Privatisation of VADS

Life is never fair and when nothing is done history will repeat itself.

Blogged on Dec 16th 2005, Privatisation Issues

• The issue of privatisation and the subsequent delisting of a listed subsidiary.
  
  Generally there are two ways companies can be delisted from a stock exchange in.
  
  The first case is the enforced, compulsory delisting of a company, in which the stock exchange forces the delisting of the stock because the listed company has failed to comply with the stock exchange listed requirements. And these are usually based on commercial reasons in which the listed companies simply cannot operate in a profitable manner.
  
  The second manner a company can be delisted from a stock is where the company voluntary informs the exchange that they no longer want to be listed. And a variation of this case, is the delisting of a listed subsidiary is made by its holding company, in which the minority shareholder of the listed company is forced to choose between the offered compensation price or risk being involved in a private company, which would ultimately offers no transparency rights.
  
  I have no problem at all with the first case. These are them bankrupt cases. Them 'koyak' companies. 'Chap-lap' companies which are losing money like crazy.
  
  The second one, the privatisation and the subsequent delisting of the listed subsidiary, this one I really don't like at all.
  
  It's just totally unfair to the minority shareholder and it makes a total mockery of the whole stock exchange.
  
  Listed Companies should not be given the approval so easily to privatise their listed subsidiary company in which the general investing public is forced or threatened with the issue of delisting. And as mentioned earlier once the company is delisted this offers the investor no transparency rights at all. So when a listed company is able to list and delist their subsidiary companies as per their wimps and fancy this would make a total mockery of the stock exchange.
  
  And what about the general offer price for the minority shareholders stake in that listed company? Would the minority shareholders get an offer that is fair or would the minority shareholder be placed in a disadvantage position? Would the premium offered over the existing share price to adequately compensate the minority investors?
  
  If no, this ultimately means that the minority investors would never be given a chance to being adequately compensated for the permanent withdrawal of a good investment opportunity.
  
  And if this is the case, then this would contradict the government's plan to woo more investors into Bursa Malaysia cause investing would have indeed turned very unattractive, a game which is very biased against the investing public.

Where did it start?

My first encounter was on Bumi Armada and its detalied in full here.

1. http://everything27.blogspot.com/2006/09/pirates-which-siezed-armada.html
2. http://everything27.blogspot.com/2006/09/more-on-privatisation-issue.html

We then have MetroJaya.

1. http://everything27.blogspot.com/2006/11/muis-purchase-of-metrojaya_02.html
2. http://everything27.blogspot.com/2006/11/muis-purchase-of-metrojaya-ii.html

The unbelievable privatisation of Johor Port.

1. http://everything27.blogspot.com/2005/12/privatisation-issues_16.html

Oh how about a stock like Powertek?

Let me ask yet again.

How could I safely know that I would ever be fully compensated for taking the investment risk in investing in a company listed subsidiary when the holding company can list and delist as per wimps and fancy?

Recently, IJM wants to privatise their listed subsidiary. Receipt of Notice of Voluntary General Offer from IJM Corporation Berhad

Today we see another privatisation case where Telekom Malaysia wants to delist its listed subsdiary VADS via privatisation exercise.

• KUALA LUMPUR (Dow Jones)--Telekom Malaysia Bhd. (4863.KU) is proposing to buy the remaining shares in Vads Bhd. (7150.KU) that it doesn't currently own for MYR7.60 per share in a move to take the company private, Vads said Monday.
  
  In a filing with the stock exchange, Vads said the proposed buyout will involve a selective capital reduction and repayment exercise.
  
  Telekom currently owns 83.4 million shares or 63.3% of Vads.
  
  Vads shares, which were suspended Monday pending the announcement, closed Friday at MYR6.80.
  

It just does not end.

For sure the minority shareholders are not happy with the less than generous offer by these holding company.

Yup another sad day where the minority shareholders do not get a fair compensation for taking the investment risk in investing in these listed subsidiaries.

What can an investor do next time?

How about being a tiny bit wiser and AVOID investing in these subsidiaries? What's the point of it all when the investor has not chance of getting a fair investing compensation?