Firms need approval to change core businesses

Firms need approval to change core businesses

Market players say proposal serves to protect minority shareholders
By JAMIE LEE

MARKET players welcomed a new Singapore Exchange (SGX) proposal that would prompt companies changing their core businesses to get permission from its investors and in particular, minority shareholders.
When a company changes the ’scope and nature of its principal business after it has been listed’, SGX said that companies ’should be required to seek shareholders’ approval before such change is effected’, according to its 100-page consultation paper introduced yesterday.

This would also apply to companies that plan to diversify into new sectors. While diversification may not mean that companies would abandon their core businesses, such companies can be queried by SGX if there is a ’substantial diversification’, said SGX spokesperson Joan Lew.

Even if SGX does not intervene, shareholders can ask for more clarification on the diversification plans, she added.

‘We don’t advocate for shareholders but we’re giving the power back to them,’ she said.

The proposed rule would force companies to be more accountable to minority shareholders, said David Gerald, president of Securities Investors Association (Singapore).

‘Minority shareholders are usually not privy to the business decisions made in the boardroom,’ said Mr Gerald.

‘Shareholders invested based on the information originally given. If the company is changing its business, it’s only right that shareholders have a say in it.’

This move is likely to affect small-cap companies more since bigger firms tend to own an ‘established space’ in the respective sectors, said DBS analyst Derek Tan.

‘Companies have to commit to the new diversification. This would prevent small businesses from trying to make a fast buck,’ said Mr Tan.

And some small-cap companies have changed their core businesses or diversified into new sectors over the last year.

This includes water treatment firm Dayen Environmental, which ventured into the energy sector. Following its soured mining rights agreement with Indonesia’s PT Modal Investasi Mineral in late June that put US$25 million in payment from its Chinese partner in jeopardy, the company has admitted that it had been too hasty in inking the coal mining deal and scrapped its diversification plan.

Dayen has invested at least $10 million in the coal mining business through a 7.28 per cent stake purchase of PT ATPK Resources - the parent of PT Modal Investasi Mineral - while the stock has lost more than half its value since it decided to explore the new sector.

IT company Aztech Systems has also diversified into the construction and building material supply business this year in a big way - in February, it won a $250 million contract to supply building material.

It has also bought four vessels worth $18.3 million over the last few months to facilitate the supply of building materials.

Source : Business Times - 11 July 2008

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Abdullah: Baton will pass to Najib by mid-2010

Abdullah: Baton will pass to Najib by mid-2010
Announcement eases political uncertainty since March elections
(KUALA LUMPUR) Malaysia’s prime minister yesterday announced that he will retire and hand over power to his deputy by mid-2010, easing the political uncertainty gripping the country since March general elections.
 
Leadership transition: Mr Najib (right) has pledged his support for Mr Abdullah (left) and urged the party to re-elect the premier in leadership elections in December 
The announcement by Prime Minister Abdullah Ahmad Badawi is likely to reduce pressure on him from dissidents in the ruling United Malays National Organisation (Umno) party who have been clamouring for his resignation. It will also put to rest questions of an unexpected and early challenge for the top post by Deputy Prime Minister Najib Razak.

Mr Abdullah said that he would hand over the post of party president to Mr Najib ‘by the middle of 2010′. Traditionally, the party president becomes prime minister.

‘I won’t lead the party and the National Front in the next general elections,’ he said, adding that he felt a bit sad as well as a ’sense of achievement’. ‘Najib also needs time to prepare himself for the next general election in 2013 or 2012,’ he said.

A two-year grooming period is expected to give Mr Najib enough time to consolidate his position in the party at a time when he is locked in an outlandish battle over alleged sexual misconduct with Opposition leader Anwar Ibrahim, who is threatening to bring down the government with parliamentary defections by mid-September.

Mr Najib, who turns 55 later this month and who was elected to Parliament at the age of 22, is regarded as political blue blood - he is the son of Abdul Razak, Malaysia’s second prime minister, and the nephew of the third, Hussein Onn.

Mr Najib’s cousin is Malaysia’s education minister while his younger brother, Nazir Razak, runs Malaysia’s second largest lender, Bumiputra-Commerce Holdings Bhd.

Zainon Ahmad, political editor with a Malaysian newspaper, said that Mr Najib was expected to allow market forces to have a freer hand in Malaysia’s economy.

‘He is a more liberal person if left on his own,’ Mr Zainon said. ‘He’ll be more egalitarian in his views of the economy. He’ll be more committed towards pulling away from the New Economic Policy (NEP).’

Malaysia launched the NEP, an affirmative action in favour of the majority ethnic Malays, following deadly racial riots in 1969.

The ruling National Front coalition, dominated by Umno, has a slim 30-seat majority in the 222-member Parliament, the result of its massive setback in the March 8 general elections.

‘Today is the start of the process of an organised leadership transition. I’m touched by (Mr Abdullah’s) willingness to let go of his position. It is not an easy thing to do. But he is willing to do so to respect public wishes,’ Mr Najib said.

Mr Najib pledged his support for Mr Abdullah and urged the party to accept his decision and re-elect the premier in leadership elections in December where disgruntled Umno elements had been expected to vent their feelings.

Even as Umno tries to get its act together, the country’s Opposition yesterday filed a motion in Parliament to discuss a loss of confidence in Mr Abdullah and his Cabinet.

The People’s Alliance, led by parliamentary opposition leader Wan Azizah Ismail, said that it submitted the ‘urgent’ motion following a surge in fuel and food prices in the country.

If it is allowed by the Parliament speaker, the debate may be held on July 14, Ms Wan Azizah said. — AP, Bloomberg, AFP

Source : Business Times - 11 July 2008

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SGX wants to widen menu, spell out ingredients

SGX wants to widen menu, spell out ingredients

Bourse proposes revamp of listing rules with more products, transparency
By MICHELLE QUAH

(SINGAPORE) The Singapore Exchange (SGX) is proposing a whole slew of changes to its listing rules - to broaden the range of companies and types of products that can list on the bourse, and to improve the disclosure relating to share issues, takeovers and changes of business by listed companies.

Its proposals include: allowing life-science companies with no financial track record, and new classes of investment funds, to list on the exchange; requiring all new initial public offerings (IPOs) to have at least 500 public shareholders, instead of 1,000; enhancing disclosures relating to share placements; imposing a minimum price of $0.20 for reverse takeovers (RTOs); and requiring companies to get shareholders’ approval before undertaking a fundamental change in their principal business.

The SGX said the proposals - detailed in a consultation paper available on its website (www.sgx.com) - arise from ‘one of the more extensive annual rule reviews and demonstrate SGX’s commitment to market-oriented regulation’.

‘In addition to the diversity of listings, changes to existing rules will enable better disclosure and increase transparency for the benefit of investors,’ it announced yesterday.

Members of the public are invited to give their feedback to these proposed changes by August 7.

As part of its efforts to allow more listing alternatives, the SGX is proposing allowing life-science companies - at the stage of bringing products to the market - to list on the exchange, if they demonstrate an ability to attract funds from professional investors and to generate revenue.

It’s proposing allowing life-science companies to list even if they cannot meet current admission requirements because they have no financial track record. The exchange will, however, require them to provide quarterly updates on the use of funds to ensure transparency and timely disclosure of material information.

The exchange said this is in view of Singapore’s bid to become a hub for life-science companies, and in consideration of the fact that such companies are capital-intensive in nature and in need of funding at various stages of their business cycle. The regulator said it looked at the practices of other developed jurisdictions in arriving at its proposal.

The SGX is also proposing allowing new classes of investment funds - specifically, investment funds in the private equity space and ‘blind pool funds’ that have not identified specific investments but have stated investment strategies - to list on the exchange. It plans to introduce specific rules for such funds, taking into account their unique features.

‘The introduction of rules catering to these funds brings a wider selection of product offerings to the market,’ the SGX said, having noted that such investment vehicles have emerged recently in international public capital markets.

In conjunction with its efforts to widen the range of offerings available to investors, the SGX is also targeting greater flexibility in terms of IPO distribution. It’s proposing that all new IPOs have a minimum number of 500 public shareholders, instead of the 1,000 currently required, and that secondary listings have a minimum number of 500 shareholders worldwide, from 2,000 currently.

The exchange also wants companies seeking a fundamental change in their principal business to obtain shareholders’ approval before such change is effected. And should the new business be contrary to public interests - for example, businesses which may facilitate money laundering - the SGX wants to reserve the right to approve or reject such a change.

The SGX is also suggesting that there be a minimum issue price of $0.20 for RTOs, which is the requirement for IPOs - in order to further level the playing field between RTOs and IPOs. The exchange has also rolled out a list of suggestions to improve disclosure and transparency in the marketplace. It’s proposing new disclosure requirements for acquisition of businesses and assets where profit guarantees are provided by vendors.

The SGX also wants to enhance the disclosure requirements for the issue of new shares, convertibles or company warrants for cash and rights issues. It’s suggesting that, when placements are made through a placement agent, companies must disclose the types of investors being targeted or excluded and how shareholders’ interests have been taken into account. Where no placement agent has been appointed, companies must explain how the placees were identified and the number of shares placed to them.

The exchange also wants companies to make an immediate announcement when a proposed major transaction, very substantial transaction or RTO is not completed or has been rescinded. Companies should disclose the reasons, the legal recourse and the financial impact.

The SGX is also looking at requiring companies to comply with the Code of Corporate Governance when disclosing the remuneration of its directors and key executives in its annual reports, that is, it wants companies to disclose the remuneration of their directors and top five executives in bands of $250,000.

Source : Business Times - 11 July 2008

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