving forward and the benefits leveraging the strong support from the controlling shareholder, CDB.
David Gerald
Founder, President & CEO
Securities Investors Association (Singapore)
